Securities and Exchange Commission: Fiscal Year Ended June 30, 1958

J-t & Lf--s -.
s- c::
~L :; ;-1.3
/ Cj .: 'Z
. {;Q .-f
y\( fl.
24th/Annual Report
of the
)J"~' Securities and Exchange
Commission
Fiscal Year Ended June 30, 1958
UNITED STATES GOVERNMENT PRINTING OFFICE. WASHINGTON. 1959
For .ale by the Superintendent or Documents. U. S. GoYerDDlent Printing Omce

W.. ~n 25. D. C. - Price '75cents (paper coYer)
SECURITIES AND EXCHANGE COMMISSION
Headquarters Office
425 Second Street, N. W.
Washington 25, D. C.
COMl\fiSSIONERS /" - (.')
January 5, 19~
EDWARD N. GADSBY, Chairman
ANDREW DOWNEY ORRICK
HAROLD C. PATI'ERSON
EARL F. fuSTINGS
JAMES C. SARGENT
ORVAL L. Dullors, Secretary
II
/
.l,
LETfER OF TRANSMITrAL
/)
~
SEOURITIES AND EXOHANGE CoMMISSION, _ .~
washington,D.O.,January5,1989./A
Sm: On behalf of the Securities and Exchange Commission, I have.
the honor to transmit to you the Twenty-Fourth Annual Report of tl{e
Commission covering the fiscal year July 1, 1951, to June 30, 195~, in
accordance with the provisions of section 23 (b) of the Securities
Exchange Act of 1934, approved June 6, 1934; section 23 of the
Public Utility Holding Company Act of 1935, approved August 26,
1935; section 46 (a) of the Investment Company Act of 1940, approved
August 22, 1940; section 216 of the Investment Advisers Act of 1940,
approved August 22,1940; and section 3 of the act of June 29, 1949,
amending the Bretton Woods Agreements Act.
Respectfully,
EDWARD N. GADSBY,
Uhairmam.
THE PRESIDENT OF THE SENATE,
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES,
Washitngton,D. O.
m
.,...... ;
• '_1\
(..:-,.1_ / "I
" 1
-, ~
,
TABLE OF CONTENTS
Page
Forevvord_________________________________________________________ xi
Commissioners and staff officers, ____________________________________ xii
Regional and branch offices , _________ __ __ ______________________ _____ xiii
Biographies of commissioners .______ xiv
PART I
CURRENT ENFORCEMENT PROBLEMS AND PROGRAl\L _
The problem of "boiler rooms" _______________ ___________________ 2
Sales of unregistered securities based on claimed exemptions; _______ 3
Evasion of registration requirements through the "no sale" theory___ 5
Promotional stocks _ _ _ _________________________________________ 5
Manipulation of the securities markets., __________________________ 6
Stop order and suspension proceedings for new issues_______________ 7
Broker-dealer inspections, ______________________________________ 7
Summary____________________________________________________ 8
PART II
LEGISLATIVE ACTIVITIES_ _ ____ ___ ___ _________ ___ __ __ ___ 9
Statutory amendments proposed by the Commission, ______________ 9
Other legisla ti ve proposals, __________________ ___________________ 10
Congressional hearings __ __________ _____________________________ 11
PART III
REVISION OF RULES AND FORMS .________________ 14
The Securities Act of 1933:
Proposed revision of rule 133________________________________ 14
Amendment of rules 134 and 433____________________________ 15
Proposed rule changes relating to assessable stock, _ _ __ 16
Amendment of rule 16L _ ________ _ ___ ______ ___ 17
Amendments to Regulation A . ___ ______ ____ _____ 17
Revision of Forms 8-2 and 8-3______________________________ 18
Amendment of Forms 8-4 and 8-5 _ __ _______________________ 18
The Securities Exchange Act of 1934:
Amendment of rule 15b-8_ _ _ _______________________________ 18
Adoption of rule 15d-20____ ________ ___________ _____________ 18
Amendment of rule 17a-3_ __ ____________ ______ _____________ 19
Amendment of rule 17a-5_ __ ____ __ ____ ____ __ _ 19
Amendments to Form 8-C ._ _____ _____ ____ ____ 20
Proposed amendments to Form 8-K_ ______ __ 21
Amendment to Form X-17 A-L_ ____ ___ __________ ____ _ 21
The Public Utility Holding Company Act of 1935:
Rescission of rule 9_ ___ ____ ___ 21
Amendment of rule 70 __ _ __________________________________ 22
The Investment Company Act of 1940;
Amendment of rule 5______________________________________ 22
Proposal to adopt rule 10F-3________________________________ 23
Proposal to adopt rule 22D-L __ __ 23
Amendments to Form N-8B-L_____________________________ 26
V
VI CONTENTS
REVISION OF RULES AND FORMS-Continued Page

Other Matters:
Amendments to statement of policy relating to investment com-
pany sales Iiterature , _____ ________ ___________________ ___ _ 26
Proposed amendment of rules regarding incorporation by reference.. 26
PAR'l IV
ADMINISTRATION OF THE SECURITIES ACT OF 1933________ 28
Description of the registration process:
Registration statement and prospectus _ _____________ ________ _ 28
Examination procedure________ __ _ _____ ________ __ __ 29
Time required to complete registration Co _ _ _ _ 29
Volume of securities registered; _ ___ ________ ____ __ 30
Registration statements filed, __________________________________ _ 32
Results obtained by the registration process_____ _ _________________ 34
Stop order proceedings. ____ ___ __ ___ __ ____ __ __ 35
Examinations and investigations_________________________________ 41
Exemption from registration of small issues, ______________________ 41
Exempt offerings under Regulation A, 42
Suspension of exemption____________________________________ 43
Exempt offerings under Regulation B________________________ 45
Litigation under the Securities Act of 1933________________________ 46
Litigation involving violations of registration and anti-fraud
I'\r........
A ~J / provisions_ - - __-- - - - - - _- - - - __ - - - - - __ - - - - _--- - __- - -__ _
..gubfle8fl8 8B€orQQHlefl:L - -----------------------------------
mae, lit.l{!;atl6n:-___________________________________________
46
53
54
~ PART V
ADl\IINISTRATION OF THE SECURITIES EXCHANGE ACT OF

1934___________________________________________________________ 56
Regulation of exchanges and exchange trading____________________ 56
Registration and exemption of exchanges_____________________ 56
Disciplinary actlonsr. , , _ _____ __ _ 56
Commission rate study __ __ __ __ _ 57
Registration of securltles on exchanges , __________________________ 57
Statistics Relating to Registratiou, _____________________ __ ___ 58
Market value of securities traded on exchanges____________________ 59
Assets of companies with listed common stocks________________ 60
Foreign stock _____________________________________________ 61
Comparat.ive over-tho-counter statistics., _ ____ ______ __________ 61
Delisting of securities from exchanges____________________________ 62
Delisting proce-edings under section 19 (a)____________________ 64
Unlisted trading priv ileges on exchanges__________________________ 71
Unlisted trading categories_____ _____________ __________ __ _ 71
Volume of unlistod trading in stocks on excbanges_____________ 72
Ap-plications for unlisted trading privilegea.c , , ________ _____ 72
Block distributions reported by exchanges , 73
Manipulation and stabillsation., ______ ___________________________ 74
Manipulation -- - - __ ___ __ __ 74
Stabilization______________________________________________ 76
Insiders' security transactions and holdings _______________________ 76
Recovery of short swing trading profits by issuer _ _____________ 78
CONTENTS vn
ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF Page
1934-Continued
Regulation of proxies , _ _ ________ __ __ ____ __ ______ ____ _______ 79
Scope of proxy regulation___ ________________________ ________ 79
Statistics relating to proxy statements _ _ _ _ ___ ____ ____________ 79
Stockholder proposals; _____________________________________ 80
Ratio of soliciting to non-soliciting eompanles . ________________ 80
Proxy contests____________________________________________ 80
Regulation of broker-dealers and over-the-counter markets__________ 81
Registration _ _ _ ___________________________________________ 81
Administrative proceedings _ _ ___________ ______________ ______ 81
Net capital rule _ _ _________________________________________ 90
Financialstatements_______________________________________ 91
Broker-dealer inspections_____ _____ ______ ____ _ 92
Supervision of activities of National Association of Securities Dealers,
Inc________________________________________________________ 94
Disciplinary actions__________ ___ __ __ ____________ ________ 95
Commission review of NASD disciplinary actioll_______________ 96
Commission review of N ASD action on membership , _ _________ 98
Litigation under the Securities Exchange Act of 19:H _ _ _ ___________ 99
Anti-fraud litigation _ _ _ ____________________________________ 100
Cases involving the net capital rule__________________________ 101
Delisting cases _ ___________________________________________ 102
Litigation involving broker-dealer registration and reporting
requirements____ __ __ __________ ______ lO:{
Proxy litigation _ _ _ ________________________________________ 104
Participation as amicus curiae.i, , ____________________________ 105
PART VI
ADMINISTRATION OF THE PUBLIC UTILITY HOLDI:\G
COMPANY ACT OF 1935_ _ __ __ ___ ____ ___________ ___ _ 107
Composition of registered holding company systems-summary of
changes____________________________________________________ 107
Developments in individual registered systems; ___________________ 110
Financing of registered public utility holding company systems-
trends in electric and gas utility industriea.,., ____________________ 124
Protective provisions of first mortgage bonds and preferred stocks of
public utility companies , _____________________________________ 128
PART VII
PARTICIPATION OF THE COMMISSIOX IN CORPORATE Rf;-
ORGANIZATIONS UNDER CHAPTER X OF THE BAXKRUPTCY
ACT, AS AMENDED__________________________________________ 1:{2
Summary of aetivitiea.; . ____ ________ ________ 1;{3
The Commission as a party to proceedings________________________ 133
Procedural matters , _ __ __ _ ___________________ 134
Trustee's investigations _ _ _ _____________________________________ 136
Problems regarding protective commlttees , _ ________ __ _____ ___ 137
Activities with regard to allowanoes.L, , __________________________ 138
Advisory reports on plans of reorganization_______________________ 141
vm CONTENTS
PART VIII Page
AD~nI:\ISTRATION OF THE TRUST INDENTURE ACT OF 1939__ 145
PART IX
ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF
1940___________________________________________________________ 146
Companies registered under the Act______________________________ 146
New companies registered and registrations terminated_____________ 147
Growth of investment company assets___________________________ 147
Study of size of investment companies; _ _ ________________________ 147
Inspection program, ___________________________________________ 148
Current information , _ ___________________ ___________________ __ _ 150
Applications and proceedings_____ ___________________________ ____ 150
Registration of foreign investment companies_____________________ 155
Unregistered investment companies-securing compliance with the
Investment Company Act- ____ ___ _ 156
Litigation under the Investment Company Act of 1940_____________ 158
PART X
ADl\II7\ISTRATION OF THE INVESTMENT ADVISERS ACT OF
1940___________________________________________________________ 160
Administrative proceedlngs..; _ _________ ____ _______ __ 161
Litigation under the Investment Advisers Act of 1940_____________ 161
PART XI
OTHER ACTIVITIES OF THE COMMISSION____________________ 163
Court proceedings, _____________ ____________ ____ ____ __________ _ 163
Civil proceedings; ______________________________________ ___ 163
Criminal prooeedinga.c.,., ______________ ________________ __ 163
Disciplinary proceedings against persons practicing before the Com-
mmsion_____________________________________________________ 174
Complaints and investlgations.L.L, ______________________________ 175
Enforcement problems with respect to Canadian securities, _ ________ 177
Section of securities violations .; , _______ ______________________ 180
Activities of the Commission in accounting and auditing____________ 181
Opinions of the Commission; _ _ ______ ________________________ ___ 187
Applications for non-disclosure of certain information __ ____________ 188
Statistics and special studies; ___________________________________ 188
Public dissemination of inforrnation..., ____________________________ 191
Information available for public Inspeetion.c ,., ________________ 193
Publioations.. _ ___ ____ _____ __________ _________ __ _____ 194
Organization__________________________________________________ 195
Personnel, Budget and Finance.; , __ _ __ ___ __ ________ 195
Personnel program.L , , ___ _ ____ _________ _________ __ 196
Canons of ethics for members of the Commission______________ 199
CONTENTS IX
PART XII
APPENDIX-STATISTICAL TABLES
Page
Table 1. A 24-year record of registrations fully effective under the Securi-
ties Act of 1933_______________________________________ __ 203
Table 2. Registrations fully effective under the Securities Act of 1933,
fiscal year 1958_ _ _ _ __ _ ___ 204
Part 1. Distribution by months, 204
Part 2. Purpose of registration and type of security _____________ 204
Part 3. Purpose of registration and industry of registranL__________ 205
Part 4. Use of proceeds and industry of registrant, ________________ 206
Table 3. New securities offered for cash sale in the United States________ 207
Part 1. Type of offering________________________ 207
Part 2. Type of security________________________________________ 208
Part 3. Type of issuer_____ __ _ ________ _______________________ 209
Part 4. Private placement of corporate securities__________________ 210
Table 4. Proposed uses of net proceeds from the sale of new corporate
securities offered for cash in the United States______________ 211
Part 1. All corporate___________________________________________ 211
Part 2. Manufacturing., , ___ ______________________________ 211
Part 3. Mining______ ___ ____________ ______________ _________ 212
Part 4. Electric, gas, and water_________________________________ 212
Part 5. Railroad., __ __ _ __ 213
Part 6. Other transportation____________________________________ 213
Part 7. Communlcation, _______________________________________ 214
Part 8. Financial and real estate , _ ____ _______ ____ _______________ 214
Part 9. Commercial and otbE'r__________________________________ 215
Table 5. Summary of corporate securities publicly offered and privately
placed from 1934 through June 1958_______________________ 216
Table 6. Suspension orders issued pursuant to Regulation A under the
Securities Act of 1933 during the fiscal year 1958___________ 217
Table 7. Brokers and dealers registered under the Securities Exchange Act
of 193~effective reglstrations as of June 30, 1958, classified
by type of organization and by location of principal office, ___ 221
Table 8. Number of issuers and security issues on exchanges, as of June
30, 1958________________________________________________ 222
Part 1. Unduplicated number of stock and bond issues admitted to
trading on all exchanges and number of issuers Involved.L; 222
Part 2. Number of stock and bond issues on each exchange and num-
ber of issuers involved________________________________ 222
Table 9. Unlisted stocks on securities exchanges_______________________ 223
Part 1. Number of stocks as of June 30,1958_____________________ 223
Part 2. Volume of trading-calendar year 1957____________________ 223
Table 10. Market value and volume of sales effected on securities ex-
changes in the 12-month period ended December 31, 1957,
and the 6-month period ended June 30, 1958______________ 224
Table 11. Block distributions , _ ______________ __ __ ________ ____ _ 225
Table 12. Comparative share sales and dollar volumes on exchangea.Lc c , , 226
Table 13. Reorganization proceedings in which the Commission partici-
pated during the fiscal year 1958_________________________ 227
Table 14. Summary of cases instituted in the courts by the Commission, _ 228
x CONTENTS
Page
Table 15. Summarv of cases instituted against the Commission, cases in

which'the Commission participated as intervenor or amicus
curiae, and reorganization cases on apneal under Chapter X
in which the Commission participated _ 228
Table 16. Injunctive proceedings brought by the Commission which were
pending during the fiscal year 1958_- -_ -- -- - - - - - - -- -- - - - -- 229
Table 17. Indictments returned for violation of acts administered by the
Commission and related Federal statutes which were pending
during the fiscal year 1958 _ 238
Table 18. Petitions for review of orders of the Commission which were
pending in courts of appeals during the fiscal year 1958 _ 243
Table 19. Contempt proceedings pending during the fiscal year 1958 _ 245
Table 20 Cases in which the Commission participated as intervenor or as
amicus curiae pending during the fiscal year 1958 _ 246
Table 21. Proceedings by the Commission to enforce subpoenas pending
during the fiscal year 1958 _ 247
Table 22. Miscellaneous actions involving the Commission or its employ-
ees pending during the fiscal year 1958 _ 248
Table 23. Actions to enforce voluntary plans under seetion 11 (e) of the
Public Utility Holding Company Act pending during the
fiscal year 1958 _ 249
Table 24. Actions under section 11 (d) of the Public Utility Holding Com-
pany Act pending during the fiscal year 1958 _ 251
Table 25. Reorganization cases under Chapter X of the Bankruptcy Act
pending during the fiscal year 1958 in which the Commission
participated when district court orders were challenged in
appellate courts _ 252
Table 26. A 25-year summary of criminal cases developed by the Com-
mission _
253
Table 27. Summary of criminal cases developed by the Commission which
were still pending on June 30, 1958 _ 254
Table 28. A 25-year summary classifying all defendants in criminal eases
developed by the Commission _ 254
Table 29. A 25-year summary of all injunction eases instituted by the
Commission _
255
Table 30. Canons of Ethics for Members of the Securities and Exchange
Commission _
256
FOREWORD
This 24th Annual Report of the Securities and Exchange Commis-
sion to the Congress for the fiscal year July 1, 1957 to June 30, 1958
describes the Commission's activities during the year in discharging its
duties under the statutes which it administers. These include super-
vision of the registration of securities for sale to the public by the use
of the mails and in interstate commerce, enforcement of the anti-fraud
provisions of the federal securities laws, surveillance of the exchange
and over-the-counter markets in securities, regulation of the activities
of brokers and dealers and investment advisers, and regulation of
registered public utility holding company systems and investment
companies.
In the fiscal year 1958 new issues of securities registered for public
sale totalled $16.5 billion, the largest amount in the Commission's his-
tory. The amount of such issues has increased at least $1.5 billion in
each year since 1953, when the total amount registered was $7.5 billion,
less than half the present amount.
With a continued high level of financial activity in the security
markets, the Commission has continued an intensified enforcement
program of discovering, preventing and punishing fraudulent and
other illegal activities in securities transactions. An important aspect
of this enforcement program during the fiscal year was an increase of
approximately 20% in the number of inspections conducted of securi-
ties brokers and dealers registered with the Commission.
During the fiscal year the Commission submitted to the Congress
proposals for a comprehensive revision of various of the acts which
it administers. These proposals were described in the Commission's
23rd Annual Report. Additional legislative proposals of the Com-
mission, as well as other bills affecting the Commission, are discussed
in this report.
All phases of the Commission's activities have been under study
during the fiscal year by the Special Subcommittee on Legislative
Oversight of the House Committee on Interstate and Foreign Com-
merce. The Commission has endeavored to cooperate fully with the
Subcommittee in its work. At its request, the Chairman, members of
the Commission and members of the staff have appeared before it and
a substantial amount of information requested by the Subcommittee
has been supplied.
~
XI
COMMISSIONERS AND STAFF OFFICERS
(As of October IS, 1958)
Term ezpir68
Commissioners June 5
EDWARD N. GADSBY of Massachusetts, Ohairman_________________________ 1963
ANDREW DOWNEY ORRICK of California_________________________________ 1962
HAROLD C. PATTERSON ofVirginia 1960
EARL F. HASTINGS of Arizona__________________________________________ 1959
JAMES C. SARGENT of New York________________________________________ 1961
Secretary : ORVAL L. DuBOIS
Staff Officers
ALBERT K. SCHEIDENHELM, Executive Director.
CHARLES T. KAPPLER. Associate Executive Director!
BYRON D. WOODSIDE, Director. Division of Corporation Finance.
SHARON C. RISK, Associate Director.
JOSEPH C. WOODLE, Director, Division of Corporate Regulation.
JOHN E. LOOMIS, Associate Director.
PHILIP A. LOOMIS, Jr., Director, Division of Trading and Exchanges.
RALPH S. SAUL, Associate Director.'
THOMAS G. :MEEKER, General Counsel.
DANIEL J. :MCCAULEY, Jr., Associate General Counsel.
ANDREW BARR, Chief Accountant.
LEONARDHELFENSTEIN. Director, Office of Opinion Writing.
W. VICTOR RODIN. Associate Director.
1 Designated Associate Executive Director, July 1, 1958.

• Designated Augnst 4, 1958.
XII
REGIONAL AND BRANCH OFFICES
Regional Administrators
Region 1. New York, New Jersey.-Paul Windels, Jr.; Edward Schoen, Jr.,
Associate Regional Administrator, 225 Broadway, New York 7, New York.
Region 2. Massachusetts, Connecticut, Rhode Island, Vermont, New Hamp-
shire, Maine.-Philip E. Kendrick, United States Post Office and Court-
house, Post OfficeSquare, Boston 9, Massachusetts.
Region 3. Tennessee, North Carolina, South Carolina, Georgia, Alabama,
Mississippi, Florida, and that part of Louisiana lying east of the Atcha-
falaya River.-William Green, Suite 138, 1371 Peachtree Street, NE.,
Atlanta 9, Georgia.
Region 4. Illinois, Indiana, Iowa, Kansas City (Kansas). Kentucky, Michi-
gan, Minnesota, Missouri, Ohio, 'Visconsin.-Thomas B. Hart, Bankers
Building (Room 630), 105 West Adams Street, Chicago 3, Illinois.
Region 5. Oklahoma, Arkansas, Texas, that part of Louisiana lying west
of the Atchafalaya River, and Kansas (except Kansas City).-Oran H.
Allred, United States Courthouse (Room 301), 10th and Lamar Streets,
Fort Worth 2, Texas.
Region 6. Wyoming, Colorado, New Mexico, Nebraska, North Dakota,
South Dakota, Utah.-Milton J. Blake, 802 Midland Savings Building,
44417th Street, Denver 2, Colorado.
Region 7. California, Nevada, Arizona, Hawaii.-Arthur E. Pennekamp,
Pacific Building (Room 339), Fourth and Market Streets, San Francisco
3, California.
Region 8. Washington, Oregon, Idaho, Montana, Alaska.-James E. New-
ton, 905 Second Avenue Building (Room 304), Seattle 4, Washington.
Region 9. Pennsylvania, Maryland, Virginia, "'est Virginia, Delaware, Dis-
trict of Columbia.-William J. Crow, Courts Building, 310 Gth Street,
NW., Washington 25, D. C.
Branch Offices
Cleveland, Ohio. Standard Building (Room 1628), 1370 Ontario Street.
Detroit, Michigan. Federal Building (Room 1074).
Houston, Texas. First National Bank Building (Room 324), 201 Main
Street.
Los Angeles, California. Guaranty Building (Room 309), 6331 Hollx wood
Boulevard.
Miami, Florida. Plaza Building (Room 440), 245 South East First Street.
St. Louis, Missouri. Arcade Building (Room 1025), 812 Olive Street.
St. Paul, Minnesota. Main Post Office and Courthouse (Room 1027), 180
East Kellogg Boulevard.
Salt Lake City, Utah. Newhouse Bullding (Room 1119), 10 Exchange Place.
xm
COMMISSIONERS
Edward N. Gadsby, Chairman
Chairman Gadsby was born in North Adams, Mass., on April 11,

1900. He received an A. B. degree from Amherst College in 1923
and a J. D. degree from the New York University School of Law in
1928. From 1929 to 1937 he was associated with the law firm of
Mudge, Stern, Williams & Tucker of New York City. From 1937
to 1947 he practiced law in North Adams, Mass. In 1947 he was
appointed a Commissioner of the Massachusetts Department of Public
Utilities and held that position until 1952, serving as Chairman from
1947 to 1949. From 1952 to 1956 he served as General Counsel of
the Massachusetts Department of Public Utilities and thereafter was
u member of the law firm of Sullivan & Worcester of Boston, Mass.
On August 20, 1957, he took office as a member of the Securities and
Exchange Commission for a term expiring June 5, 1958 and was
designated Chairman of the Commission. He was reappointed effec-
tive June 5, 1958 for a term expiring June 5, 1963 and was again
designated as Chairman.
Andrew Downey Orrick
Commissioner Orrick was born in San Francisco, Calif., on Oc-

tober 18, 1917. He received his B. A. degree from Yale College in
1940 and an LL. B. degree from the University of California (Hast-
ings College of Law) in 1947. From 1942 to 1946 he was on active
duty with the United States Army and was separated from the
service as a captain in the Transportation Corps. After being ad-
mitted to practice in California in 1947 he was associated with the
law firm of Orrick, Dahlquist, Herrington & Sutcliffe, in San Fran-
cisco, until February 1954, when he became Regional Administrator
of the San Francisco Regional Office of the Securities and Ex-
change Commission. He served in that capacity until May 25, 1955,
when he was sworn in as a member of the Commission for a term of
office expiring June 5, 1957. On June 12, 1957, he was reappointed
as a member of the Commission for a term of office expiring June 5,
1962. During the periods from :May 27, 1957 to June 6, 1957 and
from June 12, 1957 to August 20, 1957 he was designated as Acting
Chairman of the Commission.
XIV
COMMISSIONERS xv
Harold C. Patterson
Commissioner Patterson was born in Newport, R. 1., on March 12,

1897, and attended public schools in Massachusetts and Maryland.
He attended George Washington University after graduating from
Randolph Macon Academy. In 1918 he enlisted in the United States
Naval Reserve for service in W orId War I, was commissioned ensign,
United States Naval Reserve, in 1918; in June 1919 commissioned
ensign United States Navy; and resigned in 1923. Prior to 1954, he
had for many years been a partner of Auchinc1oss, Parker & Redpath,
members of the New York Stock Exchange, in \Vashington, D. C.
He resigned from the firm June 1, 1954. He served as a Board Mem-
ber of the National Association of Securities Dealers, Inc., and was
active over the years in its securities industry policing work. On
June 15, 1954, he was appointed Director of the Division of Trading
and Exchanges of the Securities and Exchange Commission and
served in that capacity until August 5, 1955, when he took office as
a member of the Commission for a term of officeexpiring June is, 1960.
Earl F. Hastings
Commissioner Hastings was born in Los Angeles, Calif., on April

27, 1908, and resides in Glendale, Ariz. He attended Texas Western
University and the University of Denver. He is a registered pro-
fessional engineer. During the years 1932 to 1941 he served as a con-
sulting engineer with mining and industrial firms. From 1941 to 1942
he worked with Hawaiian constructors on a military installation on
Oahu, T. H. From 1942 to 1947 he served in various engineering and
managerial capacities. At that time he became a general partner of
the firm, Darlington, Hastings & Thorne, which served as industrial
consultants and managers. In 1949 he was appointed Director of
Securities, Arizona Corporation Commission, Phoenix, and he served
in that capacity until March 1, 1956, when he was appointed a mem-
ber of the Securities and Exchange Commission for a term of office
expiring June 5, 1959.
James C. Sargent
Commissioner Sargent was born in New Haven, Conn., on Febru-

ary 26, 1916, and holds degrees of B. A. and LL. B. from the Univer-
sity of Virginia. He was admitted to the New York Bar in 1940 and
became associated with the firm of Clark & Baldwin, New York City.
From January 1941 to July 1951, except for military service, he was
employed as a trial attorney by Consolidated Edison Company of
New York. He enlisted in the United States Army Air Force in
1942 and served in this country as an Air Intelligence school instruc-
tor and as a combat and special intelligence officer in the South-
XVI COMMISSIONERS
west Pacific. He was separated to inactive duty in January 1946

with the rank of captain. In the fall of 1948,he served as an Assistant
Attorney General of the State of New York in the Election Frauds
Bureau in New York City. From July 1951 to August 1954 he was
employed as law assistant to the Appellate Division, First Depart-
ment, Supreme Court, State of New York. He was associated with
the firm of Spence & Hotchkiss, New York City, from August 1954
until November 1955. In November 1955 he was appointed Admin-
istrator of the Commission's New York Regional Office. He served
in that capacity until June 29,1956, when he was sworn in as a member
of the Commission for a term of officeexpiring June 5, 1961.
PART I
CURRENT ENFORCEMENT PROBLEMS AND PROGRAM
A stated purpose of Congress in enacting the Federal securities laws
was to provide full and fair disclosure with respect to securities sold
in interstate and foreign commerce and to prevent fraud and in-
equitable and unfair practices in the securities markets. Under pres-
ent conditions, the enforcement program of the Commission is an
essential instrument in attaining these objectives. That program has
been carried out, under the day-to-day direction of the Commission,
by its operating divisions in Washington and by its nine regional
and eight branch officesin principal cities throughout the country.
Recent years have witnessed a continuing surge of interest and
activity in the securities markets without parallel under the depressed
conditions of the thirties or under the circumstances of war and re-
conversion. Despite recent fluctuations in business volume, the dollar
amount of new securities registered with the Commission in fiscal
1958 totaled $16.5 billion-the largest amount in the history of the
Commission. This compares with $7.5billion of new financing during
fiscal 1953 and $6.4 billion in fiscal 1948. The aggregate market value
of all stock on all stock exchanges, which never exceeded $100 billion
between 1933 and 1945, was $250 billion at June 30, 1956, $262 billion
at June 30, 1957 and $258 billion at June 30, 1958.
The increased activity in the securities markets has reflected in part
the extraordinary increase in the number of holders of shares in pub-
licly owned corporations. The number of holders of shares of pub-
licly owned corporations was estimated by the New York Stock Ex-
change to have increased from 6,490,000in early 1952 to 8,650,000at
the end of 1955and has further increased since then.
The size of the securities markets is reflected in the fact that
there were on June 30,1958,4,752 broker-dealers and 1,562investment
advisers registered with the Commission, 2,997 stock issues traded
on stock exchanges and approximately 4,500 stock issues (excluding
investment company issues) each having more than 300 stockholders
which are traded over-the-counter. There are also thousands of
smaller issues which trade to some extent in the over-the-counter
market.
Conditions such as these have now persisted for several years and
produced enforcement problems of the first magnitude for the Com-
1
486867-59-2
2 SECURITIES AND EXCHANGE COMMISSION
mission. These conditions have attracted into the securities field a

fringe element of confidencemen who are determined to take whatever
advantage they can of the American public. The operations of these
confidence men have been encouraged by the expectations of a sub-
stantial segment of the public that it is possible for the unsophisticated
investor to reap large and quick profits in the securities markets. Un-
informed investors are often willing to purchase unknown and specu-
lative securities which are represented as offering unusual opportuni-
ties for gain.
Indeed, somewhat paradoxically, declines in the prices of seasoned
securities may increase the public appetite for such speculative of-
ferings. Conditions in the capital market have been favorable for
mergers, acquisitions and programs of expansion, including not only
the great majority which result from legitimate economic forces, but
also a substantial number which appear to be designed largely to reap
profits for promoters and speculators at the expense of the public.
Opportunities for illicit profit by the illegal or fraudulent sale of
securities have multiplied, and inevitably the number, resources and
ingenuity of violators seeking to capitalize upon these opportunities
have likewise multiplied.
Illustrative of the enforcement problems now confronting the Com-
mission are the matters briefly summarized below:
THE PROBLEM OF "BOILER ROOMS"
The term "boiler room", which unfortunately has become quite

familiar in the last few years, refers to an organization engaged in the
sale of securities primarily over the telephone, particularly the long-
distance telephone, by high pressure methods ordinarily accompanied
by misrepresentation, deception and fraud. Such organizations gen-
erally concentrate on the distribution of one or a few issues of specu-
lative securities at a time, seeking to sell these issues in quantity by
whatever misrepresentations are necessary to make a sale.
The "boiler room" continues to raise difficult enforcement problems
but these have recently taken a somewhat different form. Most of the
larger "boiler rooms" have disappeared due to the vigorous enforce-
ment program of the Commission and state agencies. In the place
of the old-fashioned "boiler room" has appeared a group of small
firms which spring up suddenly, sell one or two spurious issues quickly
and then disperse, their fraudulent purpose accomplished. This
method of operation has made speed and alertness on the part of the
Commission and its staff essential to enforcement activities.
The operators of these small "boiler rooms" have recently shown
a tendency to operate not only in the large financial centers but also
in other locations around the country. There has been a noticeable
TWENTY-FOURTH ANNUAL REPORT 3
increase, for example, in migratory operators moving from state to
state, particularly in the Western part of the country. Not infre-
quently, long-distance telephone salesmen work out of hotel rooms,
apartments and alleged business offices. Extensive use is made of in-
termediaries, often in foreign countries, to conceal the nature of trans-
actions and the identity of individuals. Payments are often made in
cash rather than by check.
The Commission has utilized all available enforcement techniques to
meet the problem. It has found, however, that resort to the civil in-
junction and administrative proceeding, no matter how vigorously
employed, is not completely effective in halting the operation of "boiler
rooms". The Commission believes that imposition of the sanctions
resulting from a criminal prosecution is necessary to stop effectively
this "cancerous diffusion". In carrying out its statutory duties, the
Commission will continue to press for criminal prosecution of
violators of the Federal securities laws where the facts warrant such
prosecution.
In addition to its enforcement powers the Commission has sought
through the dissemination of information to alert the investing public
to the risks involved in the purchase of securities from unknown high-
pressure telephone salesmen. In the last resort the problem of "boiler
rooms" can be eliminated only if the investing public in dealing with
unknown stock salesmen evaluate their representations with an atti-
tude of hard-headed skepticism.
SALES OF UNREGISTERED SECURITIES BASED ON CLAIMED

EXEMPTIONS
It appears that a substantial but undetermined number of securities

have been sold in violation of the registration, prospectus and anti-
fraud provisions of the Securities Act of 1933 pursuant to claimed
exemptions from registration which in fact were not available.
These sales have been made, in the main, under claims to exemption
based upon the intrastate exemption of section 3 (a) (11) and the
so-called "private offering" exemption of section 4 (1) of the Act.
The improper use of these exemptions to evade registration require-
ments usually occurs where an issue, or the sales procedures to be
employed, would not stand the light of the full disclosure require-
ments of registration. The Commission ordinarily learns of these
offerings only after they have been commenced and has no means of
ascertaining whether or not the exemption is available except by ini-
tiating an investigation. The staff of the Commission is now study-
ing measures for remedying this situation, some of which may involve
legislative proposals to the 86th Congress.
Various devices have been employed in an effort to evade registra-

tion by abuse of the intrastate exemption under section 3 (a) (11) of
the Securities Act of 1933. The issuer may attempt to use a resident
of the state as a nominee for non-resident beneficial owners, or the
alleged sales to residents may be merely a step in a planned distribu-
tion in interstate commerce.
One of the most frequently used devices to bring a distribution
within the "private offering" exemption is the use of the so-called
"investment intent" letter given by purchasers. In some cases an at-
tempt is made to evade the basic policy of registration under the Se-
curities Act by the technique of mechanically obtaining "investment
intent" letters from successive groups of purchasers when, in fact,
these purchasers buy with a view to distribution.
Further complicating the Commission's problems in this area has
been the fact that an increasingly large number of securities claimed
to have been issued pursuant to these exemptions have been trans-
ferred to United States citizens through Canadian, Swiss, Lichten-
stein and other foreign financial institutions. When this occurs the
Commission has been handicapped in tracing transactions and deter-
mining the facts upon which the proof of availability or non-availa-
bility of the claimed exemption depends, particularly where the laws
of a particular foreign country preclude disclosure of the pertinent
information. There is reason to believe that in many instances these
channels are utilized for the deliberate purpose of complicating or
frustrating the Commission's enforcement effort although there is no
evidence of complicity on the part of foreign banks which may be
involved.
The Commission ordinarily receives no notice of a distribution for
a foreign account unless and until the matter comes to its attention
either as a result of a complaint from a public investor or in the
course of its inspection or investigation work.
In order to cope with illegal distributions made through the use
of such foreign devices, the Commission has recently proposed a rule
requiring members of national securities exchanges and brokers and
dealers to report to the Commission orders received from non-resident
persons to purchase a significant amount of a security as well as
purchases of a significant amount of a security from a foreign
source, if the purchase is made for the account of the member, broker
or dealer or is made for the account of any other person who, to the
knowledge of the member, broker or dealer, proposes to sell or is
selling the securities in the United States.' A rule of this nature
would give the Commission prompt notice of significant transactions
for foreign accounts, insofar as brokers and dealers in the United
1 Securities Exchnnge Act Relense No. 5774.

States are involved in the transactions, and this in turn should facili-
tate the efforts of the Commission to deal more effectively with illegal
distributions of securities through foreign sources.
EVASION OF REGISTRATION REQUIREMENTS THROUGH THE

"NO-SALE" THEORY
Under Rule 133,which embodies an interpretation of long standing,

the issue of securities in connection with certain types of corporate
mergers, consolidations, reclassifications of securities and acquisitions
of corporate assets is not deemed to constitute a "sale" of securities
to stockholders of corporate parties to the transactions. This rule
has the effect of exempting issues of securities in these transactions
from the registration requirements of the Securities Act. It has been
relied upon in a very large number of corporate transactions con-
summated without registration of the securities involved. A sub-
stantial number of transactions ostensibly entered into under the rule
may, in fact, involve violations of the registration requirements.
The Commission considers that Rule 133 provides no exemption
from the registration and prospectus requirements of the Securities
Act with respect to any public distribution of securities received in
such a transaction by a security holder who may be deemed to be a
statutory underwriter. Recently the staff of the Commission pro-
posed an amendment to Rule 133 designed to restate the purpose and
effect of that rule and to clarify its application and Iimitations." The
Commission has published the proposed amendment for comment by
all persons having an interest in the matter. The staff of the Com.
mission also is preparing a proposed form for registration of securi-
ties publicly distributed following transactions of the character
referred to in the rule, in order to simplify compliance with the regis-
tration requirements in such cases. Such a form may permit the use
of a prospectus in the form of a proxy statement meeting the require-
ments of Regulation 14 under the Securities Exchange Act of 1934
where such proxy statement has been employed in connection with the
transaction under Rule 133 supplemented by certain necessary addi-
tional information.
PROMOTIONAL STOCKS
Recent economic conditions have been relatively favorable for the

sale of promotional stocks of new ventures, particularly in fields in
which the securities of established enterprises have shown marked
gains. For example, many new insurance and finance ventures have
been promoted, particularly in the South Central, Southwestern,
and Southeastern parts of the country, and their securities have been
• Securities A.ct Release No. 3965.

distributed interstate either through registration or under Regulation

A or, more commonly, in reliance upon the intrastate exemption.
Many of these issues and the sales techniques employed in their dis-
tribution appear to involve abuses and possible violations of the anti-
fraud and other provisions of the Securities Act or the Securities
Exchange Act, which require extensive investigation. The large
number of these promotions and the rapidity with which they have
increased has placed most serious burdens on the Commission's
field enforcement personnel charged with the conduct of such
investigations.
MANIPULATIONOF THE SECURmES MARKETS
Increased activity on the Nation's securities markets has tempted
some to engage in manipulation of these markets. Devious schemes
may be employed to conceal both the fact of a manipulation and the
identity of the persons actually responsible. These include schemes
to increase the quoted over-the-counter prices for relatively obscure
issues being distributed without registration in reliance upon some
exemption, or the creation of fictitious markets for such issues. Such
schemes are not uncommon in connection with distributions effected
by "boiler rooms". These activities when conducted with ingenuity
through numerous intermediaries are difficult to detect. Persons en-
gaged in, or proposing, a distribution of a security not outstanding
in the hands of the public may place orders for the purchase and
sale of small amounts of a security with numerous brokers and dealers,
or arrange to have others do this, with the result that such brokers
and dealers will publish quotations for the security at prices specified
in the orders, thus creating the appearance of an active over-the-
counter market for the security, when in fact no such market exists
except as generated by the distributors. Wnen the distribution is
completed the orders are withdrawn and the "market" disappears.
Other apparent manipulations have occurred in issues in which
there is a substantial public stockholder interest, particularly issues
of companies engaged in expansion and diversification programs de-
signed largely to reap profits for promoters and speculators at the
expense of the public. Here the motive is to facilitate the financing
of such programs, or to make the issuer's stock more attractive as a
mechanism of payment for other businesses, by creating the appear-
ance of an active and rising market in such stock. The techniques
employed are various, including the dissemination of favorable in-
formation, the placing of buy orders at strategic moments and prices
so as to have the stock close each day with a rise, and encouraging
others to buy by giving them assurances against loss or lending money
to finance the purchase. Efforts are, of course, made to conceal the
identity of the persons ultimately responsible for the activity.
TWENTY-FOUR'l'H ANNUAL REPORT 7
The investigation and prosecution of a manipulation case requires
careful and painstaking work usually over a period of many months.
Investors must be identified and interviewed. Books and records of
brokers, dealers and others must be examined and analyzed. The
information thus obtained then has to be developed in a form which
would permit its introduction in evidence in legal proceedings. That
this is a difficult matter is illustrated by the fact that one of the Com-
mission's experienced investigators has been engaged for almost a
year in assisting the United States Attorney in preparing one of
these cases for trial.
With the increasing tempo of activities in the securities markets,
the Commission has noted a growing number of instances of unusual
or unexplained market activity in particular securities. In some of
these cases a preliminary investigation has revealed that no violations
of law had occurred but in others the Commission has found it neces-
sary to obtain an injunction or recommend criminal prosecution. The
Commission is much concerned with the increase in manipulative
activities and it is expected that it will be required to devote more of
its enforcement effort to this area.
STOP ORDER AND SUSPENSION PROCEEDINGS FOR NEW ISSUES

There continue to be numerous instances where issuers filing either
under the registration requirements of the Securities Act or under the
Commission's exemptive Regulation A do not appear to be making
an effort to comply in good faith with the disclosure and other
standards required for such filings. Consequently, it is necessary that
the Commission, for the protection of investors, institute stop order
proceedings or suspension orders. Each of these has been preceded
by an investigation and in many instances has required a formal ad-
ministrative hearing. While the collection, presentation and analysis
of evidence imposes a substantial burden on the Commission's en-
forcement staff, nevertheless it has been possible in this way to prevent
the public sale of certain securities under circumstances likely to in-
volve fraud upon the investing public.
BROKER-DEALER INSPECTIONS
Increased activity in the securities markets has also resulted in a
significant increase in the number of brokers and dealers. There were
4,752 registered broker-dealers on June 30, 1958 and the Commission
presently estimates that at the end of the fiscal year 1959 there will
be 4,900 registered broker-dealers. It is estimated that this number
will increase to 5,100 at the close of the fiscal year 19M. The Com-
mission's concern with this increase in the number of registered brokers
and dealers arises from the fact that many of them are inexperienced
and un:familiar with the ethical and legal obligations owed to their
customers and that, therefore, there is a greater risk that injury may
result to public investors dealing with such persons. In order to
protect investors against possible abuses the Commission has intensi-
fied its broker-dealer inspection program. In the fiscal year 1958,
1,452inspections were completed-the greatest number since the Com-
mission was organized.
SUMMARY
The Commission believes that an adequate and effective enforce-

ment program is necessary not only to the discharge of its statutory
responsibilities but also, and perhaps more important, to the preserva-
tion of that investor confidence in the capital :formation process which
is so necessary to the continued progress and prosperity of an economy
based on the free enterprise system. To that end the Commission
has vigorously employed, and will continue to employ, all of its
enforcement weapons to protect the investing public.
PART n
LEGISLATIVE ACTIVITIES
Statutory Amendments Proposed by the Commission
In July and August 1957 the Commission submitted to the Congress
its proposals to amend an aggregate of 87 provisions of the Securities
Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture
Act of 1939, the Investment Company Act of 194:0and the Investment
Advisers Act of 1940. These proposals, together with requests for
hearings thereon, were submitted to the Committee on Banking and
Currency of the Senate and the Committee on Interstate and Foreign
Commerce of the House of Representatives, to which Committees was
assigned the duty of exercising watchfulness over the execution of
the securities laws by section 136 of the Legislative Reorganization
Act of 1946. The proposals were introduced in the Senate by Senator
Frank: J. Lausche of Ohio, the then Chairman of the Subcommittee
on Securities of the Committee on Banking and Currency, as S. 2544,
S. 2545, S. 2546, S. 2547 and S. 2796. Subsequently, they were intro-
duced in the House of Representatives by Representative Oren Harris
of Arkansas, Chairman of the Committee on Interstate and Foreign
Commerce, as H. R. 9326, H. R. 9327, H. R. 9328, H. R. 9329 and H. R.
9330. The Senate bills were referred to the Committee on Banking
and Currency and the House bills to the Committee on Interstate and
Foreign Commerce. No action was taken on these bills by either
Committee.
The overall purpose of the Commission's proposals was to
strengthen the safeguards and protections afforded the public by
tightening the jurisdictional provisions, correcting certain inadequa-
cies revealed through administrative experience and facilitating crim-
inal prosecutions and other enforcement activities. A discussion of
the more significant of these proposals is contained in the Commission's
23rd Annual Report, pp. 10-12.
On March 18, 1958, the Commission also submitted to Congress
proposals to amend various sections of the Bankruptcy Act in the
form of nine draft bills filed with the Committee on the Judiciary of
the Senate and the Committee on the Judiciary of the House of Repre-
sentatives,' These proposals are concerned with Chapters X and XI
1 For a discussIon ot the CommIssIon's duties under Chapter X of the Bankruptcy Act
see Part VII of thIs report.
9
of the Bankruptcy Act. Chapter XI affords a means of effecting a

composition of unsecured debts of debtors, including corporations.
Chapter X, on the other hand, affords a means for the reorganization
of corporations alone and has special safeguards to protect the in-
terests of public security holders which are not provided in Chapter
XI. The more significant of the proposed amendments would permit
the Commission to appeal in a Chapter X proceeding if leave to appeal
is granted by the appropriate Court of Appeals; make Chapter XI of
the Bankruptcy Act unavailable to corporations whose outstanding
securities are beneficially owned by more than 100 persons; permit
the district judge to transfer proceedings brought under Chapter XI
of the Bankruptcy Act to Chapter X upon application of a party in
interest or the Commission, if the judge finds that the interest of
creditors and stockholders would best be served by a Chapter X pro-
ceeding; and allow the judge in a Chapter X proceeding to approve
a plan of reorganization which provides for less than full compen-
sation to certain types of creditors, other than public investors, as is
now permitted in a proceeding under Chapter XI. '
These proposals were introduced in the House of Representatives
by Representative Emanuel Celler of New York, Chairman of the
Committee on the Judiciary as H. R. 11585-,H. R. 11586, H. R.
11587, H. R. 11588, H. R. 11589, H. R. 11590, H. R. 11591, H. R.
11592, and H. R. 11593 and were referred to the Committee on the
Judiciary. They were referred to the Judicial Council of the United
States Courts for review and a conference was held by the Commis-
sion with the Council in August, 1958, at Denver, Colo. No further
action was taken on these bills by the Congress.
The Commission expects to request further consideration of these
or similar proposals during the 86th Congress.
Other Legislative Proposals
H. R. 11050, introduced by Representative Abraham Multer of
New York, would remove the exemption provided by section 3 (a)
(11) of the Securities Act for a security offering confined to the resi-
dents of the state within which the issuer is both incorporated and
doing business. The Commission has not submitted its views on this
proposal. No hearings have been held on the bill.
H. R. 7671, which was introduced by Representative John Flynt
of Georgia and enacted into law, amends Section 116 (4) of Chapter
X of the Bankruptcy Act by depriving the district judge of power
to enjoin a lessor or conditional seller of aircraft equipment from
commencing a foreclosure action against an air carrier operating pur-
suant to a certificate of convenience and necessity issued by the Civil
Aeronautics Board. Since the assets of air lines consist principally of
equipment, the practical effect of the bill is to make reorganization
under Chapter X unavailable to certified corporate airline carriers
which lease their equipment or purchase it under conditional sales
contract. The Commission therefore filed a comment with the Con-
gress opposing this hill, as well as a companion bill, S. 2205, intro-
duced in the Senate by Senator John Butler of Maryland. The
Commission pointed out that the primary purpose of Chapter X
is to maintain the debtor as a going concern in order to protect the
public security holders, and that this is accomplished in part by
empowering the judge to restrain efforts to dismember the business
while the reorganization is in process.
The Commission devoted a substantial amount of time to matters
pertaining to other legislative proposals referred to it for comment.
During the fiscal year, a total of fifty-eight legislative proposals were
analyzed, as compared with thirty-three during the preceding fiscal
year. In addition, numerous congressional inquiries relating to mat-
ters other than specific legislative proposa:ls were received and
answered."
Congressional Hearings
Small Business Subcommittee of the Senate Committee on Bank-

ing and Currency.-On April 28, 1958, Chairman Gadsby and other
members of the Commission appeared before the Small Business
Subcommittee of the Senate Committee on Banking and Currency
which was considering a number of bills designed to furnish financial
assistance to small business," The Commission had previously fur-
nished the Committee with comments on S. 2160, S. 2185, S. 2286 and
S. 3191 and consequently the Chairman restricted his comments to
S. 3643 and S. 3651 which were the focal point of the hearings. The
latter bills provided for the establishment of small business invest-
ment companies for the purpose of providing financial assistance to
small business concerns, and for the regulation of certain aspects of
the organization and management of such proposed investment com-
panies. Under both S. 3643 and S. 3651 the small business investment
companies would be authorized to purchase convertible debentures of
small business concerns and would obtain funds with which to make
the purchase by issuing their own securities to the public and by
borrowing funds from the Federal government.
S. 3643 provided an outright exemption from the Securities Act
and the Investment Company Act for the proposed small business
investment companies. S. 3651 granted the Commission authority to
• No action was taken In the second session or the 85th Congress with respect to the
proposals to Increase the registration fees under the Securities Exchange .Act or 1934 and
to Increase to '500,000 the exemptive limit or Section 3 (b) or the Securities Act or 1933
which were passed by the Senate and are discussed at pages 12-13 and 15 or the 23rd
Annual Report.
• Hearings betore a Subcommittee or the Commlttes on Banking and Currency, United
States Senate, 85th Congress, 2d Session, April 21, 22, 23, 24, 25, 28, 29, 30 : May I, and 2,
1958, pp. 195-233.
exempt, by rule or regulation, from the provisions of the Securities

Act and the Trust Indenture Act, securities issued by the small busi-
ness investment companies. The Commission opposed the exemptions
granted by S. 3643, pointing out the need for disclosure to investors
of information necessary for the formulation of an informed judgment
J,S to the investment merit of the securities of the small business invest-
ment companies offered to the public. With respect to S. 3651, it was
pointed out that the bill did not establish any definitive standards to
guide the Commission in the exercise of its discretionary exemptive
powers. The Commission was of the further view that the proposed
small business investment companies should be subject to the provisions
of the Investment Company Act, which provides needed additional
protections for investors (see Part IX infra). As S. 3651 was reported
out by the Committee on Banking and Currency and later passed by
the Congress, it made the small business investment companies subject
to the provisions of the Investment Company Act, except for section
18 of that Act, relating to asset coverage :for indebtedness. Authority
to grant exemptions :from the provisions of the Securities Act and the
Trust Indenture Act remained unchanged in the final draft.
Suhcommittee on Legislative Oversight of the House Committee
on Interstate and Foreign Commerce.-Since June 1957, all phases
of the Commission's activities have been under study and investigation
by the Special Subcommittee on Legislative Oversight o:f the House
Committee on Interstate and Foreign Commerce. The Subcommittee
was organized in 1957, after Speaker Rayburn had recommended that
the Committee on Interstate and Foreign Commerce set up a Subcom-
mittee with authority to go into the administration of the laws by
agencies subject to the oversight of the House Committee on Interstate
and Foreign Commerce, "to see whether or not the law as we intended
it is being carried out or whether a great many of these laws are being
repealed or revamped by those who administer them." 4
The Chairman and members of the Commission, as well as several

members of the Commission's staff, appeared before the Subcommittee
during January and June of 1958. In addition, the Commission has
furnished the Subcommittee with answers to several detailed ques-
tionnaires. At least one attorney :from the Subcommittee's staff has
been working on matters involving this Commission on a full-time
basis since September 1957, and the Commission has :furnished working
space to the Subcommittee for the convenience of its staff. The Com-
mission has cooperated with the Subcommittee in every possible way,
devoting approximately 10,000 man hours to the inquiry, which was
still pending at the end of the fiscal year.
• Congressional Record, February 5, 1957, p. 1383.

During its investigation the Subcommittee has inquired into various
matters including questions whether certain inadequacies exist in the
Acts administered by the Commission and budgetary limitations upon
the Commission's ability to act, its conduct of particular cases, its in-
ternal administrative policies, and its relationships with other
branches of government. During June and July of 1958, the Subcom-
mittee conducted lengthy hearings on the conduct of the Commission
in the case of S. E. O. v. The East Boston Oompany (reported at page
124 of the Twenty-Second Annual Report). The Commission ap-
peared only once during these hearings,"
• Since the end of the fiscal year the Commission made three additional appearances
before the Subcommittee on September 16, 17 and 18 to complete Its testimony In tbe
East Boston. Company case and to dtscuss other matters.
PART ill
REVISION OF RULES AND FORMS

The Commission maintains a continuous program of reviewing its
rules and forms under the various statutes administered by it in order
to determine whether any changes are appropriate in the light of
changes in techniques and conditions in the securities field. Certain
members of the staff are assigned the task of maintaining an overall
review of rules and forms, and the need for changes therein are
brought to the attention of the Commission. Changes are also sug-
gested, from time to time, by other members of the staff who are
engaged in the examination of material filed with the Commission, as
well as by persons outside of the Commission, such as issuers and
underwriters and their attorneys, accountants or other representatives.
With a few exceptions provided for by the Administrative Procedure
Act, proposed new rules and forms and proposed changes in existing
rules and forms, are published in preliminary form for the purpose of
obtaining the views and comments of interested persons, including
issuers and various industry groups. During the 1958 fiscal year, the
Commission published a number of proposed changes for comment
and adopted certain other changes in its rules and forms. These are
described below.'
THE SECURITIES Acr OF 1933
Proposed Revision or Rule 133
Rule 133 provides in general that for the purpose of determining

the application of the registration and prospectus provisions of Section
5 of the Securities Act, no "offer" or "sale" shall be deemed to be
involved so far as stockholders of a corporation are concerned, where,
pursuant to provisions of a statute or the certificate of incorporation
there is submitted to the vote of such stockholders a plan involving a
statutory merger, consolidation, reclassification of securities or
1The rules and regulations of the Commission are published in the Code of Federal
Regulations, tbe rules adopted under the various Acts administered by the Commission
appearing in the following parts of Title 17 of that Code:
Secur1ties Act of 1933, part 230.
Securitles Exchange Act of 1934, part 240.
Public Utility Holding Company Act of 1935, part 250.
Trust Indenture Act of 1939, part 260.
Investment Company Act of 1940, part 270.
Investment Advisers Act of 1940. part 275.
14
transfer of assets of the corporation in consideration of the issuance
of securities of another corporation.
On October 2, 1956, the Commission invited comments on a pro-
posal, the effect of which would have been to rescind rule 133 and to
provide that transactions of the character referred to in the rule
involve an "offer" and "sale" of a security subject to the registration
and prospectus provisions of the Act," The Commission received
numerous comments and a public hearing was held on January 17,
1957. On March 15, 1957, the Commission announced that it was
deferring action on the proposal pending further study of the problem
and questions raised and that any future modification of the rule
would be undertaken only after opportunity for further public
commentthereon.
On September 15, 1958the Commission issued a release S which re-
cited that its staff had been engaged in a comprehensive review of
all relevant legislative and other statutory materials, prior Commis-
sion and staff actions, and the views expressed by those who appeared
at the Commission's public hearing on the 1956proposal or had other-
wise commented on the question, and that on the basis of this study
the staff had recommended that the Commission abandon the 1956
proposal for revision of Rule 133, restate the purpose and effect of
Rule 133, and adopt rules designed to clarify the applications and
limitations of the rule.
The release invited comment on a proposed amendment of the rule
designed to implement the recommendations of the staff. This amend-
ment would retain the existing rule but would incorporate into it
certain additional provisions which would make clear that registra-
tion is required in certain cases where a public distribution of securi-
ties initially required in transactions exempted by the rule is subse-
quently made by a person defined as a statutory underwriter. The
release stated that there was in preparation a proposed form which
could be used for registration of securities issued in distribution
transactions of the character referred to in the proposed amended
rule.
~dmenlofRw&134and433
Rule 134 specifies the information required and the information
permitted to be included in an advertisement which is not deemed to
be a prospectus with respect to a security when published or trans-
mitted to any person after a registration statement has been filed.
Rule 433 relates to the use of preliminary prospectuses prior to the
effective date of the registration statement. Both of these rules re-
• Securities Act Release No. 8698.

• Securities Act Release No. 89611.
16 SECURITIES AND EXCHANGE CO:MMISSION
quire the inclusion of legends calling attention to the fact that a reg-
istration statement has been filed and cautioning the reader that offers
or sales may not be made until there has been compliance with State
and Federal requirements. These rules were amended during the fiscal
year to make minor verbal changes in the required legend to avoid con-
flict with the wording of the legend required by State securities admin-
istrators and make possible the use in such advertisements and pre-
liminary prospectuses of a single legend meeting both Federal and
State requirements.'
Proposed Rule Changes Relating to Assessable Stock
During the fiscal year the Commission invited public comments on

a proposed new Rule 136 and a proposed amendment of Rule 140 with
respect to assessable stock and the levying of assessments thereon." In
connection with these proposals the Commission is also considering
further changes in its exemption rules under the Act so that the levy-
ing of small amounts of assessments may be effected pursuant to an
exemption, upon appropriate terms and conditions, from registration
under the Act. Action on the proposed new Rule 136 and the proposed
amendment of Rule 140 has been deferred pending the publication of
proposed rule changes to provide such exemption and consideration of
comments thereon.
The proposed new Rule 136 would operate to make the levying-of
assessments on assessable stock subject to the disclosure requirements
of the Act, either by way of registration under the Act or through
compliance with the terms and conditions of an appropriate exemp-
tion which is presently under study by the staff. The amendment to
Rule 140 is intended to clarify its application and specifically define
as an underwriter any company which is chiefly engaged in levying
assessments on its assessable stock in order to purchase the securities
of another issuer or of two or more affiliated issuers.
The above proposals are being considered because of continuing
complaints received by the Commission from the public as to the exist-
ence of abuses in connection with the levying of assessments by various
companies on their outstanding assessable stock. Certain companies
having assessable stock outstanding continue to levy assessments
against their stockholders without disclosing the status of the com-
pany or the purpose for which the proceeds are to be used. In some
instances stockholders who seek to obtain information from their com-
panies receive very little information or even meet with a flat refusal
by company officials to furnish any information whatever. It appears
that in some cases proceeds received from the assessments will not be
• Secnritles Act Release No. 38811(January 7, 19(8) •

• Secnrltles Act Release No. 3903 (March II, 19(8).
productive of any present or potential benefit to the stockholders
against whom they are levied. In fact, some such companies appear to
be operated largely, if not solely, for the personal benefit of insiders.
There are indications that some companies having assessable stock
outstanding are being used as vehicles for raising funds for other
companies which are unable or unwilling to seek funds directly from
the public.
Amendment of Rule 161
Rule 161 provides that securities offered in conformity with the

rules and regulations under section 3 (b) of the Act may continue
to be offered in accordance with the rules and regulations in effect
at the time the offering commenced, notwithstanding subsequent
amendments to such rules and regulations. This rule was amended
during the fiscal year to provide that it shall not apply to offers
after January 1, 1959 of securities under Regulation D, which was
rescinded July 23, 1956, or under Regulation A as in effect prior
to its revision on July 23,1956.6 The purpose of the amendment was
to require any offerings under the previously existing Regulation
A or D to comply with the revised Regulation A if the offering is
continued after January 1, 1959.
Amendments to Regulation A
Regulation A provides an exemption from registration for issues

of securities not in excess of $300,000which are offered in accordance
with the terms and conditions of the regulation. A number of amend-
ments to this regulation were adopted during the fiscal year.' One
of these amendments provides that where the securities to be offered
are interests in an unincorporated real estate syndicate there need
not be included in computing the amount of securities which may
be offered, the amount of interests in other unincorporated real estate
syndicates affiliated with the issuer. Another amendment to the regu-
lation provides procedures for the filing of amendments to notifica-
tions and for the withdrawal of such notifications. There was also
added a requirement that underwriters must furnish a certification
that the information given in the notification and in the offering
circular with respect to underwriters, their directors, officersor part-
ners is accurate and complete and does not omit any required informa-
tion or any information necessary to make the statements made not
misleading. The remaining amendments were chiefly of a technical
or clarifying nature.
• Securities Act Release No. 3935 (;ruue 11,1958).

• Securities Act Release No. 3935 (;rune 11, 1958).
486867-59-3
Revision of Fol'llUlS-2 and S-3

During the fiscal year revisions of Forms 8-2 and 8-3 were
adopted," Form 8-2 is used for registration under the Securities Act
of securities of commercial and industrial companies in the promo-
tional and development stage. Form 8-3 is a similar form for min-
ing companies in the exploratory or development stage. The revi-
sions were for the purpose of bringing the forms up-to-date in the
light of the Commission's experience and current administrative prac-
tice. Form 8-11, another form for mining companies in the ex-
ploratory stage, was merged into Form S-3 so that there is now only
one form for use by this type of mining company.
Amendment of Forms S-4 and S-5
These forms are used for registration under the Securities Act of
securities of investment companies registered under the Investment
Company Act of 1940. A registration statement on either of these
forms includes certain of the information and documents which would
be required in a registration statement under the Investment Com-
pany Act of 1940 if such a statement were currently being filed.
Forms 8-4 and S-5 were amended during the fiscal year to adapt the
requirements of these forms to the Commission's amended Form
N-8B-1, described below, which is the corresponding basic form for
registration under the Investment Company Act,"
THE SECURITIES EXCHANGE Acr OF 1934
Amendment of Rule lSb-8

Rule 15b-8 requires every broker-dealer who files an application for
registration to file with his application duplicate original statements
of financial condition disclosing, as of a date within 30 days of such
filing, the nature and amount of his assets, liabilities and net worth.
The amendment, effective September 15,1957, deleted from the rule an
exemption from this requirement formerly available to a partnership
succeeding to and continuing the business of another partnership reg-
istered as a broker-dealer at the time of such succession.w
Adoption of Rule lSd-20
During the fiscal year the Commission adopted a new rule, desig-
nated rule 15d-20, which provides for the granting of an exemption
from the reporting requirements of section 15 (d) of the Act to cer-
tain issuers,v
• Securities Act Releases Nos. 8828 and 8829 (August 19, 1957).
• Securities Act Release No. 3854 (October 30,1957) •
.. Securities Exchange Act Release No.lili60.
U Securities Exchange Act Release No.li692 (May 6, 1958).
Section 15 (d) requires each issuer of securities registered under
the Securities Act of 1933 to include in its registration statement an
undertaking to file annual and other periodic reports corresponding
to those required to be filed pursuant to-section 13 by issuers having
securities listed and registered on a national securities exchange, if
the aggregate offering price of the issue covered by the registration
statement plus all of the outstanding securities of the same class,
computed on the basis of the offering price, amounts to $2,000,000or
more. The obligation to file reports is suspended under certain con-
ditions not pertinent here.
The new rule provides that the Commission may, upon application
and subject to appropriate terms and conditions, exempt an issuer
from the duty to file such reports if the Commission finds that all of
the outstanding securities of the issuer are held of record, that the
number of such record holders does not exceed 50 persons and that
the filing of such reports is not necessary in the public interest or
for the protection of investors.
The exemption expires if any of the issuer's securities cease to be
held of record, if the number of record holders increases to more
than 50 persons, or if the issuer fails to comply with any of the
terms or conditions upon which the exemption was granted. Provi-
sion is also made for termination of the exemption by the Commis-
sion, after an opportunity for a hearing, if the Commission finds
the termination to be necessary or appropriate in the public interest
or for the protection of investors.
Amendment of Rule 17a-3
Rule 17a-3 specifies the books and records required to be main-

tained and kept current by certain members, brokers and dealers.
The amendment, effective July 1, 1958/2 requires such persons to
prepare and maintain a record of the proof of money balances of all
ledger accounts in the form of trial balances currently at least once
a month.
Amendment of Rule 17a-5
Rule 17a-5 designates the members, brokers and dealers required

to file reports of financial condition containing the information called
for by Form X-17A-5, specifies the time when such reports must
be filed, and provides certain other requirements with respect to such
reports. Prior to the amendment, paragraph (a) required each mem-
ber, broker and dealer subject to the rule to file the report within each
calendar year, except that reports for any two consecutive years could
a SecurIties Exchange Act Release No. 117011.

not be filed within less than four months of each other. As amended,
this paragraph requires the report to be filed as of a date within each
calendar year, except that the first report (by others than successors)
must be as of a date not less than one nor more than five months after
the member, broker or dealer becomes subject to the rule. It also
provides that a member, broker or dealer who succeeds to and con-
tinues the business of a predecessor need not file a report as of that
year if the predecessor has filed the required report as of that year.
Paragraph (b) (1) of the rule describes the circumstances under
which a report must be certified. Prior to the amendment, there
was an exemption from the certification requirements for a mem-
ber, broker or dealer who was not required to file a certified financial
statement with any State agency or any national securities exchange
and who, during the preceding calendar year, had not made a prac-
tice of extending credit to or holding funds or securities for cus-
tomers except as an incident to transactions promptly consummated
by payment or delivery. The amendment to this paragraph pro-
vides that every Form X-17A-5 report must be certified by an in-
dependent accountant unless one of three limited exemptions is avail-
able. The first exemption is for a member of a national securities
exchange who, from the date of his previous report, has not trans-
acted business with the public, has not carried any margin account,
credit balance or security for any person other than a general partner,
and has not been required to file a certified financial statement with
any national securities exchange. The second exemption is available
to a broker whose securities business is so limited that he has been
exempt from the Commission's aggregate-indebtedness-net-capital-
ratio rule 15c3-1. The third exemption is for a broker or dealer
whose securities business has been limited to buying and selling evi-
dences of indebtedness secured by liens on real estate and who has
not carried margin accounts, credit balances or securities for securi-
ties customers."
Amendments to Form 8-C
Form 8-C is used for registration under the Act of a class of securi-
ties on a national securities exchange on which the registrant has no
securities registered, if such class is already listed and registered on
another national securities exchange. An application on Form 8-C
consists chiefly of copies of applications, reports and proxy state-
ments filed with the original exchange, together with copies of the
required exhibits. This form was amended during the fiscal year to
provide for a considerable reduction-in the amount of material re-
quired to be filed in cases where the issuer intends to continue list-
11 Securities Exchange Act Release No, 5560.

TWENTY -FOURTH ANNUAL REPORT 21
ing and registration of the securities on the original exchange>
Certain other changes in wording were also made in the form in
the interest of clarity.
Proposed Amendments to Form 8-K
During the fiscal year the Commission invited public comments
on certain proposed amendments to Form 8-K which is the form
prescribed for current reports filed pursuant to sections 13 and 15
(d) of the Act.15 The proposed amendments relate to Item 11 of
the form which requires information in regard to matters submitted
to a vote of security holders either at a meeting of such security
holders or otherwise. The purpose of the proposed amendments is
to clarify the item and the instructions thereto in certain respects.
The matter was still under consideration at the end of the fiscal
year."
Amendment to Form X-17 A-I
Form X-17A-1 is the form required to be used under rule 17a-2
by a "manager" of a distribution of securities and by other persons
subject to the rule who have a participation in an account for which
stabilizing purchases are effected. The amendments to the form
consist of a restatement of the instructions for use of the form, to
simplify and clarify its use, and of a requirement that the totals
of certain reported transactions be shown."
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Rescission of Rule 9
On March 14, 1957 the Commission issued notice of It proposal
to rescind rule 9, which provides for the exemption of holding com-
pany systems having gross utility revenues not over $350,000 for
the preceding calendar year or having net utility assets not
over $1,000,000 currently or at December 31, 1946.18 After care-
ful consideration of all the data, views and comments received in
response to its notice, the Commission concluded that adequate legal
basis for such exemption was lacking, and, on February 5, 19!'i8,
announced the rescission of the rule." The effective date of the
rescission, initially fixed at September ~O, IVfJ8,was postponed to
December 31, 1958.20
1< Securities Exchange Act Release No. 5701 (May 26,1958).

U Securities Exchange Act Release No. 5699 (May 20, 1958).
18 The amendments were adopted shortly after the end of thc IIscal year. See Securities
Exchange Act Release No. 5734 (July 16, 1958).
It Securities Exchange Act Release No. 5638.
B Holding Company Act Release No. 13414.
B Holding Company Act Release No. 13670.
• Holding Company Act Release No. 13833.

Amendment of Rule 70
During the fiscal year, the Commission amended rule 70 promul-
gated under the Public Utility Holding Company Act of 1935. Sec-
tion 17 (c) of that Act prohibits any registered holding company
or any subsidiary company thereof from having as an officer or
director any executive officer, director, partner, appointee or repre-
sentative of any bank, trust company, investment banker, or banking
association or firm except as permitted by rules and regulations of
the Commission as not adversely affecting the public interest or the
interest of investors or consumers. Rule 70 defines those persons
or situations to which the Commission has granted- exception from
section 17 (c). Prior to the adoption of the amendment the rule
provided in effect that no holding company or subsidiary could have
as many as one-half of its directors persons with financial connec-
tions within the scope of section 17 (c). After issuing a notice of
proposal to amend the rule and requesting comments thereon," the
Commission adopted the amendment as circulated for comment;" As
amended, the rule exempts from the "less than one-half" limitation
a person whose only financial connection is that of a director, and
who is not an officeror employee, of one or more commercial banks
each having combined capital and surplus not in excess of $2,500,000
and who proposes to act as a director, but not as an officer or em-
ployee, of a registered holding company or subsidiary which is a
public utility company. In no event, however, may the number of
directors with financial connections proscribed by section 17 (c) ex-
ceed two-thirds of the total.
THE INVESTMENT COMPANY ACT OF 1940
Amendment of Rule 5
On October 25, 1957,the Commission adopted a clarifying amend-
ment to rule 5 under the Act.23 This rule provides a simplified gen-
eral procedure designed to expedite the disposition of proceedings,
initiated by application or upon the Commission's own motion, pur-
suant to any section of the Act or any rule or regulation thereunder
except in cases involving sections of the Act where specified rules
prescribe a different procedure. Paragraph (c) of the rule prior to
the amendment was subject to the interpretation that the Commission
was required to order a hearing on a matter upon the request of any
interested person whether or not it appeared that a hearing was
necessary or appropriate. The amended rule makes it clear that the
Commission will order a hearing only if it determines that such is
.. Holding Company Act Release No. 13530 (August 19, 1957).

II Holding Company Act Release No. 13585 (November 4, 1957).
II Investment Company Act Release No. 2620.

necessary or appropriate in the public interest or for the protection
of investors.
Proposal to Adopt Rule 10F-3
In a proposed rule considered during the fiscal year the Commis-
sion sought, among other things, to alleviate the problems and ad-
ministrative burdens involved in processing applications for
exemptions under section 10 (f), particularly in view of the tight
time schedules usually present in these cases. Notice of this pro-
posal was issued on July 15, 1958.24
Section 10 (f) of the Act provides that an investment company,
unless exempted by rule, regulation or order, is prohibited from
purchasing a security during the existence of an underwriting syndi-
cate, if any of the principal underwriters are affiliated persons of the
investment company. As a consequence, in such cases investment
companies must either first obtain an exemptive order of the Com-
mission or purchase the securities conditioned on obtaining such
exemptive order within such periods of time as a particular under-
writer might be willing to grant even though extending beyond the
date of the public offering. The proposed rule would permit the
investment company to make such purchases under certain condi-
tions without having to obtain an order of exemption.
The experience of the Commission in its consideration of requests
for orders of exemption under its exemptive authority over the years
indicates that the protection of investors in such situations may be
adequately insured by the conditions and safeguards specified in the
rule. These include limitations with respect to the consideration paid,
as related both to the 'amount of the offering and the assets of the
investment company, the amount of underwriters' commissions, pur-
chases from an affiliated underwriter, and effective registration of the
offering under the Securities Act of 1933. These conditions are de-
signed to permit purchases where the circumstances are such as to
make it unlikely that such purchases would not be consistent with
the protection of investors.
Comments received on the proposal unanimously favored adoption
of the rule although they included a number of suggestions for modi-
fication of the conditions and prerequisition contained therein.
The Commission has taken the various comments under advisement,"
Proposal to Adopt Rule 220-1
On May 28, 1958, the Commission issued notice of a proposal to
adopt Rule 22D-l relating to permissible variations in the sales charge
.. Investment Company Act Release No. 2744.

'" The Commission adopted RnIe 10F-3 on December 2, 1958. Investment Company Act
Release No. 2797.
made upon the sale of redeemable securities of registered investment

companies." This action followed a comprehensive review of. t~e
legislative history of section 22 (d) of the Act, and all past adminis-
trative interpretations and exemptive orders issued under that sec-
tion.
Section 22 (d) prohibits a registered investment company, its prin-
cipal underwriter or a dealer in its shares from selling such shares
to any person except at a current public offering price described in
the prospectus. Its purpose is to prevent discrimination among pur-
chasers and to provide for the orderly distribution of such shares
by preventing their sale at a price less than that fixed in the pro-
spectus.
One objective of the proposed rule is to lessen the burden on the
Commission and the industry of preparing and processing exemp-
tion applications under section 6 (c) in cases identical to those where
such relief had been previously granted. An equally important ob-
jective of the rule is to codify and make public the Commission's
interpretation of section 22 (d), made on a case-by-case basis over
the past years, with such changes as believed necessary, and thus
ensure uniform compliance with its provisions.
The proposed rule would require some changes in current industry
practices, particularly with respect to the availability of so-called
"quantity discounts" for group purchases. The Commission in 1941
determined that section 22 (d) permitted the sale of an investment
company's redeemable securities to be made to "any person" on the
basis of a scale of reducing prices dependent upon the quantity of
shares purchased at a single time. Thereafter, the term "any per-
son" was construed to include a trustee or other fiduciary, or a cus-
todian or agent purchasing for more than one account. It was
particularly noted that the prohibitions of the statute apply only
to an investment company, its underwriters, and dealers in its shares,
and not to individuals who might form a group, such as members
of a medical society or college faculty, to purchase through an agent
in a quantity sufficient to entitle them to a discount.
A review of industry practices and complaints, showed a growing
tendency on the part of investment companies, underwriters and
dealers to organize, promote or solicit the formation of such groups.
Such activity raises a serious question as to whether these persons
were not in fact creating a favored "class" of individuals to effect
sales at a price less than that generally available to other members
of the public purchasing a like number of shares, contrary to the
purpose and intent of section 22 (d).
"Im"estment Company Act Release No. 2718.

ill addition, such sales made to the group's agent or 'representative,
as opposed to a fiduciary with investment discretion, 'involve the
danger that prospectuses will not be furnished to all members of
the group, contrary to the requirements of the Investment Company
Act of 1940 and the Securities Act of 1933.
The proposed rule would ,limit the granting of a quantity discount
to (i) a single individual purchasing shares with his own funds for
himself or as a gift to others, or (ii) a trustee or other fiduciary
purchasing for a single trust estate, although there may be more
than one beneficiary.
Another change in current practices which the proposed rule would
require relates to the use of so-called "letters of intent" pursuant
to which a purchaser is entitled to 'receive the discount applicable
to the total quantity of shares purchased within a stated period,
usually 13 months. The proposed rule does not sanction this method
of pricing, and the Commission stated that it was tentatively of the
opinion that the mere intent to purchase shares in the future would
not be a sufficient basis for computing a quantity discount.
The proposed rule also does not include any provision permitting
sales at reduced sales loads to officersand employees of an investment
company, its principal underwriter, and its investment adviser. The
Commission in the past has issued orders exempting such sales where
made for investment purposes, on the ground that they promoted
employee incentive and good will. The Commission's release an-
nouncing the proposed rule stated that upon reconsideration of this
matter it was tentatively of the opinion that the business purposes
to be served by reduced sales loads to such persons are insufficient to
warrant continuation of this practice in the light of the policy and
intent of section 22 (d).
Over forty-five comments were received in response to the Com-
mission's notice. Most of the comments favored adoption of the
rule, although there was strenuous objection to its failure to sanction
use of letters of intent and a number of suggestions were made for
changes in language. Some comments also contended that the Com-
mission should continue to sanction sales to employees of investment
companies at a reduced sales load.
The Commission heard oral argument on the proposed rule on
July 23, 1958, and took the matter under advisement."
:rr Upon reconsideration, the Commission determined to include provisions in the rule
permitting sales at a reduced sales load pursuant to letters of intention and to officers
and employees of an Investment company, Its underwriter and Investment adViser subject
to appropriate safeguards. The Commission adopted RUle 22D-1 on December 2, 1958.
Investment Company Act Release No. 2798.
Amendments to Form N-8B-I

Form N-8B-1 is prescribed for registration statements filed under
the Act by all management investment companies except those which
issue periodic payment plan certificates. This form was amend~d
during the fiscal year to require the furnishing of a table which In
effect shows on a per-share basis a ten-year comparative summary of
earnings and capital changes together with certain ratios." It is the
purpose of the new requirement to provide for investors a more
informative presentation of the operations of the registrant than
was provided by the table required previously.
OTHER MA1TERS
Amendments to Statement of Policy Relating to Investment Company Sales

Literature
The Commission, during the 1958 fiscal year, adopted certain
amendments to its Statement of Policy relating to sales literature
used by investment companies registered under the Investment Com-
pany Act of 1940.29 The Statement of Policy is designed to serve
as a guide for issuers, underwriters and dealers in the preparation of
such sales literature so as to avoid violation of the anti-fraud pro-
visions of section 17 of the Securities Act of 1933. It was adopted in
1950 and was amended in 1955. The amendments adopted during
the past fiscal year were published in preliminary form and a public
hearing was held thereon. The amended Statement of Policy per-
mits a more liberal use of charts and tables, provided they meet
certain standards of disclosure and arrangement.
Proposed Amendment of Rules Regarding Incorporation by Reference
The rules of the Commission permit filings with the Commission
to incorporate by reference rather freely papers and documents pre-
viously filed with the Commission under the same statute or under
different statutes administered by the Commission. This practice,
however, has interfered with the Commission's disposal of out-of-
date records since many filings made in recent years incorporate by
reference papers and documents filed in earlier years. As a necessary
step to conforming the Commission's Records Program to the overall
Federal Records Legislation, the Commission, during the 1958 fiscal
year, published for comment certain proposed amendments to its
rules regarding incorporation by reference." The effect of the pro-
posed amendments would be to limit incorporation by reference to
documents which have been in the Commission's files not more than
IIIInvestment Company Act Release No. 2618 (October 30, 1957) •

.. Securities Act Release No. 3856 (October 31,1957) •
.. Securities Act Release No. 3867 (December 2, 1957).
10 years, and to require reference to specific prior filings. This time
limit would remove one of the conditions which now prevent the :final
disposition of many original records, and the specific filing reference
would substantially reduce the research now necessary to assemble
previously filed documents for consideration in connection with cur-
rent filings. A number of letters of comment were received in regard
to the proposed amendments which pointed out certain practical dif-
ficulties which such amendments might create. At the end of the
fiscal year, the staff was preparing for the Commission's consideration
a revised proposal which would accomplish the objective desired and
would also obviate the mechanical problems indicated in the com-
ments.
PART IV
ADl\DNISTRATION OF THE SECURITIES ACT OF 1933
The Securities Act of 1933 is designed to provide disclosure to
investors of material facts concerning securities publicly offered for
sale by use of the mails or instrumentalities in interstate commerce,
and to prevent misrepresentation, deceit, or other fraudulent prac-
tices in the sale of securities. Disclosure is obtained by requiring
the issuer of such securities to file with the Commission a registration
statement and related prospectus containing significant information
about the issuer and the offering. These documents are available for
public inspection as soon as they are filed. The registration state-
ment must become "effective" before the securities may be sold to the
public. In addition the prospectus must be furnished to the pur-
chaser at or before the sale or delivery of the security. The regis-
trant and the underwriter are responsible for the contents of the
registration statement. The Commission has no authority to control
the nature or quality of a security to be offered for public sale or to
pass upon its merits or the terms of its distribution. Its action in
permitting a registration statement to become effective does not con-
stitute approval of the securities, and any representation to a prospec-
tive purchaser of securities to the contrary is made unlawful by Section
23 of the Act.
DESCRIPTION OF THE REGISTRATION PROCESS

Registration Statement and Prospectus
Registration of any security proposed to be publicly offered may
be effected by filing with the Commission a registration statement on
the applicable form containing prescribed disclosures. When a reg-
istration statement relates, generally speaking, to a security issued,
by a corporation or other private issuer, it must contain the informa-
tion, and be accompanied by the documents, specified in Schedule A
of the Act; when it relates to a security issued by a foreign govern-
ment, the material specified in Schedule B must be supplied. Both
schedules specify in considerable detail the disclosure which should
be made available to an investor in order that he may make an in-
formed decision whether to buy the security. In addition, the Act
provides flexibility in its administration by empowering the Com-
mission to classify issues, issuers and prospectuses, to prescribe ap-
28
propriate forms, and to increase or in certain instances vary or
diminish the particular items of information required to be disclosed
in the registration statement as the Commission deems appropriate
in the public interest or for the protection of investors.
In general the registration statement of an issuer other than a
foreign government must describe such matters as the names of per-
sons who participate in the direction, management, or control of the
issuer's business; their security holdings and remuneration and options
or bonus and profit-sharing privileges alloted to them; the character
and size of the business enterprise, its capital structure, past history
and earnings, and its financial statements, certified by independent
accountants; underwriters' commissions; payments to promoters made
within two years or intended to be made; acquisitions of property not
in the ordinary course of business, and the interest of directors, officers,
and principal stockholders therein; pending or threatened legal pro-
ceedings; and the purpose to which the proceeds of the offering are to
be applied. The prospectus constitutes a part of the registration
statement and presents the more important of the required disclosures.
Examination Procedure
The staff of the Division of Corporation Finance examines each
registration statement for compliance with the standards of accurate
and full disclosure and usually notifies the registrant by an informal
letter of comment of any material respects in which the statement
appears to fail to conform to those requirements. The registrant is
thus afforded an opportunity to file a curative amendment. In addi-
tion, the Commission has power, after notice and opportunity for
hearing, to issue an order suspending the effectivenessof a registration
statement. In certain cases, such as where a registration statement is
so deficient as to indicate a willful failure to make adequate disclosure,
no letter of comment is sent and the Commission either institutes an
investigation to determine whether stop-order proceedings should be
instituted or immediately institutes stop-order proceedings. Informa-
tion about the use of this "stop-order" power during 1958 appears
below under "Stop Order Proceedings."
Time Required to Complete Registration
Because prompt examination of a registration statement is im-
portant to industry, the Commission completes its analysis in the
shortest possible time. Congress provided for 20 days in the ordinary
case between the filing date of a registration statement or of an amend-
ment thereto and the time it may become effective. This waiting
period is designed to provide investors with an opportunity to become
familiar with the proposed offering. Information disclosed in the
registration statement is disseminated during the waiting P?ri?d ~y

means of the preliminary form of prospectus. The COmmISSIOnIS
empowered to accelerate the effective date so as to shorten the 20-day
waiting period where the facts justify such action. In exercising
this power, the Commission is required to take into account the ade-
quacy of the information respecting the issuer theretofore available
to the public, the facility with which investors can understand the
nature of and the rights conferred by the securities to be registered,
and their relationship to the capital structure of the issuer, and the
public interest and the protection of investors. The note to Rule
460 under the Act indicates, for the information of interested per-
sons, some of the more common situations in which the Commission
feels that the statute generally requires it to deny acceleration of the
effective date of a registration statement.
The median time which elapsed between the date of filing and the
effective date with respect to 685 1 registration statements that be-
came effective during the 1958 fiscal year was 24 days, compared with
23 days for the 1957 and 1956 fiscal years. This time was divided
among the three principal stages of the registration process, approxi-
mately as follows:
(a) From the date of filing the registration statement to the date
of the letter of comment, 14 days;
(b) From the date of the letter of comment to the date of filing
the first material amendment, 6 days; and
(c) From the date of filing the first amendment to the date of
filing the final amendment and effective date of registration, 4 days.
All of these periods include Saturdays, Sundays and holidays.
This increased average lapsed time is a matter of concern to the
Commission. It is being carefully watched, and all appropriate steps
are being taken to reduce the time lapse as much as possible, including
steps to cure personnel shortages.
VOLUME OF SECURITIES REGISTERED

Securities effectively registered under the Securities Act during fis-
cal 1958totalled $16.5billion, the highest volume for any fiscal year in
the 24-year history of the Commission. Registrations have more than
doubled since 1953, when $7.5 billion of securities were registered,
reflecting annual increases of at least $1.5 billion. The chart below
shows the dollar amount of effective registrations from 1935 to 1958.
1 Does not include 130 registration statements of investment companies filed and elfec-
tive as post-elfective amendments to previously elfective registration statements pursuant
to section 24 (a) of the Investment Company Act of 1940. The median elapsed time
for these 130 registration statements was 23 calendar days.
VOLUME OF SECURITIES REGISTERED WITH THE S. E. C.

1935.1958
20
(00110,. Billion. )
15
10
o
1935 1940 1945 1950 1955
(Fiscol Yeo,.)
os. 3972
These figures cover all securities effectively registered, including

new issues sold for cash by the issuer, secondary distributions, and
securities registered for other than cash sale, such as exchange trans-
actions and issues reserved for conversion of other securities.
Of the dollar amount of securities registered in 1958, 80.5 percent
was for the account of issuers for cash sale, 18.3 percent for account
of issuers for other than cash sale and 1.2 percent was for account of
others, as shown below:
Account for which securities were registered under the Securities Act of 193:1
during the fiscal year 19.')8 oomparetl with the fiscal yeal's 1957 and 1956
1958 in Percent 1957 in Percent 1956ln Percent

milhons of total rmlhons of total millions of total
-- --- -- --- --
Registered for acconnt of ISSuers for cash sale ____ $13.281 805 $12.019 822 $9.206 703
Registered for account of ISSuers for other than
cash sale. __.. ____. __...... __. _......• _•. ____.. 3,008 183 2,225 152 2,819 21 5
Registered for account of others than the issuers. 201 1.2 380 2.6 1,071 8.2
TotaL .. _...• __.. __. _____• ____• _____• __• __
---
16,490
--
1000
---
14,624
--
1000
---
13,096
--
100 0
The most important category of registrations, issues to be sold for

cash for account of the issuer, amounted to $13.3 billion in 1958, an
increase of about 10 percent over the previous year. Most of the
difference was due to the large volume of debt securities, $6.9 billion
as compared with $5.7 billion in 1957. There was little change in
the amount of either common or preferred stock registered. Of the
1958 volume, 52 percent was made up of debt securities, 45 percent

common stock and 3 percent preferred stock. Close to half of the
total for common stock represented securities of investment companies.
The number of statements, total amounts registered, and a classifi-
cation by type of security for issues to be sold for cash for account of
the issuing company in each of the fiscal years 1935 through 1958 are
shown in appendix table 1. More detailed information for 1958 is
given in appendix table 2.
The classification by industries of securities registered for cash
sale for account of issuers in each of the last 3 fiscal years is as
follows:
1958 In Percent 1957 in Percent 1956 In Percent

millions of tot a! millions of total millions oftota!
-- --- -- --- --
~I annfactnring ......•.......• _•. _.. _.. _. __._ ... $2,239 16 9 $2,674 222 $1,788 194
Mirung , ___._ .... _..•• _... _._ .. __..•••....... _..UO 8 283 24 148 1.6
Electric, g-a.1) and water __________________________
3,373 254 2,951 24. 5 1,802 196
'1'1 ansportatlon, other than railroads ----------- 52 .4 112 9 118 13
Commumcanon ------- 2978 224 2,030 169 1,294 141
----- 2~19 22.0 2,614 21 8 2,890 31 4
Investment COmp3Il1e-S~~ = = ==============_ 952 7.9 852 9.2
Other financial and real estate. _' .........
Trade __..... __....••..
-----
_.. _.. _._ ... _..... _. --.--
1 109
34
84
.2 84 .7 73 .8
Service .. __... __...• __.... _............ _ ------ 29 .2 33 3 41 .4
Construction ... _... _.......... _.... _... ------ --------
2.1 2- ---_.----- ------_. ..
--- --
12,868
969
--- --
11,733 97.6
--- 9,006
--97.8
Forelg~o:~~;=:~~::::::::::: :::: :::::: :::::: 412
31 286 24 200 22
--- -- --- -- --- --
TotaL ., ........ _..... __.... _. __.•.••... _. 13,281 1000 12,019 100.0 9,206 100.0
The investment company issues referred to in the table above were

classified as follows:
1958 ill 1957 in 1956 in

nullions millIOns millions
$2,784 $2,361 $2,675

gro~~j~~J~~J:~:e.~:::
:::::::::::::::::::::::::::
:::::::::::::::: 12 -------.---- 42
Face amount certrfleate compames .....• _•...••....••....••....•... _ 123 253 173
TotaL ..... _....... _......... _...•.•...•.....••..•.•.......•.. 2,919 2,614 2,890
I Periodie payment plans or their underlying securities are included.
Of the net proceeds of the corporate securities registered for cash

sale for the account of issuers in 1958, more than 70 percent was des-
ignated for new money purposes, including plant, equipment, and
working capital, close to 3 percent for retirement of securities, and. 27
percent for other purposes, principally the purchase of securities by
investment companies.
REGISTRATION STATEMENTS FILED

During the 1958 fiscal year, 913 registration statements were filed
for offerings of securities aggregating $16,913,744,964,compared with
943 registration statements filed during the 1957 fiscal year covering
offerings amounting to $14,667,282,319.
Of the 913 registration statements filed in 1958, 254, or 28 percent,
were filed by companies that had not previously filed any registration
statement under the Securities Act of 1933, compared with 305, or 32
percent, of the corresponding total during the 1957fiscal year und 415,
or 42 percent, for the 1956 fiscal year.
The growth in the volume of proposed financing under the regis-
tration provisions of the Securities Act of 1933 is shown by the fol-
lowing tabulation, which reflects a 4-year increase in 1958 of 88 per-
cent over 1954in the aggregate dollar amount of offerings as stated in
the registration statements filed.
Number Number
of state- Aggregate dol- of state- AglITegate dol-
FIscal year
ments
filed
lar amount II FIScal year
ments
filed
Iar amount
1954 ____________________ ]957 ____________________

649 $8, 983, .172,623 ( 943 $14,667,282,319
8i9 11,009,7,7, 113 1958 ------------------- 913 16, 913, 744, 964
J~g~:::::::::::::::::=:1 I 981
1
I d. 097, 787, 623 I
I
A cumulative total of 14,704 registration statements has been filed

under the Act by 6,925 different issuers covering proposed offerings of
securities aggregating almost $151 billion during the 25 years from
the date of the enactment of the Securities Act of 1933 to June 30,
1958.
Particulars regarding the disposition of all registration statements
filed under the Act to June 30, 1958 and the aggregate dollar amounts
of securities proposed to be offered which were reflected in the regis-
tration statements both as filed and as effective, are summarized in
the following table.
Number and disposition of registration statements filed
Prior to July 1, July I, 1957 to Total as of June

1957 June 30, 1958 30, 1958
Registration statements.
FIled _________________________________________
13,791 '913 14,704
Disposition:
EffectIve-net 12,024 2810 • 12, 823
Under stop or-i-;;iusaiorde;-neC_:::::::::: 193 3 196
Wlthdrawn. ______________________________ 1,469 1,540
71
Pending at June 30,1957 __________________ 105 ------------------ -----------------
Pending at June 30,1958 __________________ 145
----------- ------- ----------- - -- ---
Total. ______________________________________
13,791 14,704
Aggregate dollar amount
As filed _______________________________________
As effectlve ___________________________________ $133, 757, 747, 284 $16,913, 744, 964 $150,671,492, 248
$130, 759, 374, 732 $16,489,735,521 $147, 249, 110, 254
I Includes 134 registration statements covermg proposed offerings totalling $2,601,069,370 which were filed
by Investment companies under section 24 (e) of the Investment Company Act of lOW.
I Excludes 5 registration statements that became effective during the year but were withdrawn; these 5
statements are counted In the 71 statements withdrawn during the year.
I Excludes 11 statements that were etfectrve prior to Jnly 1, 1957 but were withdrawn; these 11 statements
are counted m the 71 statements withdrawn during the year.
486867-59--4
The reasons for requesting withdrawal of the 71 registration state-

ments withdrawn during the 1958 fiscal year are shown in the fol-
lowing table:
Number of Percent of
Reason for registrant's withdrawal request statements total with-
withdrawn drawn
1. Withdrawal requested after receipt of staff's letter of comment _________________ 13 19

2. Registrant ad vised that statement should be withdrawn or stop order pro-
ceedlngs would be necessary ________________________________________________ 13 19
3. Change in flnanemg plans __________________________________ • __________________ 16 22
4. Change in market condruons ____• ________________________________ • ___________ 14 m
5. Financing was obtained elsewhere. __________• ___________•• _. _________________ 3 4
6. Regulation A could be used __________________________________ ._. _____________ 3 4
7 Insufflcient funds raised under an escrow agreemenL. ________________________ 5 7
8. Registrant could not comply with the Trust Indenture Act of 1939____________• 1 1
9. Registrant unable to negotiate acceptable underwriting agreement, __________ 3 4
• __
Total. _. ________________________________________________________________
71 100
RESULTS OBTAINED BY THE REGISTRATION PROCESS

As the result of the staff's examination of registration statements,
numerous significant changes were effected in the disclosures made
to the investing public. Among these results were changes in account-
ing presentation, as illustrated by the following examples:
Stock Issued in Exchange for Partnership Assets.-Several part-
ners organized a corporation to which they transferred certain
partnership assets in exchange for some 1,900,000 shares of $1 par
value common stock of the new company. The number of shares
issued was based principally on appraised values assigned to the assets
transferred.
A registration statement was filed by the new corporation in which
its assets were stated at such appraised values. In view of the ab-
sence of an arm's length relationship between the partners and the
corporation the registrant was requested to amend its financial state-
ments so that the assets would be stated on the basis of the cost to
the partners.
As a result of this request the assets were restated and the equity
section of the balance sheet showed as a deduction from the aggregate
par value of shares outstanding about $1,400,000representing the ex-
cess of par value of shares issued and other consideration over in-
corporators' cost of assets acquired at or since incorporation. This
change reduced the total assets of the corporation from $2,700,000to
$1,300,000.
Subsequently the company was recapitalized, with the 1,900,000
shares of $1 par value common stock being converted into 425,000
shares of $1 par value Class A stock, a reduction in capital more than
sufficient to eliminate the excess item from the equity section of the
balance sheet.
Pooling of Interests vs, Purchase Accounting.-The principle of
"pooling of interests" accounting permits the combining of the earned
surplus accounts of companies involved in a merger or combination
and avoids the recording of goodwill or an upward revaluation of
other assets as would be required in many purchase or acquisition
transactions under "acquisition" accounting.
In a recent registration statement in which an exchange offer was
described, acquisition accounting was proposed for the combination
of two companies, of which the proposed parent company was one-
fifth the size of the company being acquired. The smaller company,
which had some 400,000 shares of stock outstanding, was to issue
1,600,000 shares of its $.25 par value common stock for the entire
outstanding stock of the larger company, assigning to its own shares
a value of $2 per share. The prospectus also carried a public offering
of 250,000 shares at a price to net the company $2.10 per share.
As originally proposed in the registration statement, $2,600,000 of
the excess of the ascribed. value of the new shares was to be assigned
to certain undeveloped real estate owned by the larger company.
After reviewing the terms of the proposed combination, our staff ob-
jected to the use of acquisition accounting and the resulting substan-
tial write-up in the value of the land. Certain unusual features of the
plan prompted this position. The registrant's previously outstand-
ing common shares were redesignated as Class A convertible stock
which was convertible into debentures until a specified date, after
which it automatically became common stock. Both Class A stock
and the debentures had voting rights for the election of five directors,
and the new common stock to be issued under the plan of exchange was
limited to the right to elect five directors, making a total of ten di-
rectors. Two members of the new group in the organization were to
become president and secretary of the parent company.
After discussions, an amended registration statement was filed in
which the pooling of interests concept was applied to the combination
and the investment in the subsidiary was recorded on the books of the
parent at the underlying book value based on cost, and hence no re-
valuation of the real estate emerged.
STOP ORDER PROCEEDINGS

Section 8 (d) 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 looking to the issuance of
a stop order suspending the effectiveness of the registration statement.
Where such an order is issued, the offering cannot lawfully be made,
SECURITIES AND EXCHANGE COMMISSION
36
or continued if it has already begun, un~il the registration .st~tement
has been amended to cure the deficiencIes and the COmmISSIOnhas
lifted the stop order. During the 1958fiscal year, 8 new proceedings
were authorized by the Commission under section 8 (d) of the Act
and 7 such proceedings were continued from the preceding year. Two
of such cases were thereafter consolidated. In connection with these
14 proceedings 5 stop orders were issued during the year, one of which
was subsequently vacated when the registration statement was ap-
propriately amended. In 2 other cases the registration statement was
withdrawn. The remaining 7 cases were pending as of June 30, 1958.
A proceeding in which a stop order was issued with respect to a
registration statement filed by Republic Cement Corporation was de-
scribed in the 23rd Annual Report." The other 4 proceedings which
resulted in the issuance of stop orders during the fiscal year are de-
scribed below as well as 1 proceeding in which a stop order was is-
sued shortly after the end of the fiscal year.
Horton Aircraft Corporation.- This registrant, a Nevada cor-
poration, was organized for the purpose of manufacturing and sell-
ing a so-called Horton Wingless Airplane. The company filed two
registration statements with the Commission. The first statement,
filed in 1955, covered a proposed offering of 500,000 shares of no par
value common stock of which 400,000 shares were to be offered by the
registrant and 100,000 shares by the president, William E. Horton,
at $1.00 per share or the market price, whichever was higher. The
other registration statement, filed in 1956, covered 100,000 shares of
common stock of the registrant held by Horton which was to be offered
at $25.00per share. A consolidated hearing was held as to both regis-
tration statements and the Commission issued a stop order suspend-
ing the effectiveness of both statements.
The Commission :found the registration statements false and mis-
leading in the following material respects, among others,"
The representation in the registration statements that Horton had
assigned to the registrant a patent with respect to the wingless air-
plane was materially misleading in view of the :fact that Horton had
previously assigned all of his right, title and interest in his "invention"
to another person. The description in the registration statements of
the Horton Wingless Airplane, the aeronautical principles involved,
and the coverage of the patent obtained by Horton, was also mate-
rially false and misleading. False and misleading statements were
also made with respect to the performance of Horton's model of the
wingless plane. The registration statements also contained false and
misleading statements with respect to the use of the proceeds from the
• Pp. 46-47.
• SecurIties Act Release No. 3855 (October 29,1957).
previous sale of unregistered securities, the price of the securities
being registered and the proposed use of the proceeds therefrom.
In addition, the Commission found that while the second registra-
tion statement disclosed the entry of an injunction against registrant
and Horton based on false and misleading claims and the return of
an indictment against Horton based on fraud, registrant nevertheless
omitted to disclose the nature of the false and misleading statements
and the fraud involved.
Columbia General Investment Corporation.- The registrant, a
Texas corporation organized for the purpose of engaging in the in-
vestment business, filed a registration statement covering 100,000
shares of its common stock, $1 par value, to be offered to its stock-
holders at $4.50 per share. The Commission, finding that the regis-
tration statement contained materially misleading statements, denied
a request for withdrawal of such statement and issued a stop order.
The registration statement stated, among other things, that 42,000
shares of the common stock of Columbia General Life Insurance
Company, acquired from the promoters of the insurance company
and registrant in exchange for 210,000shares of registrant's common
stock, and representing a substantial portion of registrant's assets,
had an "estimated fair value" of $420,000. The $420,000value was
stated to be based on the fact that at and prior to such acquisition,
shares of such stock had been sold at prices of $10 and more by the
insurance company in the course of a public offering and by one of
the promoters through a company established for the purpose of
maintaining and stabilizing the market in that stock. However, the
Commission held that the prices paid in such sales could not be con-
sidered a true reflection of the market or fair value of the stock at
such time in view of the materially misleading statements employed
in connection with the sales. The Commission found that the failure
to disclose the facts surrounding the insurance company offering
rendered the statements regarding the value of the 42,000 shares
misleading.
The Commission further found that registrant had sold 53,059of
its own shares to stockholders of the insurance company at $9 per
share, and 10,07'7shares to the general public at $12per share, without
disclosing that such prices had been arbitrarily determined, that there
had been recent sales of such stock at $2 per share to insiders and
others, and that registrant's capital and surplus figures included the
misleading $420,000valuation attributed to the 42,000 shares of in-
surance company stock. As a result of such sales, the Commission
ruled, a contingent liability to the purchasers was created which
should have been disclosed in the registration statement .•
• Securities Act Release No. 3901 (March 5, 1958). A petition for review of the Com-
mission's order has been filed in the United States Court of Appeals for the Fifth Circuit.
Lewisohn Copper Corporation.-This registrant, a Delaware cor-

poration, was organized for the purpose of exp!oring, devel?ping a~d
operating mining properties in Arizona. PrIOr to ~he £?mg of Its
registration statement, the company had, commencmg m October
1955,sold 200,000 shares of its common stock at a.. .
stated public offering
price of $1.50 a share under claim of exemption from registration
under Regulation A. The registration statement, filed in March
1956, covered a proposed offering of 100,000 shares at a price to be
determined prior to the effective date of the registration statement
and which had tentatively been estimated at at least $10 a share. Stop
order proceedings, instituted in August 1956, with respect to the
registration statement were consolidated with proceedings under
Regulation A, instituted in June 1956, with respect to suspension of
the exemption thereunder of the earlier 200,000share offering.
More than half of the 200,000 share offering was sold to a few
broker-dealer firms, including one firm closely connected with the
underwriter, for their own accounts, or for the accounts of members
or their families, at the stated offering price of $1.50 a share. Such
firms and persons in turn resold a large part of the stock, mostly at
prices in excess of $1.50 and ranging as high as $9.50 or more. The
Commission found the offering circular used in connection with the
offering false in stating that the public offering price was $1.50 a
share and deficient in failing to disclose that profits would be received
by the various firms and individuals, upon the resale of the stock
by them at higher prices. The Commission found that such resales
constituted part of the public distribution of the stock. Since most
of the resales were at prices in excess of $1.50, the aggregate offering
price to the public exceeded the $300,000 maximum prescribed by
section 3 (b) of the Act and Regulation A and accordingly '110 ex-
emption under the regulation was available. On this and other
grounds, including misleading publicity circulated by the issuer and
underwriter in connection with the offering, the Commission per-
manently suspended the exemption of the offering under Regulation A.
With respect to the registration statement, the Commission issued
a stop order, finding the prospectus deficient in failing to disclose the
facts as to the 200,000 share offering referred to above and the con-
tingent liability resulting from the sale of the 200,000 shares when
no exemption from registration was available. The Commission
further found the prospectus misleading in failing to disclose the
activities of the issuer, the underwriter and others having a tendency
to influence the market price of the company's stock. These activi-
ties included market activities by the underwriter and others and
publicity circulated by the company and the underwriter, which
gave the misleading impression that there had been an immediate
public demand for and acceptance of the stock and which contained
optimistic and misleading statements about the company's drilling
program, results of assays, possible tonnages of ore on its properties
and am. application for a certificate of tax necessity on a large con-
centrating mill, and did not disclose that the existence of a mineable
ore body had not been established. Additional deficiencies found
in the prospectus included the failure to disclose the underwriter's
profit in the resale of 33,000 shares of the issuer's stock purportedly
purchased by the underwriter for investment and the contingent
liability of the issuer for the sale of these shares without registration.
In view of the serious nature of the deficiencies in the registration
statement the Commission denied the registrant's request to be allowed
to withdraw it. The Commission indicated that the fact that the
company had a substantial amount of stock outstanding in the hands
of investors distinguished the situation presented ill this case from
that involved in Jones v. S. E. 0., 298 U. S. 1 (1936) where
withdrawal was required,"
The Fall River Exploration and Mining Company.-The regis-
trant, a Colorado corporation, then named The Fall River Power
Company, filed a registration statement covering a proposed public
offering of 500,000 shares of its no par value common stock at $2.00
per share. After hearings illstituted pursuant to section 8 (d) of
the Act, the Commission ordered suspension of the effectiveness of
the registration statement. The company consented to the entry of
the stop order. 6
Among the deficiencies constituting the grounds for the issuance
of the Commission's stop order were: (1) representations that the
registrant's business was in part that of a public utility, notwith-
standing the fact that there was no demand for power from the long-
idle hydro-electric plant owned by the registrant, (2) the use of an
appraisal of the hydro-electric plant, based on estimated replacement
cost, where the appraisal was not prepared in accordance with accepted
standards and failed, among other things, to consider the lack of de-
mand for power, (3) the use of an appraisal of water rights not
founded on a basis sufficient to sustain it, (4) the representation that
a portion of the proceeds from the sale of the stock would be applied
toward the purchase of milling facilities, without disclosing that there
were no known ore bodies and no present need for milling facilities,
and (5) the inclusion in the financial statements of an appraisal, at
present day cost, of tunnels represented as development work on min-
• Securities Act Release No. 8907 (March 18, 1958). A petition for review of the Com-
mission's order has been filed In the United States Court of Appeals for the Ninth Circuit.
• Securities Act Release No. 8932 (June 4,1958).
ing claims, which were constructed by prede~essors of the registr~nt

in large part to transport ore from mines which were no longer bemg
worked.
Shortly after the close of the fiscal yeWl'under review the registra-
tion statement was amended. In ,its amended form, the statement
disclosed that the registrant's name, which in its original form sug-
gested the company was an operating 'Publicutility, had been changed
to indicate that the business was exploration and mining. Since the
amended statement had been revised to meet the various objections
previously cited, the Commission vacated the stop order, and the
registration statement was ordered effective."
Woodland Oil & Gas Co., Inc.-The registrant, a Delaware cor-
poration, filed a registration statement covering a proposed public
offering of 700,000shares of its common stock at $1.50 per share, of
which 600,000shares were to be offered on behalf of the registrant
and 100,000shares were to be offered on behalf of the principal pro-
moter and general manager of the registrant. The company was
organized for the purpose of exploring, developing and operating oil
and gas properties. Its assets consisted of interests in certain partially
developed Pennsylvania properties, and an interest in some wildcat
acreage in Western Kentucky. The proceeds of the issue were
intended for drilling and testing on both properties.
After examination of the registration statement and hearings, pur-
suant to section 8 (d) of the Securities Act, the Commission found
that the registrant had failed to make adequate disclosures with
respect to (1) its poor production record which had resulted in sus-
tained operating losses, (2,) its recoverable reserves and the extent to
which they could be produced profitably, (3) the remote possibilities
of investors realizing income from or a return of their investment,
(4) unsuccessful drilling tests on the Kentucky property, and
(5) certain underwriting agreements. The Commission found that
misleading statements were contained in (1) the statements regarding
use of the proceeds, (2) references to large quantities of oil in the
Western Kentucky general area, and (3) the geologist's report. The
Commission found that in order to make the speculative features of
the enterprise "plainly evident" to the ordinary investor, they had to
be set forth in summary fashion in one place in the early part of the
prospectus under an appropriate heading.
A stop order was issued by the Commission shortly after the close
of the fiscal year under review,"
T Securities Act Release No. 3957 (August 15, 1958).

• Securities Act Release No. 3942 (July 11, 1958).
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). For this purpose the Com-
mission is empowered to subpena witnesses and require the produc-
tion of pertinent documents. Four such examinations were initiated
during the 1958 fiscal year and one examination was pending from
the previous fiscal year. In two cases the examination led to proceed-
ings under section 8 (d) of the Act, in two others the registration
statements were withdrawn and in the fifth the registration statement
was amended and the examination closed. No examinations under
section 8 (e) of the Act were pending at the end of the fiscal year.
The Commission is also authorized by section 20 (a) of the Act to
make an investigation to determine whether any provisions of the Act
or any rule or regulation prescribed thereunder have been or are about
to be violated. The Commission has instituted investigations under
this section as an expeditious means of determining whether a regis-
tration statement is false or misleading or omits to state any material
fact. During the 1958 fiscal year 16 such investigations were insti-
tuted. Eight such investigations were pending from the previous
fiscal year. Five investigations resulted in the institution of stop order
proceedings under section 8 (d) of the Act, five were closed, in one
the registration statement was withdrawn and in the remaining case a
permanent suspension order was entered under Regulation A. Twelve
investigations were pending at the end of the 1958fiscal year.
EXEMPTION FROM REGISTRATION OF SMALL ISSUES

Under section 3 (b) of the Securities Act, the Commission is em-
powered to exempt, by its rules and regulations and subject to such
terms and conditions as it may prescribe therein, any class of securi-
ties from registration under the Act, if it finds that the 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 in-
vestors by reason of the small amount involved or the limited char-
acter of the public offering. The statute imposes a maximum
limitation of $300,000 upon the size of the issues which may be
exempted by the Commission in the exercise of this power.
Acting under this authority the Commission has adopted the fol-
lowing exemptive regulations:
Regulation A:
General exemption for United States and Canadian issues up to
$300,000.
Regulation A-M:
Special exemption for assessable shares of stock of mining companies
up to $100,000.
Regulation A-R:
Special exemption for first lien notes up to $100,000.
Regulation B:
Exemption for fractional undivided interests in oil or gas rights up
to $100,000.
Regulation B-T:
Exemption for interests in oil royalty trusts or similar types of trusts
or unincorporated association up to $100,000.
Exemption from registration under section 3 (b) of the Act does
not carry exemption from the civil liabilities for false and misleading
statements imposed upon any person by section 12 (2) or from the
criminal liabilities for fraud imposed upon any person by section
17 of the Act.
Exempt Offerings Under Regulation A
The Commission's Regulation A permits a company to obtain not
exceeding $300,000 (including underwriting commissions) of needed
capital in anyone year from a public offering of its securities without
registration if the company complies with the regulation. Regula-
tion A requires the filing of a notification with the appropriate
Regional Office of the Commission, supplying basic informa-
tion about the company, certain exhibits, and except in the case of a
company with an earnings history which is making an offering not
in excess of $50,000, an offering circular which is required to be used
in offering the securities.
During the 1958 fiscal year, 732 notifications were filed under Regu-
lation A, covering proposed offerings of $133,889,109, compared with
919 notifications covering proposed offerings of $167,269,900 in the
1957 fiscal year. Included in the 1958 total were 71 notifications
covering stock offerings of $14,433,379with respect to companies en-
gaged in the exploratory oil and gas business and 69 notifications
covering offerings of $14,257,615by mining companies.
The following table sets forth various features of the Regulation A
offerings during the past three fiscal years :
Offermgs under Regulation A
Fiscal year
1958 1957 - 1956
Size:
~100,OOOor less _______________________________________• __________
231 307 481
Over $100,000 but not over $200,000 ______________________________ 165 163 246
Over $200,000 but not over $300,000 ______________________________ 336 449 736
732 919 1,463
Underwriting:
U sed ____________________________________________________________
Not used ____ • _________________________________• ________________ 243 328 630
489 591 833
732 919 1,463
Offerors:
Issuing eornpanles ______ • ___________________• _________• ___•• ____
Stockholders. ___• _. _____• ______________________• _. ___• ______• ___ 704 865 1,38ll
28 52 62
Issuers and stockholders jointly ________________• ________________
0 2 12
732 919 1,463

Most of the offerings which were underwritten were undertaken by

commercial underwriters, who participated in 185 offerings in 1958,
252 in 1957, and 528 in 1956. The remaining cases where commis-
sions were paid were handled by officers,directors, or other persons not
regularly engaged in the securities business.
Suspension of Exemption
Regulation A provides for the suspension of an exemption there-

under where, in general, the exemption is sought for securities for
which the regulation provides no exemption or where the offering is
not made in accordance with the terms and conditions of the regula-
tion or in accordance with prescribed disclosure standards. Following
the issuance of a temporary suspension order by the Commission, the
respondents may request a hearing to determine whether the tem-
porary suspension should be vacated or made permanent. In the case
of filings made under Regulation A as revised in July 1956, if no
hearing is requested within thirty days after the entry of the tem-
porary suspension order, and none is ordered by the Commission on
its own motion, the temporary suspension order becomes permanent.
During the 1958 fiscal year, temporary suspension orders were is-
sued in 88 cases as compared with 132 in the 1957 fiscal year. Of the
88 orders, 3 were later vacated. Requests for hearing were made in
18 cases and in 7 of such cases the requests were later withdrawn; pro-
ceedings in the remaining 11 cases are pending. The names of the
companies involved in the orders issued during the 1958 fiscal year
are set forth in table (6) of the appendix. A few cases are sum-
marized below to illustrate the misrepresentations and other noncom-
pliance with the regulation which led to the issuance of suspension
orders.
Washington Planning Corporation of Maryland.- In its order
temporarily suspending the Regulation A exemption, the Commission
alleged that the offering circular contained untrue statements of mate-
rial facts and failed to disclose required information concerning the
net loss sustained from the issuer's business operations. There was
also a failure to disclose that the offering of securities was being made
on an installment payment basis, that commissions were paid for the
sale of the securities despite statements in the offering circular to the
contrary, and that part of the proceeds from the offering were used
to pay expenses and make advances to companies other than the is-
suer. The Commission's order further alleged that the use of the
offering circular without appropriate disclosure had been and would
be in violation of section 17 of the Securities Act of 1933. In addi-
tion, the terms and conditions of Regulation A were not complied
with in that the issuer failed to file a complete and accurate report
of the sales of its securities. No hearing was requested and the suspen-
sion order became permanent.
Seaboard Drug Company, Inc.-The Commission temporarily
suspended the exemption because the terms and conditions of Regu-
lation A were not complied with since the aggregate offering price of
shares sold by stockholders in the market and shares sold on behalf of
the issuer exceeded the $300,000 ceiling. The Commission also stated
that the offering circular operated as a fraud and deceit upon the pur-
chasers and contained untrue statements of material facts and omitted
to state certain material facts with respect to the issuer's assumption
of expenses of certain affiliates and predecessor companies, and the
utilization of proceeds of the offering for a personal loan to an officer,
director and principal security holder of the issuer. No hearing has
been requested and the suspension order remains in effect.
Tejanos Mining Corporation.-In its order temporarily suspend-
ing the exemption, the Commission alleged that the notification failed
to disclose the issuance of certain shares within one year prior to the
subject filing, and failed to disclose the identity of the underwriter.
The Commission further alleged that the Regulation A exemption was
not available since the president of the issuer had been indicted for
selling unlicensed securities and selling securities without registering
as a dealer in the State of Texas. The order also alleged that mis-
leading statements were made concerning the use of proceeds and the
interests of the officers, directors and promoters in the issuer. No
hearing was requested and the suspension order became permanent.
Microveer, Incorporated.-The Commission's temporary suspen-
sion order alleged that the offering circular was misleading and con-
tained untrue statements of material facts with respect to statements
made concerning the physical properties of the issuer's product, a thin
wood veneer, the existence of potential purchasers of the company's
product and the amount of funds needed to equip the issuer's plant
adequately with machinery. No hearing was requested and the sus-
pension order became permanent.
Central Oils, Incorporated.- The Commission suspended the
Regulation A exemption for an offering of the above company because
of misleading, inaccurate and incomplete statements in the offering
circular concerning, among other matters, the interests of the direc-
tors and promoters in the company's properties, the past and pro-
spective productivity of the company's oil properties, and the mislead-
ing nature of the geological materials. A request for hearing was
filed and later withdrawn, and the suspension became permanent.
Gem State Securities Corporation.- In its order temporarily sus-
pending the Regulation A exemption, the Commission alleged that
the Regulation A exemption was unavailable because securities were
sold prior to the time permitted by the regulation, at a different price
from that stated in the offering circular, and without delivery of an
offering circular. No hearing was requested and the suspension order
became permanent.
Garner Aluminum Corporation.-The Commission temporarily
suspended the Regulation A exemption because it had reasonable
cause to believe that oral misrepresentations were made in the sale
of securities under the offering which operated as a fraud and deceit
upon the purchasers, particularly with respect to statements made
concerning the refunding of investors' money, the amount of securi-
ties already sold, and the use of proceeds received therefrom. No hear-
ing has been requested and the suspension order remains in effect.
The Commission is given discretionary authority in rule 252 (f)
of Regulation A to determine upon a showing of good cause that cer-
tain disabilities, arising in general from past conduct of the issuer,
underwriter or others associated with them in the purchase or sale
of securities, and which ordinarily have the effect of making the Reg.
ulation A exemption unavailable, shall not operate to bar an exemp-
tion under the regulation. During the 1958 fiscal year, 14 applica-
tions for relief from various disabilities were granted under rule 252
(f) by the Commission.
Exempt Offerings Under Regulation B
During the fiscal year ended June 30,1958,109 offering sheets were
filed pursuant to Regulation B and were examined by the Oil and Gas
Unit of the Commission's Division of Corporation Finance. During
the 195'7fiscal year, 133 offering sheets were filed and during the 1956
fiscal year, 114 were filed. The following table indicates the nature
and number of Commission orders issued in connection with such
filings during each of the fiscal years referred to:
Action taken on offering sheets (iled under Regulation B
Fiscal years
1958 1957 1956

--------------------1--- ------
Temporary suspension orders ._____________________________________ 9 12 5
Permanent suspensIOn orders • .______ 1
Orders terminating proceeding after amendment; • ._____________ 1 7 5
Orders accepting amendment of offering sheet (no proceeding pending) ___ 60 72 60
Orders consenting to withdrawal of offerme sheet (no proceedmg pending) _ 3 3 4
Orders consenting to withdrawal
ceeding. _• • •
of offering sheet and termlnatmg pro-
._____________ 2 • _. • __
Order terminating effectiveness of offering' sheet ._ 1
Total nnmber of orders • ! 94 76
Reports of sales.-The Commission requires persons who make of-

ferings under Regulation B to .file reports of the actual sales made
pursuant to that regulation. The purpose of these reports is to aid
the Commission in determining whether violations of law have oc-

curred in the marketing of securities offered under the regulation.
The following table shows the number of sales reports filed under
Regulation B during the past three fiscal years and the aggregate
dollar amount of sales during each of such fiscal years:
Reports of eales undm' Regulation B
Fiscal years
1958 1957 1956
Number of sales reports filed__________________________________ 1,712 1,318 1,419

Aggregate dollar amount of sales reported _____________________$1,093.362 $1,154, 792 $1,234,541
UTIGATION UNDER THE SECURITIES ACT OF 1933
The Commission is authorized by the Securities Act to seek in-

junctions in cases where the continued or threatened violations of
the Act may result in damage to members of the public. Many such
actions were brought by the Commission during the year in cases
involving violations of the registration and anti-fraud provisions of
the Act.
Litigation Involving Violations of Registration and Anti.fraud Provisions
The Commission obtained injunctions against :further viola-
tions of the registration provisions in actions in which it was found
that the defendants were selling fractional interests in oil leases or
in oil and gas properties without registration. Permanent injunc-
tions were obtained in S. E. O. v, Gerald L. Reasor and John O. Kar-
strom, Jr.,9 S. E. O. v. Horace E. Watkins, doing business as Watkins
Oil 00. et al./o both referred to in the 23rd Annual Report,u and
S. E. O. v. Edward J. Prestonr? In S. E. O. v, Ben Franklin Oil and
Gas Corporation; et al.,14 a preliminary injunction was obtained pro-
hibiting the sale of shares of Ben Franklin Oil and Gas Corporation
without registration.
Sales of unregistered securities in mining companies also required
Commission action within the year. In S. E. O. v, Tannen and 00.,
Inc., et al.15 a permanent injunction was obtained against 8 defendants
to prevent further sales of unregistered stock. Similar injunctions
were obtained in S. E. O. v, Cataract Mining Oorporatioti. et al.,10
• N. D. Illinois, No. 56-C-2038 (December 4, 1956).
]JJ D. Colorado No. 1)533 (November 9, 1956).
np.54.
12 D. Montana No. 765 (December 20, 1957).
U D. New Jersey, No. 601-57 (June 19, 1957).
'" S. D. New York No. 123-115 (August 2, 1957).
,. S. D. New York No. 126-173 (October 30, 1957).
S. E. O. v. OolwmlJus-RewaZlOil Oompany, et al.,l1S. E. O. v, Ores-
well-Keith Mining Trust, et al.r S. E. O. v, Dawn Uranium and
Oil Oompany, et al.r S. E. O. v. William J. Owen and Leonard S.
Fo», doing business as Uinta Basin Oil and Gas Leasing Oompany,
et al.,20and S. E. O. v. Strategic Minerals Oorporation of America,
et al.21 Injunctions were entered by consent in the last four of the
above cases. A preliminary injunction was obtained in S. E. O. v.
Royal Drift Mining Oompany, et al.22
Final judgments were also entered in S. E. O. v. Arkansas Securities
Oorp, et al.,23S. E. O. v, Great Fidelity Life Insurance 00., et al.,24
S. E. O. v. Oregon Timber Products Oo; In(J.,et al.,25S. E. O. v. Farm
and Home Agency, Ino., et al.,26S. E. O. v. Television and Radio
Broadcasting Corporation. and James D. Asher27 and S. E. O. v.
Franois Distributing 00., Inc., et al.r enjoining further sales of un-
registered shares. The injunctions were entered by consent in the
Farm and Home, Great Fidelity Life and Television and Radio cases.
In S. E. O. v. Backers Discount and Finance Oompany and James
Sorce, Jr.29 the defendant, who was in the business of purchasing
installment notes received by contractors, offered to investors par-
ticipating certificates in these installment notes guaranteeing 12%
net return on the investment and purportedly assigning a mortgage
to the investor. The amount invested had in fact no relation to
the face amount of the mortgage assigned, and if the mortgagor
defaulted, another mortgage was substituted. In some instances
no mortgage was assigned to the investor but rather a participation
in general portfolio holdings of Backers. These "guarantee sav-
ing certificates" were found not to be guaranteed by any outside
independent guarantor, but merely secured by Backers. Notwith-
standing assurances by Backers that it would discontinue interstate
sales until such time as it had complied with the registration re-
quirements of the Act, over $10,000 of the certificates were sold to
residents of 6 states. A final injunction was entered by the Court
to enjoin further sales of these securities.
"D. Utah, No. C-167-57 (October 9,1957).
mw. D. Arkansas No. 733 (January 9,1958).
"E. D. Washington No. 1395 (June 1,1956).
"D. Colorado No. 5749 (July 24,1957).
lIlN. D. Texas No. 7889 (June 6, 1958).
"N. D. Callfornla No. 7706 (March 5, 1958) •
.. W. D. Arkansas No. 734 (January 9, 1958).
IN S. D. Indiana No. IP-58-C19 (January 16, 1958).
llISD.Nevada No. 1280 (October 8, 1956) •
.. S. D. Indiana No. IP 58 C83 (April 16,1958).
lI7D. Massachusetts No. 57-640 A (July 1, 1957).
-D. Massachusetts No. 58-424-8 (Aprll22, 1958).
-D. New :Jersey No. 14-58 (January 7, 1858).
In S. E. O. v. Micro-Moisture Oontrols, et al.30 16 defendants, in-

cluding 7 registered broker-dealer firms, were permanently enjoined
from further violations of the registration requirements of the Act
in the offer and sale of common stock of Micro-Moisture Controls,
Inc. This action, which was also referred to in the 23rd Annual Re-
port," involved an increased number of outstanding shares resulting
from an exchange of assets of Converters Acceptance Corporation of
Canada for stock of Micro-Moisture. A subsequent public distribu-
tion by certain controlling stockholders of Micro-Moisture was made
through the defendant broker-dealer firms and 2 residents of Canada,
also named as defendants.
In S. E. O. v. Land Development Oompany of Nevada, et al.,32the
complaint charged, among other things, that the defendants had been
offering and selling the capital stock of Land Development Company
of Nevada and certain evidences of indebtedness, investment contracts
and profit sharing agreements when no registration statement was
in effect as to such securities. The defendants consented to the entry
of a preliminary injunction.
Violations of the registration provisions of the Securities Act were
also charged in S. E. O. v. Roy B. Kelly, et al.,33 S. E. O. v, TrlUJkee
Showboat, fnc.,34 and S. E. O. v. Doctors' Motels, Inc.35 In the Kelly
case the complaint was dismissed by agreement of the parties, subject
to a stipulation effectively preventing sale of the stock without regis-
tration. In the Truckee Showboat case the application for a prelim-
inary injunction was denied, the court indicating that it was convinced
that the defendant was not threatening to violate the law and that an
injunction was therefore unnecessary. In the Doctor'S' Motels case the
complaint. was dismissed by stipulation of the parties subsequent to
the filing of a registration statement.
A final injunction was obtained by consent in S. E. O. v. Edward L.
Elliott, et al.36 to prevent distribution of unregistered securities of
Crowell-Collier Publishing Company. The related administrative
proceedings are discussed in this report under the Securities Exchange
Act of 1934.37
Sales of unregistered mining stock, which also violated the anti-
fraud provisions of Section 17 of the Securities Act in that false and
misleading statements were used in such sales, brought about the entry
.. S. D. New York No. 116-190 (January 9. 1957). Notice of appeal from this injunction
was filed by four corporate defendants and five individual defendants before the end of the
fiscal year .
.. P. 54.
.. D. Nevada. No. ~4 (September 27,1957).
33 District of Columbia. No. 2635-57 (October 18, 1957) .
.. S. D. California. No. 901-57 WB (July 23,1957).
35 D. Kansas. No. KC907 (June 27, 1957) •
.. S. D. New York No. 123-234 (August 12, 1957) •
....Infra, page 83.
of a final injunction in S. E. O. v. Triwmph Mines, Ltd., et aZ.aa and
resulted in a preliminary injunction in S. E. O. v. Alan Russell Securi-
ties, Incorporated, et al.39 Preliminary injunctions to prevent further
violations of Section 5 and 17 of the Securities Act were also entered
in S. E. O. v. Franklin Atlas Oorp., et al.,40 and S. E. O. v. American
Founders Life Insurance Oompany of Denver, Colorado, et al.41 In
the latter case an injunction was entered against the corporate de-
fendants, American Founders Life Insurance Company of Denver,
Colorado and Colorado Management Corporation. Among other
statements found to be misleading by the Court were the omission to
disclose the intercorporate relationships existing between the corpo-
rate defendants; for example, that Colorado Management Corporation
entered into a management contract with American Founders for a
consideration equal to at least 5 % of the gross income of the insurance
company for a 10-year period.
A permanent injunction was entered against Judson I. Taggart in
S. E. O. v. Ada:ms Bond and Share, Inc. and Judson I. Taggart.42
The complaint alleged that Taggart as vice president of defendant
company had, in the sale of stock in that company, made false and mis-
leading statements by, among other things, omitting to state to pur-
chasers that another company, whose business his company was pur-
chasing, had been continually operating at substantial losses, amount-
ing to over $46,000 within a specified SIx-month period. In S. E. O.
v, Evergreen Memorial Park Association, et al.,43 the defendants con-
sented to the entry of an injunction restraining further violations of
Section 17 of the Securities Act.
False and misleading statements in violation of Section 17 of the
Securities Act as well as sales in violation of the registration pro-
visions were alleged in the Commission's complaint in S. E. O. v.
Crusader Oil and Uraniwm Oompany, et al.44 In that case, the Com-
mission alleged that in connection with the offer and sale of unregis-
tered common stock of the Wyoming Oil Company (Delaware) the
defendants had represented that the selling price of 20~ to 50~ per
share was a special price offered to a few stockholders, whereas in fact
it was far in excess of the market price, and the offering was not
limited to a few stockholders. A final judgment was entered by con-
sent permanently enjoining Crusader Oil and Uranium Company and
James R. Macon, president and controlling person, from further vio-
as W. D. Washington No. 4555 (March 18, 1958) .

.. S. D. New York No. 130-358 (March 7, 1958).
40 S. D. New York No. 120-172 (September 4, 1957) .
.. D. Colorado No. 6021 (April 1, 1958) •
.. D. Idabo No. 3413 (January 11, 1958) •
.. E. D. Pennsylvania No. 24. 424 (April 3,1958) •
.. D. Colorado No. 5769 (August 19. 1957).
486867-li9-5
lations of Sections 5 (a) and (c) and 17 (a) of the Act, and Robert W.
Wilson, a broker-dealer, from further violating Section 17 (a) of the
Act.
In S. E. O. v. Southwest Securitiee, Ino., et al.4IJ a permanent injunc-
tion was entered enjoining General Insurance Investment Company,
Harvey E. Smith, Margaret Brand Smith, and Bennie L. Dean from
further violations of the registration provisions of the Securities
Act. At the same time the Court entered an order extending until
further order the effectiveness of a temporary restraining order which
had been previously entered against Southwest Securities, Inc., Allen
Goldsmith and Faye Goldsmith, restraining them from further viola-
tions of the registration and anti-fraud provisions of the Securities
Act, as well as of the broker-dealer registration requirements of the
Securities Exchange Act of 1934.
S. E. O. v. Robinson Development Oorporation, Skid Oonirot 001'-
poration, et al.46 also involved violations of Section 5 (a) and (c) and
Section 17 (a) of the Securities Act. The Commission's complaint
alleged, in addition to the fact that the securities being offered and
sold were unregistered, that the defendants employed a scheme to de-
fraud by means of displaying a false and misleading motion picture
and made false and misleading statements regarding, among other
things, the identity of the inventor, the guarantee against competi-
tion, acceptance of the skid-control device by trucking and taxicab
companies, profits to result, success of tests and future value of divi-
dends. The court granted a final injunction against the defendants,
Robinson Development Corporation, Louis M. Robinson, Skid-Con-
trol Purchasing, Inc., Robinson Skid-Control Associates, Inc. and
Cedar-Vale Development Corporation.
Universal Service Corporation had been the subject of a Commis-
sion stop order issued February 5, 1957 following the :filing of a false
and misleading registration statement and prospectus. The stop
order was lifted when Universal filed amendments purportedly cor-
recting the original filings. However, the Commission found it nec-
essary to institute action to enjoin Universal Service Corporation and
its officers from proceeding to sell under the amended :filing. The
Commission's complaint in S. E. O. v. Unive1'salSe1'Vice Oorporation,
et al.47 alleged that the registration statement and prospectus of the
defendant contained untrue statements of material facts and that they
omitted to state facts required to be stated, in violation of the anti-
fraud and registration provisions of the Act. As an example, Uni-
versal had asserted ownership of 253 mining claims in the State of
Texas, when in fact the claims had been forfeited to the State of Texas
'IS E. D. Arkansas No. 3566 (May 19, 1958).
'" W. D. Pennsylvania No. 16203 (September 11, 1957).
t7 S. D. Texas No. 11608 (March 6, 14158).
:for failure to pay rentals. A final injunction was entered against
Universal and its board chairman Bert Thompson, and the temporary
restraining order already in effect was continued against the remaining
defendants.
In S. E. O. v. Mississippi Valley Portland Oement,48the defendant
was permanently enjoined from further violation of Sections 17 and 23
of the Securities Act. One of the allegations of the Commission's
complaint was that the defendant had falsely stated that the fact that
a registration statement had become effective meant that the Commis-
sion and its "cement consultant" had determined that cement could be
economically produced from materials owned by the defendant near
Vicksburg, Mississippi.
The defendant was also enjoined in S. E. O. v. James O. Gl'aye,
doing business as J. O. Graye 00.,49 from further violations of Sec-
tion 17 of the Securities Act. He had been selling stock of Atlas
Gypsum Corporation, Ltd. largely on the strength of an untrue and
misleading statement announcing a proposed merger between Atlas
Gypsum Corporation, Ltd. and Johns-Manville. Another permanent
injunction was obtained at about the same time against the same de-
fendant as a broker-dealer in an earlier action charging violation of
the Commission's net capital rule.50
In S. E. O. v. Los Angeles Trust Deed and Mortgage Exchange,
et al.51 the defendants sold securities described in the complaint as
evidences of indebtedness, investment contracts, and receipts for or
guarantees of such securities arising out of the sale of promissory
notes secured by deeds of trust covering real estate in California. The
complaint alleged violations of the registration provisions of the Se-
curities Act as well as violations of the anti-fraud provisions of that
Act and of the Securities Exchange Act of 1934. Charges were made
in the complaint that the advertising and selling literature contained
incomplete, ambiguous, flamboyant, misleading, untrue and deceptive
statements of material facts, such as a statement to the effect that the
plan affords investors an opportunity to buy an income for life with-
out reducing their principal and that the plan constitutes a safe and
secure method of realizing rapid capital appreciation through the
"magic of compound interest", omitting to disclose, among other
things, the speculative nature of investments in second trust notes,
and the differences between trading securities listed and registered
on national securities exchanges and the open-market trading in deeds
of trust conducted by the defendants. After the close of the fiscal
year a temporary injunction was obtained against all but one of the
48 D. C. No. 3187-57 (December 20, 1957) •

.. S. D. New York No. 129-145 (.January 23, 1958).
EO S. D. New York No. 126-144 (October 29, 1957).
01 S. D. California No. 261-58 TC (March 24, 1958).
defendants and a receiver appointed. The Court of Appeals for the

Ninth Circuit subsequently granted a stay pending appeal.
The Commission has been very much concerned in recent years with
the high-pressure tactics of broker-dealer firms which use long dis-
tance telephone calls to prospective investors to sell unregistered se-
curities. The salesmen for these securities firms frequently make
claims of a spectacular future for the security they are attempting
to sell.
During the fiscal year, the Commission secured preliminary injunc-
tions in 8. E. O. v. Globe Securitie« Corporation; et al.52 and in 8. E. O.
v. Herbert Rapp, doing business as Webster Securitie« Corporation;
et al.53 These broker-dealer firms were offering and selling unregis-
tered common stock of Taylorcraft, Inc. to United States residents by
means of long distance telephone calls. They made many misleading
and extravagant claims as to the present and future merits of an in-
vestment in Taylorcraft, Inc. stock; among them, (1) that Taylorcraft,
Inc. had received a multi-million dollar government contract for
guided missiles research, (2) that Taylorcraft, Inc. had enough gov-
ernment contracts to keep them busy three to five years, (3) that
they anticipated an annual volume for Taylorcraft, Inc. in excess of
$5 million and (4) that Taylorcraft, Inc. stock, at the time selling for
$1 a share would rise to $3, $4, $8 or $15 per share in short periods of
time.
The defendants in 8. E. O. v, J. H. Lederer 00., Inc.; et al.54 con-
sented to the entry of a permanent injunction restraining them from
further violations of the registration provisions of the Securities Act
in the offer and sale of unregistered common stock of Continental
Mining Exploration, Ltd., a Canadian corporation. The Commission
had alleged that practically all of the shares of Continental acquired
by J. H. Lederer Co., Inc. were sold by means of long distance tele-
phone calls to thousands of residents of the United States.
In 8. E. O. v. Mono-Kearsarge Oonsolidated Mining Oompany,
Jean R. Vedite 00., Ino., et al.55 the Commission's complaint alleged
that the individual defendants, who were persons closely connected
with the corporate defendants, acted as conduits to facilitate the pub-
lic distribution of nearly a million unregistered shares of Mono-
Kearsarge stock. It was further alleged that 380,000 of such shares
had already been offered and sold to U. S. residents by means of long
distance telephone calls and the United States mails. After the close
of the fiscal year certain of the defendants consented to the entry of a
.. S. D. New York No. 132-343 (April 29, 1958) •

.. S. D. New York No. 132-344 (April 29, 1958) •
.. S. D. New York No. 135-81 (;rune 25, 1958).
GO D. Utah No. C-58-58 (June 2, 1958).
permanent injunction, and permanent injunctions were entered against
other defendants, including the companies named above.
The Commission .filed a complaint near the close of the fiscal year
in S. E. O. v. Linooin: Securities Oorporation; et 01.56 charging that
defendants had been offering and selling by means of long distance
telephone solicitations unregistered shares of Shoreland Mines, Ltd.
The complaint further charged that the defendants in order to induce
sales of Shoreland Mines, Ltd. used false and misleading statements,
among others, (1) that the company had iron ore claims adjacent
to iron mines actually in operation by one or more large steel cor-
porations (2) that Shoreland Mines, Ltd. was engaged in the ex-
ploration and development of newly discovered resources, and (3)
that the price of Shoreland Mines, Ltd. would substantially increase
in the near future. The affidavits .filed in support of the Commis-
sion's motion for preliminary injunction stated that there had been
no exploration work on the claims allegedly owned by Shoreland
Mines, Ltd.; that Shoreland Mines, Ltd. had no working capital; that
no mines are in operation adjacent to Shoreland Mines property; and
that the claims of Shoreland Mines, Ltd. were not owned outright
but subject to a payment of $15,000 to the president of the company.
A temporary restraining order was entered and the action is still
pending.
The Commission's complaint and supporting affidavits in S. E. O.
v. Alan RU8selZSecurities, Ina.57 charged that the defendants had been
offering International Ceramics Mining, Limited stock, which is listed
on the Canadian Stock Exchange in Montreal, to residents of the
United States by means of long-distance telephone calls. The de-
fendants in these telephone calls had falsely represented to prospective
investors that International Ceramics had large government contracts;
that it was producing a product for use in the guided missile and
rocket field; and that individuals associated with the Office of the
President of the United States had invested in the stock. In addition
to asserting the falsehood of such representations and others, the affi-
davits averred that International Ceramics for the past ten years had
been a pilot operation and operated at a deficit. A permanent in-
junction was entered restraining the defendants from further anti-
fraud violations. .
Subpoena Enforcement
During the past fiscal year the Commission on several occasions
was obliged to resort to the courts to seek enforcement of subpoenas
issued in connection with investigations of violations of the Securities
110 s, D. New York No. 135-79 (June 25.1958).

IT Supra, p. 49.
Act. In S. E. O. v. Linda Lord 58 the Commission applied for an order

to require obedience to the subpoena issued in an investigation of de-
fendant's activities in the sale, by telephone, of the stock of Shore-
land Mines, Ltd. An order to show cause was issued on June 2,1958
to which defendant failed to respond. On July 30, 1958 a criminal
information was filed against the defendant for violation of Section
19 (b) of the Securities Act and Section 21 (b) of the Exchange Act
for willful failure to respond to the subpoena. She is presently a
fugitive and a bench warrant has been issued for her arrest. The in-
junctive action initiated subsequent to the investigation is described
at page 53, S'Wpra.59
InS. E. O. v. Doeskin Products, Inc., et al.,60 the Commission sought
court enforcement of a subpoena duces tecum calling for the production
of certain records of Doeskin Products, Inc., charging that the refusal
to produce the information was impeding the Commission's investiga-
tion of whether the Securities Act had been violated in the issuance
and sale of securities of Swan-Finch Oil Corporation and Doeskin
Products, Inc. This action was subsequently dismissed by consent,
the records having been produced after the action was commenced.
For an account of related litigation, see pp. 54--55,infra. In S. E. O.
v. Dudley P. South,61 the District Court ordered the production of
certain books and records of the Surinam Corporation in obedience
to the Commission's subpoena duces tecum.
Other Litigation
In S. E. O. v. Doeskin Produote, Inc.,62 the Commission's complaint
was dismissed against two of the seven defendants, final judgment
having been entered by consent against the other five. This litigation,
which involved violations of Section 5 of the Securities Act, is dis-
cussed, together with the related proceedings in S. E. O. v, Swan-
Finch Oil Oorporaiion, et. al., on pages 52-3 of the 23rd Annual Re-
port. In addition to the subpoena enforcement proceedings discussed
above on this page, there arose, in connection with the proceedings,
a civil suit against the Commission and various members of the Com-
mission's staff. In that action Doeskin Products, Inc., filed a com-
plaint in the New York Supreme Court," claiming damages of
$1,000,000 as a. consequence of the alleged unwarranted interference
by the Commission and its staff with the sale and transfer of plain-
~iff's~mmon stock in connection with the Commission's investigation
III this case and the related Swan-Finch case.
liB S. D. New York No. M-18-304 (May 28, 1958).

GO S. E. O. v. Lincoln Securities Corporation, et al.
GO S. D. New York (March 18, 1958).
It s. D. Texas No. 11, 517 (February 5,1958).

ell S. D. New York, No. 119-301 (Aprll11, 1957)
ell Doe8kin Products, Inc. v. WindelB, et aJ., New' York Supreme Court New York County
(December 17, 1957). "
Upon petition by the Commission and individual defendants the
case was removed to the Federal District Court for the Southern
District of New York.64 Defendants subsequently filed a motion to
dismiss, on the ground that the complaint failed to state a claim
upon which relief could be granted as against the individual
defendants, in that the acts complained of were performed in dis-
charge of their duties as governmental officials and consequently no
liability attached, and further as against the Commission, in that
the Court lacked jurisdiction over the subject matter. The motion to
dismiss was granted and a notice of appeal was filed but subsequently
withdrawn. .
The Commission has been alert to the need to use all possible means
to protect investors from fraudulent promotions originating in foreign
countries. To this end a Foreign Fraud Order was obtained against
several companies and indiv:iduals engaged in a fraudulent distribu-
tion from Cuba into the United States of Latin American Explora-
tion Company stock. The fraud order was based upon evidence
supplied by the Commission that the United States mails were being
used in. the conduct of the scheme to obtain money by means of
false and fraudulent representations concerning the geological nature
of the area in which the companies' property was located; the likeli-
hood of bringing in profitable oil production from wells to be drilled
on such properties; anticipated increases in the value of stock; the prob-
ability of a big strike in oil on the property of the company and various
other similar lJ.'epresentations. The fraud order, which is directed to
all postmasters authorized to dispatch mail to Cuba, instructs them
to stamp "FRAUDULENT" on all mail directed to any of the com-
panies or persons listed in the order, and to return the same to the
sender.
In Oomico Oorporation v. S. E. 0.,65 a petition was filed for review
of the Commission's order denying petitioner's application for with-
drawal of the registration statement. The Commission moved to
dismiss the petition on the ground that the court lacked jurisdiction.
A per curiam order was subsequently entered dismissing the petition.
'" Doeski.n Product8, Inc. v, Wi.nde18. et al •• S. D. New York, No. 128-271 •

.. C. A. D. C. No. 14.344.
PART V
ADMINISTRATION OF THE SECURITIES EXCHANGE ACT

OF 1934
The Securities Exchange Act of 1934 provides for the registration

and regulation of securities exchanges, and the registration of securi-
ties listed on such exchanges and it establishes, for issuers of securities
so registered, financial and other reporting requirements, regulation
of proxy solicitations and requirements with respect to trading by
directors, officers and principal security holders. The Act also pro-
vides for the registration and regulation of brokers and dealers doing
business in the over-the-counter market, contains provisions designed
to prevent fraudulent, deceptive and manipulative acts and practices
on the exchanges and in the over-the-counter markets and authorizes
the Federal Reserve Board to regulate the use of credit in securities
transactions. The purpose of these statutory requirements is to en-
sure the maintenance of fair and honest markets in securities.
REGULATION OF EXCHANGES AND EXCHANGE TRADING
Registration and Exemption of Exchanges
At the close of 1958, 14 stock exchanges were registered under the
Exchange Act as national securities exchanges:
American Stock Exchange Pacific Coast Stock Exchange
Boston Stock Exchange Philadelphia-Baltimore S to c k Ex-
Chicago Board of Trade change
Cincinnati Stock Exchange Pittsburgh Stock Exchange
Detroit Stock Exchange Salt Lake Stock Exchange
Midwest Stock Exchange San Francisco Mining Exchange
New Orleans Stock Exchange Spokane Stock Exchange
New York Stock Exchange
The following 4 exchanges have been exempted from registration

by the Commission pursuant to section 5 of the Act:
Colorado Springs Stock Exchange Richmond Stock Exchange
Honolulu Stock Exchange Wheeling Stock Exchange
Disciplinary Actions
Each national securities exchange reports to the Commission dis-

ciplinary actions taken against their members for violation of the
Securities Exchange Act of 1934 or of exchange rules. During the year
56
7 exchanges reported 44 cases of such disciplinary action. The ac-
tions taken included the imposition of .finesaggregating $18,430 in 10
cases; the suspension of 1 individual and 2 firms from exchange
membership; cancellation of the registration of 1 individual as a
specialist; and censure of a number of individuals and firms.
Commission Rate Study
Section 19 (b) of the Exchange Act imposes on the Commission
certain responsibilities and duties with respect to the rules of na-
tional securities exchanges including rules in respect of such matters
as the fixing of reasonable rates of commission and other charges.
Under an amendment to its Constitution, effective May 1, 1958, the
New York Stock Exchange provided for an increase in the minimum
commission rates to be charged by members and member firms. On
April 14, 1958, the Commission announced that it had directed its
staff to conduct a study of such commission rates and to report to the
Commission whether such commission rates and other charges are
reasonable and in accord with the standards contemplated by appli-
cable provisions of the Exchange Act.' Pursuant to the directive of
the Commission the staff is now making a comprehensive study of
commission rates on the New York Stock Exchange.
Nine other registered national securities exchanges, including the
American Stock Exchange, have recently adopted scheduIes of com-
mission rates identical with that of the New York Stock Exchange.
REGISTRATION OF SECURITIES ON EXCHANGES
It is unlawful for a member of a national securities exchange or a

broker or dealer to effect any transaction in a security on such ex-
change unless the security is registered on that exchange under the
Securities Exchange Act or is exempt from such registration. In
general, the Act exempts from registration obligations issued or guar-
anteed by a State or the Federal Government or by certain sub-
divisions or agencies thereof and authorizes the Commission to adopt
rules and reguIations exempting such other securities as the Commis-
sion may find necessary or appropriate to exempt in the public in-
terest or for the protection of investors. Under this authority the
Commission has exempted securities of certain banks, certain securi-
ties secured by property or leasehold interests, certain warrants and,
on a temporary basis, certain securities issued in substitution for or
in addition to listed securities.
Section 12 of the Exchange Act provides that an issuer may register
a class of securities on an exchange by filing with the Commission and
1 SecurIties Exchange Act Release No. 5678.

the exchange an application which discloses pertinent information

concerning the issuer and its affairs. An application requires the
:furnishing of information in regard to the issuer's business, capital
structure, the terms of its securities, the persons who manage or con-
trol its affairs, the remuneration paid to its officers and directors, the
allotment of options, bonuses and profit-sharing plans, and financial
statements certified by independent accountants.
Form 10 is the form used for registration by most commercial and
industrial companies. There are specialized forms for certain types
of securities, such as voting trust certificates, certificates of deposit
and securities of foreign governments.
-Section 13 requires issuers having securities registered on an ex-
change to file periodic reports keeping current the information fur-
nished in the application for registration. These periodic reports in-
clude annual reports, semi-annual reports, and current reports. The
principal annual report form is Form 10-K which is designed to keep
up-to-date the information furnished in Form 10. Semi-annual re-
ports required to be furnished on Form 9-K are devoted chiefly to
furnishing mid-year financial data. Current reports on Form 8-K
are required to be filed for each month in which any of certain speci-
fied events have occurred. A report on this form deals with matters
such as changes in control of the registrant, important acquisitions
or dispositions of assets, the institution or termination of important
legal proceedings and important changes in the issuer's capital se-
curities or in the amount thereof outstanding.
Statistics Relating to Registration
eAs of June 30, 1958, a total of 2,236 issuers had 3,795 classes of se-
curities listed and registered on national securities exchanges of which
2,663 were classified as stocks and 1,132 as bonds. Of the total 2,236
issuers, 1,28~ had 1,526 stock issues and 1,087 bond issues listed and
registered on the N ew York Stock Exchange. On a percentage basis,
the New York Stock Exchange had listed 57% of the issuers, 57% of
the stock issues and 96% of the bond issues.
During the 1958 fiscal year, a total of 54 issuers listed and registered
securities for the first time on a national securities exchange and the
listing and registration of all securities of 74 issuers was terminated
during the year. The number of applications filed during the fiscal
year for registration of classes of securities on national securities ex-
changes was 207.
The following table shows the number of annual, semi-annual and
current reports filed during the year by issuers having securities listed
and registered on national securities exchanges. The table also shows
the number of such reports filed under section 15 (d) of the Securities
Exchange Act of 1934 by issuers obligated to file such reports by rea-
son of their undertaking contained in one or more registration state-
ments filed and effective under the Securities Act of 1933 for the public
offering of securities. As of June 30, 1958, there were 1,365 such is-
suers, including 184 also registered under the Investment Company
Act of 1940.
Number of annual and other periodic reports filed by issuers under the Securities
Exchange Act of 1934- during the fiscal year ended June 30, 1958
Number of reports filed

by-
Total
Type of report Listed Over-the- reports
Issuers counter is- filed
tI1mgreports suers tI1mg
under sec. reports
13 under sec.
15 (d)
Annual reports on Form lQ-K, etc ______________________________ 2,269 1,270 3.539

Semiannual reports on Form 9-K _______________________________ 1,884 886 2,770
Current reports on Form 8-K _________________________________ 3,427 1,405 4,832
Total reports filed _______________________________________ 7,580 3,561 11,141
MARKET VALUE OF SECURITIES TRADED ON EXCHANGES
The market value on December 31, 195'7, of all stocks and bonds ad-
mitted to trading on one or more stock exchanges in the United States
was approximately $331,2'7'7,155,000as reported below.
Number Market value

of issues Dec. 31, 1957
Stocks:
New York Stock Exchange ____________________________________________1,522 $195.570,176,000
•________
American Stock Exchange ____________________________________ 855 25.545,238, 000
Exclusively on other exchanges ________________________________________ 584 3,097,925,000
Total stocks ___________________________
_______ ~ _________ R _ • ___ • _____
2,961 224,213,339,000
Bonds:
New York Stock Exchange , ____•_____________________________________ 1,106 106,071,744,000
American Stock Exchange __•__________________________________________ 59 860,410,000
•_____________________
Exclusively on other exchanges __________________ 28 131,662,000
Total bonds _________________________________________________________1,193 107,063,816,000
Total stocks and bonds ______________________________________________4,154 331,277,156,000
1 Bonds on the New York Stock Exchange.1ncluded:54~U.~S. Government'and New York State and City
Issues wIth $80,795,454,000aggregate market value.
The New York Stock Exchange and American Stock Exchange

figures were reported by those exchanges. There is no duplication of
issues between them. The figures for all other exchanges are for the
net number of issues appearing only on such exchanges, excluding the
many issues on them which were also traded on one or the other of
the New York exchanges. The number of issues as shown excludes
60 SECURITIES AND EXCHANGE CO:M:MISSION
those suspended from trading and a few others for which quotations
were not available. The number and market value as of December
31,1957, of stock issues alone are shown below:
Preferred stock Issues Common stock Issues
Number Market value Number Market value
Listed on registered exchanges _____________ 580 $7,948,896,000 2.053 $197,177,312,000

Unllsted on all exchanges __________________ 50 542, 204, 000 207 18, 133, 145, 000
Listed on exempted exchanges 1________ • ___ 13 16,975,000 58 394,807,000
Total stocks _____ • _______ . _______• ___ 643 8. 508, 075, 000 2,318 215, 705, 264, 000
1 ExcludJng Issues also traded on registered exchanges.
Reported market values for all stocks on the New York Stock
Exchange and estimated unduplicated market values for all stocks
on the other exchanges on June 30 of each year commencing in 1949,
in billions of dollars, have been as follows:
New York American All other

June 30 each year Stock Stock exchanges Total
Exchange Exchange
1949_______•• _. _._. __•••• ___• ___________ . _. _____________ $63.9 $12.0

1950 ________• _______. ___________________________________ $3.0 $78.9
1951. _____________• _____________ . _____________________._ 80.7 13.0 3.2 96.9
1952 ___• _____• ______________________ 97.9 15.2 3.2 116.3
1953__________________________________ -~----------------
. _________________
114.5 16.7 3.1 134.3
1954 ____ . _________• ______________________. ______________ 113 3 16.1 3.0 132.4
1955. ____• __________________. ___________________. _______ 139.2 18.7 3 2 161.1
1956____• _________________________. _____________________ 194.4 24. 6 3.8 222.8
1957____•• __________•• _________________________________• 218.6 27.6 3.8 250.0
227.9 30.5 3.6 262 0
1958 __• _. _. __• __•• ___•••• ___• _______________• ___________
224.9 30.0 3.0 257.9
No deductions have been made from the market values in the three
preceeding tables for intercompany investments tending toward dupli-
cation of values. The leading example of this duplication is the
Standard Oil (New Jersey) ownership of more than $10 billion market
value of shares of Creole Petroleum Corp., Humble Oil & Refining
Co., Imperial Oil Ltd., and International Petroleum Co., Ltd. This
ownership comprises well over half of the total value of all unlisted
shares admitted to trading on the American Stock Exchange. It is
reflected, of course, in the market value of the Standard Oil shares on
the New York Stock Exchange.
The number of shares admitted to trading on the stock exchanges
on December 31,1957, was approximately 6,773,000,000,compared with
6,334,500,000 on December 31, 1956. Some 6,246,900,000 shares, or
92.2% of the total, were listed on registered exchanges, and included
170,500,000preferred and 6,076,400,000common shares.
Assets of Companies With Listed Common Stocks
As shown above, there were 2,053 common stock issues with an

aggregate market value of about $197 billion listed on registered
exchanges as of December 31, 1957. The assets of the issuers involved
were about $273 billion, based on a showing of $255.2 billion by the
New York Stock Exchange and an estimate as to issuers represented
on other exchanges. The figures represent a conglomerate of indi-
vidual and consolidated company reports and various treatments of
such matters as reserves for depreciation.
Foreign Stock
The market value on December 31, 1957, of all shares and certifi-
cates representing foreign stocks on the stock exchanges was reported
at about $9.7 billion, of which $8.9 billion represented Canadian and
$0.8 billion represented other foreign stocks. The market values of
the entire Canadian stock issues were included in these aggregates.
Most of the other foreign stocks were represented by American
Depositary Receipts or American Shares, only the outstanding
amounts of which were used in determining market values.
Comparative Over-we-Counter Statistics
Section 15 (d) of the Securities Exchange Act of 1934 requires that

registration statements filed pursuant to the Securities Act of 1933
contain undertakings by the issuers to file the reports required by
section 13 of the Securities Exchange Act when the class of securities
offered and outstanding exceeds $2,000,000. The number of issuers
required to file these reports increased from 1,086 to 1,151 during the
fiscal year, excluding issuers also filing under the Investment Com-
pany Act of 1940. These issuers had securities outstanding with a
market value in excess of $20 billion on June 30, 1958.
The number of issuers registered under the Investment Company
Act of 1940 increased from 432 to 453, and their aggregate assets
increased roughly from $15 billion to $17 billion during the fiscal
year. Of the 453 issuers, 37, having assets totalling about $1.8 billion,
had their stocks listed on an exchange and the stocks of 3 whose
assets totalled about $56 million, were traded on an exchange on an
unlisted basis. The securities of the remaining 413 issuers were traded
exclusively in the over-the-counter market.
The number of active domestic issuers of over-the-counter stocks
(exclusive of registered investment companies) reporting 300 or more
holders appears not to have changed materially in recent years from
the estimated total of 3,500 mentioned in previous annual reports. The
numerous annual additions have been substantially offset by removals
due to listing, merger or other causes. The growth in issuers of
over-the-counter stocks appears more with respect to assets, market
values and number of shares outstanding and shareholders, than in
number of companies. In this respect they resemble issuers having
securities listed and registered on exchanges, whose number was 2,210
on June 30, 1953 and 2,236 on June 30, 1958, but whose aggregate
assets, market values, shares outstanding and shareholders have greatly
increased. The aggregate market value on December 31, 1957 of
the over-the-counter domestic stocks with 300 or more reported holders,
was about $44 billion or about 20% of the $224.2 billion market value
for all stocks on the exchanges on that date. The approximate number
of issuers and the aggregate market values of their over-the-counter
stocks were: for 700 bank issuers, $12 billion; for 275 insurance issuers,
$8 billion; for 300 utility issuers, $6 billion; and for 2,225 industrial
and miscellaneous issuers, $18 billion. The principal estimate in the
above amounts is the inclusion of about $1 billion in stock values for
500 issuers not found in the standard securities manuals nor reporting
to the Commission. The data are exclusive of issuers registered under
the Investment Company Act of 1940 and of foreign issuers.
The principal dollar volume in bonds of the United States and its
political subdivisions, in high-grade corporate bonds and preferred
stocks, and in bank, insurance, and investment trust shares is consum-
mated in the over-the-counter market. The principal dollar volume
in stocks, other than those noted above, is consummated on the ex-
changes.
DELISTING OF SECURITIES FROM EXCHANGES
Pursuant to Section 12 (d) of the Securities Exchange Act a se-

curity registered on a national securities exchange may be withdrawn
or stricken from listing and registration in accordance with the rules
of the exchange and, upon such terms as the Commission may deem
necessary to impose for the protection of investors, upon application
by the issuer or the exchange to the Commission.
During the fiscal year 1958, the Commission granted applications
by exchanges and issuers to remove 42 securities from listing and reg-
istration pursuant to section 12 (d) and rule 12<12-1(b) thereunder,
as follows:
Stock Bond
Applications filed by: fBsues isslIes
New York Stock Exchange _ 10 2
Aunerican Stock Exchange _
8 0
Midwest Stock Exchange _ 1* 0
Pacific Coast Stock Exchange _ 2 0
Philadelphia-Baltimore Stock Exchange _ 5 0
Salt Lake Stock Exchange _ 2 0
San Francisco ]dining Exchange _
Issuers _ 3 0
10 0
~otal rernovals _
41 2
- *Th1s stock was also delisted by New York Stock Exchange.
The New York Stock Exchange has adopted a revised policy with
respect to delisting, It has stated that it will consider initiation of a
delisting application where the size of a company has been reduced to
$2,000,000 or less in aggregate market value of the common stock
outstanding or net tangible assets applicable to common stock and the
average net earnings after taxes for the last three years is below
$200,000; or where distribution of the listed issue is limited to such an
extent that, in the case of common stock, there are 250 or fewer stock-
holders of record discounting holders of odd lots, or the stock
outstanding exclusive of concentrated holdings amounts to 30,000
shares or less or has a market value of $500,000 or less, or, in the case
of other listed securities, the issue outstanding exclusive of concen-
trated holdings has a market value of $200,000 or less or totals 2,000
shares or less in the case of stock or $200,000 or less of principal
amount in the case of bonds. The exchange has also stated that it will
consider initiation of a delisting application in instances, among
others, where stockholders have authorized liquidation or where sale
of assets has been made without authorizing liquidation. All of the
delisting applications filed by the New York Stock Exchange were
initiated in accordance with this policy. The revised policy with
respect to delisting of securities on the New York Stock Exchange
was at issue in two cases described on p. 96 of last year's Annual
Report,"
The 8 delistings by the American Stock Exchange included 4:
closely-held stocks, 3 stocks suspended for failure to meet reporting
requirements among other reasons, and 1 stock following upon distri-
bution of the company's principal assets. The 13 delistings by the
regional exchanges included 6 stocks with small volumes on the ex-
changes, and 7 stocks of issuers (including 5 mining companies) fail-
ing to meet reporting requirements among other things.
Of the 10 delistings upon applications by issuers, 5 were for the
purpose of reducing multiple listings, 3 were by mining companies
of uncertain financial condition, 1 was for long absence of exchange
transactions, and 1 followed a stockholder vote heavily in favor of
delisting.
During the fiscal year 1958 the Salt Lake Stock Exchange and the
San Francisco Mining Exchange adopted rules providing for sus-
pension of trading in issues of companies which have not filed the
annual reports required under section 13 of the Securities Exchange
Act within 60 days after such reports are required to be filed, and
for the filing of delisting applications with the Commission if the
failure is not cured within 90 days after suspension. There were 8
delistings upon application of these exchanges and issuers of securi-
ties listed thereon during fiscal 1958, based principally on failure or
2 EllJchangeBuffet Oorporation v, New York Stock EllJchangfl,and S. E. 0., 244 F. 2d 507
(C. A. 2, 1957) ; Atla8 Tack Gorp. v. New York Stock EllJchange,et aI., 246 F. 2d 811 (C. ..l.
I, 1957).
inability to comply with the new rule. The Spokane Stock Exchange
also adopted a similar rule during the fiscal year.
The Philadelphia-Baltimore Stock Exchange on April 9, 1958,
established a rule similar to that of the New York Stock Exchange
and several other exchanges, providing that, in the absence of special
circumstances, there must be a vote of security holders on delisting
proposals by issuers. In such cases, proxy statements must be cleared
through the Commission in accordance with its proxy rules. The
Salt Lake Stock Exchange adopted a substantially similar rule on
August 2,1957.
Delisting Proceedings Under Section 19 (a)
Section 19 (a) (2) authorizes the Commission to suspend for a

period not exceeding twelve months, or to withdraw, the registration
of a security on a national securities exchange if, in its opinion, such
action is necessary or appropriate for the protection of investors and,
after notice and opportunity for hearing, the Commission finds that
the issuer of the security has failed to comply with any provision
of the Act or the rules and regulations thereunder. Section 19 (a)
(4) authorizes the Commission summarily to suspend trading in any
registered security on any national securities exchange for a period
not exceeding ten days if in its opinion such action is necessary or
appropriate for the protection of investors and the public interest
so requires.
Seven cases were pending under section 19 (a) (2) at the beginning
of the fiscal year and two cases were initiated during the fiscal year.
One case was closed during the fiscal year and eight cases were
pending at the end of the year. The case which was closed during
the year and six cases which were closed shortly after the end of the
year are described below.
In the past the Commission has used the power under section 19
(a) (4) infrequently. However, during the year it found it neces-
sary and appropriate in connection with proceedings under section
19 (a) (2) involving Bellanca Corporation to use its authority sum-
marily to suspend trading in that corporation's securities registered
on the American Stock Exchange.
Bellanca Corporation.- Bellanca Corporation, a Delaware corpora-
tion, was a small manufacturer of aircraft parts until February
1955 when Sydney L. Albert, a buyer and liquidator of failing busi-
nesses, acquired over 80% of its stock. Soon after Albert's acquisition
the market price of Bellanca stock rose to a peak of 30%, but in
early June, 1956, the market price of the stock broke sharply and
continued to decline through 1956 to about $2.00 per share. The
Commission instituted proceedings under section 19 (a) (2) of the
Act to determine whether the common stock of Bellanca should be
suspended or withdrawn from registration on the American Stock
Exchange.
In ordering the withdrawal of the registration of the common
stock of Bellanca on the American Stock Exchange, the Commission
found that the company violated sections 13 and 14 of the Act which
require, respectively, the filing of reports with the Commission and
the exchange, and the filing of preliminary proxy soliciting material
with the Commission," The Commission ruled that Bellanca's failure
to file certain required information as well as its filing of false in-
formation with respect to a number of securities transactions reflected
a "flagrant disregard for its responsibilities to public investors."
The Commission found that beginning in March, 1955, and continu-
ing until June, 1956, Bellanca through Albert, who had become its
president, and others engaged in a program of acquiring interests
in other companies by means of a series of complex transactions
many of which resulted in benefits to the insiders rather than to
Bellanca. It was held that the reports that were filed through June,
1956, served only to mislead the public and obscure the facts by failing
to disclose unfavorable aspects of Bellanca's transactions and related
financing arrangements.
Among the reporting deficiencies discussed by the Commission
were those relating to N. O. Nelson Company and Automatic Washer
Company. According to the decision, Bellanca failed to report that
its purchase of N. O. Nelson Company in 1955 was accomplished
by means of a $4,000,000 loan for which a premium of $500,000 was
paid in addition to interest of 6%, nor was the subsequent refinancing
of the Nelson purchase disclosed. Bellanca exchanged its Nelson
stock for a controlling block of stock of Automatic Washer Company,
at a time when Bellanca's president was in a controlling position
with respect to Automatic. The Commission found that Bellanca
should have filed a current report to disclose the agreement with
Automatic, and that a subsequently filed current report was mis-
leading and inadequate in failing to disclose the interest of Bellanca's
president and others in the transactions. In addition, the Commis-
sion found that the financial statements in the annual report for 1956
and in preliminary proxy soliciting material filed with the Com-
mission in 1957 were misleading and inadequate with respect to the
value placed on Bellanca's shares of Automatic stock.
The Commission further found that securities owned or held by
Bellanca or a subsidiary were used by the president for his own
personal benefit and that such information should have been disclosed
• Securities Exchange Act Release No. 5706 (June 2,1958).

486867-59-6
in the company's annual report for 1956 and in the preliminary proxy
soliciting material, as required under the Commission's rules. Al-
though all such shares were eventually returned or replaced, it was
noted that in some instances the market value of the shares when
they were returned was considerably lower than at the time they
were taken.
The Commission held that the evidence showed a "course of con-
duct over an extended period involving flagrant violations of the
reporting and proxy provisions of the Act. The purpose of the
reporting provision is to inform existing and potential investors of
material corporate activities as they occur and the purpose of the
proxy provisions is to enable stockholders to exercise their voting
rights upon the basis of an informed judgment." The Commission
concluded that the record established that the protection of investors
required the withdrawal of the registration of Bellanca's securities
on the Exchange and pointed out that such withdrawal would con-
form with the Congressional intent reflected in section 19 (a) (2) as
well as the Commission's previous decision in the Great Sweet Grass
Oils case.'
Eureka Company.-In the Eureka Oompany case, the Commission
found that reports filed by the company with the San Francisco
Mining Exchange and the Commission during 1956 and 1957pursuant
to section 13 of the Securities Exchange Act were false and mis-
leading. In addition, the company failed to file an annual report
for 1955 and semi-annual reports for the periods ending June 30,
1955 and June 30, 1956, and filed a false and misleading proxy state-
ment with respect to its annual meeting of stockholders for November
14,1955.
The reports filed, some of which were filed late, were found to con-
tain false and misleading statements concerning the acquisition of
significant amounts of oil, gas and mining properties and other physi-
cal assets. Morover, the reports misrepresented that certain securities
sold and issued by the company in exchange for various assets were
exempt from the registration requirements of the Securities Act of
1933 pursuant to the provision of section 4 (1) of the Act which ex-
empts "transactions by an issuer not involving any public offering."
The Commission found that in a series of transactions from J an-
uary to February, 1957, the company issued a substantial amount .of
its common stock in exchange for various interests in oil, gas and min-
ing properties and related machinery and equipment. Current reports
required to be filed to reflect these transactions were filed late, and no
reports were filed with respect to certain acquisitions of assets. Fur-
4 Securities Exchange Act Release No. 5483 (April 8, 1957).

thermore, the reports which were filed did not furnish required in-
formation regarding the date and manner of acquisition, a description
of the assets involved, the nature and amount of consideration given
therefor, the identity of the persons from whom the assets were ac-
quired and the nature of the material relationships which existed be-
tween such persons and the company, its directors and officers, and
associates thereof.
Each of the current reports filed concerning the issuance of com-
mon stock in exchange for assets stated that such securities were not
registered under the Securities Act and that such "securities were
taken for investment by the purchaser." In this connection, the
Commission held that representations by a purchaser that he is ac-
quiring securities for investment or that he will not transfer them for
a certain period are not of themselves sufficient to establish a private
offering exemption pursuant to section 4: (1) of the Securities Act. In
this case the Commission found that the number and nature of the
purchasers and the manner of distribution were such as to clearly in-
volve a public offering. The stock issued by the company in 1956 for
properties and services were distributed to about 35 original pur-
chasers. By February 1957, a large number of shares issued to the
original recipients were transferred to 70 other persons or firms, in-
cluding more than 15 broker-dealer firms. A substantial number of
such shares eventually were widely distributed to the public.
The Commission found that the transfers and distributions were
known or should have been known to Eureka, and held that the cur-
rent reports were false and misleading in representing that the shares
listed in such reports were exempt from registration under the Securi-
ties Act and were taken for investment by the purchasers. Such re-
ports should have disclosed that the shares were sold in violation of
section 5 of the Act.
The Commission stated that use of the facilities of a national securi-
ties exchange by an issuer is a privilege involving important responsi-
bilities under the Securities Exchange Act, including compliance with
the reporting and proxy solicitation requirements. It pointed out
that Congress has specified that when violations occur, such privilege
may be withdrawn if necessary or appropriate for the protection of
investors, and decided that under the circumstances of the case, the
protection of investors required that the registration of the common
stock of Eureka on the San Francisco Mining Exchange be with-
drawn,"
Nev-Tah Oil and Mining Company.-In the case of Nev-Tah Oil
and Mining Company the Commission found that the company had
failed to file current reports giving information as to acquisition of
S Securities Exchange Act Release No. 5729 (July 7. 1958).

certain interests and the subsequent loss thereof and also as to a judg-
ment for $100,000 in connection with one of the transactions.
Moreover certain current reports represented that large issues of
stocks were registered under the Securities Act of 1933 whereas, in
fact, such shares were not registered and were offered to the public
in violation of the Act. Neither the sales of such shares nor an in-
junction obtained by the Commission by consent in the United States
District Court for the District of Nevada enjoining the registrant and
certain officers from further sales, were disclosed in current reports.
A vigorously contested issue in this case was whether control was exer-
cised by the principal promoter who was the manager and generally
the largest single stockholder, who selected the president, two direc-
tors and the general counsel, who controlled the finances and opera-
tions, negotiated most of the acquisitions 'and dispositions and deter-
mined the prices and participated in a substantial way at board meet-
ings although not a director. The Commission found that such
person in fact controlled and was the parent of the registrant and
that the required reports not only failed to disclose such control but
also falsely denied it existed. The registrant asked for a 90-day delay
of the Commission's determination so as to permit it to submit a plan
of rehabilitation, but the Commission found that the record did not
indicate any basis on which such a plan could be achieved and ordered
that the registration of the common stock on the Salt Lake Stock
Exchange be withdrawn,"
Nevada Monarch Consolidated Mines Corporation.- In the Nevada
Monarch case, the company had not filed annual reports for the years
1951 through 1956. Its report for 1956 was ultimately filed some five
months after it was due. In addition, the company failed to file un-
til March, 1958, (after institution of delisting proceedings by the Com-
mission) a current report due in July, 1957, reporting that in June,
1957, it had executed a three-year lease on all its properties coupled
with an option to the lessee to purchase the properties. Moreover, the
annual report finally filed for 1956 contained a balance sheet which
stated that proceeds of $50,000 from a government loan had been ex-
pended by the lessee for the development of a tungsten ore body, when
as a matter of fact the lessee received only $4,875 from such a loan
and in addition expended a maximum of $18,000 "in connection with"
such loan.
In reaching the conclusion that the protection of investors required
the withdrawal of registration from the Salt Lake Stock Exchange,
the Commission pointed out that the purpose of the reporting provi-
sions of the Act is to inform existing and potential investors of ma-
• Securities Exchange Act Release No. 5738 (July 22, 1958).

terial corporate activities and the corporation's financial condition,
and found that the registrant had ignored its obligations under these
provisions. The Commission also pointed out that the company's
asserted belief that the loan had been granted in its full amount could
not absolve the company of responsibility for the substantial over-
statement of assets in its financial statement.'
Intermountain Petroleum, Inc.-In the Intermountain Petroleum,
Inc. case the Commission found that reports filed by the company with
the Salt Lake Stock Exchange and the Commission pursuant to sec-
tion 13 of the Securities Exchange Act were not filed within the pre-
scribed time and, when filed, were false and misleading. These
reports were found to contain false and misleading statements regard-
ing the availability of exemptions from registration under the Securi-
ties Act, the recipients of stock issues and the value of mining and
oil claims.
The Commission in its opinion held that she record did not estab-
lish that the claimed exemption under section 4 (1) of the Securities
Act was available for the issuance of about 1,400,000 shares to ap-
proximately 90 persons in one transaction and the issuance of 274,500
shares to about 58 persons in another transaction. The opinion
points out that in the proceedings, and in amended reports for the
months in question, the company abandoned its contention that pri-
vate offering exemptions under section 4 (1) of the Securities Act
were available and instead urged that registration was not required
because no sale of the securities occurred within the meaning of Rule
133 under the Securities Act. The Commission, in holding that this
position was without substance, stated that the theory of Rule 133 is
that no sale of securities to stockholders is involved where the distri-
bution of securities to them results from the authorization by them,
voting as a group, of a corporate act such as a transfer of assets for
stock of another corporation, a merger or a consolidation, because in
such situations there is not present the element of individual consent
ordinarily required for a "sale" of securities in the contractual sense.
However, it was found in this case that the conditions of Rule 133, in-
cluding the requirement of a vote of stockholders, were not met. It
was further stated that, even if the terms and conditions of that rule
had been literally met, no exemption would have been available under
that rule if a vote by the shareholders of the acquired company would
have been merely a formal act due to its affairs being controlled by a
single individual who negotiated the exchange.
The Commission also found that the reports in question were mis-
leading with respect to mining and oil claims which had not been the
'Securities Exchange .Act Release No. 5146 (July 30. 1958).

subject of geological appraisals or exploratory drillings. The Com-

mission stated that the use of the terms "appraised value" and
"valued" in connection with unexplored and undeveloped mining and
oil prospects was misleading since such terms carried with them an
implication that value had been determined by a scientific method.
Moreover, it was especially important that there be no misleading
implications as to the "value" of the claims covered by one of the re-
ports, since those claims were sold to the company by an officer and
controlling person of the company.
The company asserted that there was no intent to mislead or with-
hold information and that the deficiencies were the result of a lack
, of understanding of the requirements and the failure to consult
counsel. The Commission concluded that while the company's asserted
lack of understanding of applicable law and regulations and its lack
of legal counsel did not condone the violations which it had found, it
appeared that such violations did not stem from any plan or intent
to defraud investors and that the company now fully appreciates its
obligations and exhibited a willingness to file accurate information.
Under all the circumstances, the Commission concluded, the protec-
tion of investors would be satisfied without withdrawal of the regis-
tration of the company's stock on the exchange if complete and
accurate reports were filed. Accordingly, the registration of the com-
pany's stock on the exchange was suspended shortly after the end of
the fiscal year for a period of 60 days, with the provision that if within
such time the company filed corrected current reports, an order termi-
nating the suspension and discontinuing the proceedings would be
entered. If no such reports were filed within the stated period, an
order withdrawing the registration on the exchange of the company's
stock would be entered,"
Verdi Development Company.-The Commission found that the
company had failed to file current reports required to be filed pursuant
to section 13 of the Act and the rules and regulations thereunder and to
report material dispositions of the company's assets, defaults on its
debt securities, the institution and termination of material litigation
and the granting by the company of stock options. In addition, the.
Commission found that annual reports filed by the company after
the institution of proceedings against the company failed to include
required financial statements, and concluded that the company's stock
should be withdrawn from registration on the San Francisco Mining
Exchange,"
North American Resources Corp.-The North American Resources
Corp. case involved the question of misrepresentations in a proxy
• SecurIties Exchange .Act Release No. 5753 (.August 11, 1958). Subsequently In October,
1958, the company filed corrected reports and the suspenston proceedIngs were discontinued.
• Securities Exchange .Act Release No. 5754 (August 14, 1958).
TWENTY-FOURm ANNUAL REPORT 71
statement. The company filed a proxy statement with the Commis-
sion, which was mailed to stockholders, indicating that one of the
matters to be acted on at the meeting was a proposal to increase the
amount of authorized common stock from 2,000,000 shares to 10,000,000
shares and that a portion of the new shares would be traded or
exchanged for oil and gas leases, royalties and mining properties. In
this connection it stated: "However no negotiations in this respect
have been undertaken and the Board of Directors does not presently
have in mind any specific properties for acquisition. In addition,
there have been no plans, agreements or discussions concerning the
present program of expansion or acquisitions in which the company
or its officers and directors or any prospective officer or director have
been or are now engaged."
The Commission found, however, that the evidence adduced at
the hearing established that at the time the proxy statement was
issued, the company's controlling person did in fact have in mind
specific properties for acquisition, and that there had been plans
and negotiations with respect thereto. The Commission concluded
that the proxy statement was materially false and misleading and
that the company in its use of such proxy materiel violated section
14 (a) of the Act and rule X-14a-9 thereunder, This fact, plus
the failure to file a current report on Form 8-K in connection with
the dssuance of 6,'750,000 shares of the company's stock for assets
acquired, led the Commission to find that it was necessary and ap-
propriate for the protection of investors to withdraw the registration
of the company's common stock on the Salt Lake Stock Exchange,'?
UNLISTED TRADING PRIVILEGES ON EXCHANGES
Unlisted Trading Categories

Under the provisions of section 12 (f) of the Securities Exchange
Act of 1934, the Commission may approve applications by national
securities exchanges to admit securities to unlisted trading privileges
without action on the part of the issuers, if it finds such admissions
are necessary or appropriate in the public interest or for the pro-
tection of investors. Such admissions dmpose no duties-on issuers
beyond any they may already have under the Act. Section 12 (f)
provides for three categories of unlisted trading privileges.
Clause (1) of section 12 (f) provides for continuation of unlisted
trading privileges existing on the exchanges prior to March 1, 1934.
The number of unlisted trading privileges under Clause (1) in issues
listed 0'11 other exchanges has declined Hom '75 bond and 991 stock
admissions on December 31, 1935, to 2 bond and 536 stock admissions
on June 30, 1958. The number of unlisted trading privileges in
20 Securities Exchange .Act Release No. 5756 (.August 20, 1958).
issues not Iisted on other exchanges has declined from 496 bond
and 817 stock admissions to 20 bond and 246 stock admissions duning
the same period."
Clause (2) of section 12 (f) provides for granting by the Com-
mission of applications by exchanges for unlisted trading privileges
in securities listed on other exchanges. There were 926 unlisted trad-
ing privileges in effect under Clause (2) on June 30, 1958, of which
925 involved stocks and 1 a bond issue.
Clause (3) of section 12 (f) provides for granting by the Com-
mission of applications for unlisted trading privileges conditioned,
among other things, upon the availability of information substan-
tially equivalent to that required to be filed by listed issuers. On
June 30, 1958, unlisted trading privileges existed pursuant to clause
(3) in only 12 bond and 4 stock issues, and 2 of the stock issues
have also become listed on other exchanges. There have been no
applications under clause (3) since 1949.
Volume of Unlisted Trading in Stocks on Exchanges
The reported volume of shares traded on an unlisted basis on the

stock exchanges during the calendar year 1957 included approxi-
mately 28.8 million shares in stocks admitted to unlisted trading only
and 29.2 million shares in stocks listed on exchanges other than where
unlisted trading occurred. These amounts were respectively about
2.69 and 2.73 percent of the total share volume reported on all ex-
changes. Appendix table 9 shows the distribution of share volume
among the various categories of unlisted trading privileges on ex-
changes.
Applications for Unlisted Trading Privileges
Pursuant to applications filed by exchanges with respect to stock

listed on other exchanges, unlisted trading privileges were extended
during the year ended June 30, 1958, as follows:
Stock Exchange: Number oj stock«
Boston 19
I>etroit 2
Philadelphia-Baltimore .___ 13
Pacific Coast 3
Total 31
The Commission's rule 12f-2 provides that when a security ad-

mitted to unlisted trading privileges is changed in certain minor
respects it shall be deemed to be the security previously admitted to
11 Trading privileges may exist in the same issue on numerous stock exchanges. Accord-
ingly, the number of trading privileges is greater than the net number of issues concerned.
Exempted exchanges are excluded.
unlisted trading privileges, and, if it is changed in other respects,
the exchange may file an application requesting the Commission to
determine that, notwithstanding such change, the security is substan-
tially equivalent to the security theretofore admitted to unlisted trad-
ing privileges. During the fiscal year, the Commission granted an
application by the Pacific Coast Stock Exchange for continuance of
unlisted trading in a stock under this rule.
BillCK DISTRIBUTIONS REPORTED BY EXCHANGES
Rule 10b-2 under the Securities Exchange Act of 1934 in substance

prohibits any person participating or otherwise financially interested
in the primary or secondary distribution of a security from paying
any other person for soliciting a third person to buy any security of
the same issuer on a national securities exchange. This rule is an
anti-manipulative rule adopted under section 10 (b) of the Act which
makes it unlawful for any person to use any manipulative or decep-
tive device or contrivance in contravention of Commission rules pre-
scribed in the public interest or for the protection of investors. Para-
graph (d) of rule 10b-2 exempts transactions where compensation
is paid pursuant to the terms of a plan, filed by a national securities
exchange and declared effective by the Commission, authorizing the
payment of such compensation in connection with the distribution.
The Commission in its declaration may impose such terms and condi-
tions upon such plan as it deems necessary or appropriate in the pub-
lic interest or for the protection of investors.
At the present time two types of plans are in effect to permit a block
of securities to be distributed through the facilities of a national secu-
rities exchange when it has been determined by the exchange that the
regular market on the floor of the exchange cannot absorb the particu-
lar block within a reasonable time and at a reasonable price or prices.
These plans have been designated the "Special Offering Plan," essen-
tially a fixed-price offering based on the market price, and the "Ex-
change Distribution Plan," which is a distribution "at the market".
Both plans contemplate that orders will be solicited off the floor but
executed on the floor. Each of such plans contains certain anti-
manipulative controls and requires specified disclosures concerning
the distribution to be made to prospective purchasers.
In addition to these two methods of distributing large blocks of
securities on national securities exchanges, a third method is com-
monly employed whereby blocks of listed securities may be distributed
to the public on the over-the-counter market. This method is com-
monly referred to as a "Secondary Distribution" and such a distribu-
tion usually takes place after the close of exchange trading. It is
generally the practice of exchanges to require members to obtain the
approval of the exchange before participating in such secondary

distributions.
The following table shows the number and volume of special
offerings and exchange distributions reported by the exchanges having
such plans in effect, as well as similar figures for secondary distribu-
tions which exchanges have approved for member participation and
reported to the Commission.
Totalsale8--12 months ended December 31, 19571
Shares In Value (thou-

Number offer Shares sold sands of
_ dollars)
Special offerlngs _______•__________________________ 5 68,016 63,408 1,845

Exchange distributions •••. ______________________
--- 33 448,394 390,832 16,855
Secondary dlstributions ____._______________________ 99 9,327,228 9,324, 699 339,062
6 montbj! ended June 30, 19581
Special offerings, __________________________________ 445 152 3,286

Exchange distrlbutlons ••__________________________ 93,
347,605 1 88,
347,315 1 10,686
Secondary dlstnbutions ____________________________
MI 4,464,850 4,544,297 199,592
1 Details of tbese dlstrlbntions appear In the Commission's monthly Statistical Bulletin. For data for
prior years see appendix table.
MANIPULATION AND STABILIZATION

Manipulation
The Exchange Act describes and prohibits certain forms of manip-

ulative activity in any security registered on a national securities
exchange. The prohibited activities include wash sales and matched
orders effected for the purpose of creating a false or misleading ap-
pearance of trading activity in, or with respect to the market for, any
such security; a series of transactions in which the price of such se-
curity is raised or depressed, or in which actual or apparent active
trading is created for the purpose of inducing purchases or sales of
such security by others; circulation by a broker, dealer, seller, or
buyer, or by a person who receives consideration from a broker,
dealer, seller or buyer, of information concerning market operations
conducted for a rise or a decline in the price of such security; and
the making of any false and misleading statement of material in-
formation by a broker, dealer, seller, or buyer regarding such security
for the purpose of inducing purchases or sales. The Act also em-
powers the Commission to adopt rules and regulations to define and
prohibit the use of these and other forms of manipulative activity
in any security registered on an exchange or traded over the counter.
The Commission's market surveillance staff in its Division of
Trading and Exchanges in Washington and in its New York Regional
Office and other field offices observes the tickertape quotations of
securities listed on the New York Stock Exchange and on the Ameri-
can Stock Exchange, the sales and quotation sheets of the various
regional exchanges, and the bid and asked prices published by the
National Daily Quotation Service for about 6,000 unlisted securities
to observe any unusual or unexplained price variations or market
activity. The financial news ticker, leading newspapers, and various
financial publications and statistical services are also closely followed.
When unusual or unexplained market activity in a security is ob-
served, all known information regarding the security is examined and
a decision made as to the necessity for an investigation. Most in-
vestigations are not made public so that no unfair reflection will be
cast on any persons or securities and the trading markets will not be
upset. These investigations, which are conducted by the Commis-
sion's regional offices, take two forms, A preliminary investigation
or "quiz" is designed to discover rapidly evidence of unlawful activity.
If no violations are :found, the preliminary investigation is closed.
If it appears that more intensive investigation is necessary, a formal
order of investigation, which carries with it the right to issue subpenas
and to take testimony under oath, is issued by the Commission.
If violations by a broker-dealer are discovered, the Commission may
institute administrative proceedings to determine whether or not
to revoke his registration or to suspend or expel him from member-
ship in the National Association of Securities Dealers, Inc., or from
a national securities exchange. The Commission may also seek an
injunction against any person violating the Act and it may refer in-
formation obtained in its investigation to the Department of Justice
recommending that persons violating the Act be criminally prosecuted.
In some cases, where State action seems likely to bring quick results
in preventing fraud or where Federal jurisdiction may be doubtful,
the information obtained may be referred to State agencies for State
injunction or criminal prosecution.
The following table shows the number of quizzes and formal inves-
tigations pending at the beginning of fiscal 1958, the number initiated
in fiscal 1958, the number closed or completed during the same period,
and the number pending at the end of the fiscal year:
Trading investigations
Quizzes I tI:~~~
tlons
Pending June
Initiated 30,fiscal
during 1957-----------------------------------------------------------
year - 66661 9
1
Changed
TotaL
Total
to formalduring
•
1Iscal
. .
Closed or completed durlngllscal year -----.----------.-------------------------

year--_-_---------------------------------------
._
- . -_--- _- I---
1321
85
86
B
_1-------.----2
10
Pending at end of 1Iscal year ---.-------------------.---------------------------- 461 8

When securities are to be offered to the public, their markets are

watched very closely to make Sure that the price is not unlawfully
raised prior to or during the distribution. Eight hundred and nine
registered offerings having a value of $16,489,700,000 and 732 offer-
ings exempt under section 3 (b) of the Securities Act, having a value
of about $134 million were so observed during the fiscal year. One
hundred and ninety seven other offerings, such as secondary distri-
butions and distributions of securities under special plans filed by
the exchanges, having a total value of $446 million, were also kept
under surveillance.
Stabilization
Stabilization involves open-market purchases of securities to pre-

vent or retard a decline in the market price in order to facilitate a
distribution. It is permitted by the Exchange Act subject to the
restrictions provided by the Commission's rules 10b-6, 7 and 8. These
rules are designed to confine stabilizing activity to that necessary for
the above purpose, to require proper disclosure and to prevent un-
lawful manipulation.
During 1958 stabilizing was effected in connection with stock of-
ferings aggregating 18,221,647 shares having an aggregate public
offering price of $453,580,132 and bond offerings having a total of-
fering price of $201,138,350. In these offerings, stabilizing transac-
tions resulted in the purchase of 316,945 shares of stock at a cost of
$8,335,724and bonds at a cost of $3,755,794. In connection with these
stabilizing transactions, 4,445 stabilizing reports showing purchases
and sales of securities effected by persons conducting the distribution
were received and examined during the fiscal year.
INSIDERS' SECURITY TRANSACTIONS AND HOLDINGS
A corporate "insider," by virtue of his position, may have knowl-

edge of the company's condition and prospects which is not available
to the general public and may be able to use such information to
advantage in transactions in the company's securities. Section 16 of
the Securities Exchange Act of 1934 and similar provisions contained
in section 17 of the Public Utility Holding Company Act of 1935
and section 30 of the Investment Company Act of 1940 were designed
to provide other stockholders and investors with information as to
the transactions and holdings of insiders and to prevent the unfair
use of confidential information by insiders to profit from in-and-out
trading in a company's securities.
Section 16 (a) of the Securities Exchange Act requires every person
who is a direct or indirect beneficial owner of more than 10 percent
of any class of equity securities (other than exempted securities)
which is registered on a national securities exchange, or who is a
director or officer of the issuer of such securities, to file reports with
the Commission and the exchange disclosing his ownership of the
issuer's equity securities. This information must be kept current by
filing subsequent reports for any month in which a change in his
ownership occurs. Similar reports are required by section 17 (a) of
the Public Utility Holding Company Act of officers and directors
of public utility holding companies and by section 30 (f) of the
Investment Company Act of officers, directors, principal security
holders, members of advisory boards and investment advisers or
affiliated persons of investment advisers of registered closed-end in-
vestment companies.
All ownership reports are available for public inspection as soon
as they are filed at the Commission's officein Washington and reports
filed pursuant to section 16 (a) of the Securities Exchange Act may
also be inspected at the exchanges where copies of such reports are
filed. In addition, for the purpose of making the reported informa-
tion available to interested persons who may not be able to inspect
the reports in person, the Commission summarizes and publishes such
information in a monthly "Official Summary of Security Transactions
and Holdings," which is distributed by the Government Printing Of-
fice on a subscription basis. The increasing interest in this publica-
tion is evidenced by the increase of more than 1,000 in subscriptions
during the past year. The total circulation is now nearly 6,000.
The number of ownership reports filed continued at a high level-
33,126 for the fiscal year. This is a decline from the record high of
34,443 reports filed during the 1957 fiscal year. The following table
shows the number of such reports filed during each of the last five
fiscal years.
Number of oumerstut: reports filed during tile last five fiscal years
Numbero!
reports
Fiscal year: filed
1958 33,126
1957 34,443
1956 32,001
1955 2~975
1954 23,199
The following table shows details concerning reports filed during

the fiscal year ended June 30, 1958.
Number of reports fileiL iLuring fiscalllear 1958
Securities Exchange Act of 1934: 1

lrorm 4 28,524
lrorm 5_________________________________________________________ 633
lrorm 6 3,133
Total 32,290
Public Utility Holding Company Act of 1935: 2

lrorm U-17-1___________________________________________________ 29
lrorm U-17-2___________________________________________________ 332
Total_________________________________________________________ 361
Investment Company Act of 1940 :a

Form N-30F-1__________________________________________________ 159
Form N-30F-2__________________________________________________ 316
Total_________________________________________________________ 475
Grand Total 33,126
1 Form 4 is used to report changes in ownership; Form 5 to report ownership at the

tIme an equity security of an issuer is first registered on a national securities exchange;
and Form 6 to report ownership of persons who subsequently become officers, directors or
principal stockholders of the issuer.
2 Form U-17-1 is used for initial reports and Form U-17-2 for reports of changes of
ownership. -
a Form N-30F-l is used for initial reports and Form N-30F-2 for reports of changes of
ownership.
Recovery of Short-Swing Trading Profits hy Issuer
In order to prevent insiders from making unfair use of information

which may have been obtained by reason of their relationship with a
company, section 16 (b) of the Securities Exchange Act, section 17 (b)
of the Public Utility Holding Company Act, and section 30 (f) of
the Investment Company Act provide for the recovery by or on behalf
of the issuer of any profit realized by insiders from certain purchases
and sales, or sales and purchases, of securities of the company within
any period of less than six months. The Commission has certain ex-
emptive powers with respect to transactions not comprehended within
the purpose of these provisions, but is not charged with the enforce-
ment of the civil remedies created thereby. The Commission has,
however, filed briefs as amicus curiae in several suits instituted by
private parties where the construction of applicable statutory provi-
sions or rules was involved.
REGULATION OF PROXIES
Scope of Proxy Regulation
Under sections 14 (a) of the Securities Exchange Act, 12 (e) of the

Public Utility Holding Company Act of 1935, and 20 (a) of the In-
vestment Company Act of 1940 the Commission has adopted Regula-
tion 14 requiring the disclosure in a proxy statement of pertinent in-
formation in connection with the solicitation of proxies, consents and
authorizations in respect of securities of companies subject to those
statutes. The regulation also provides means whereby any security
holders so desiring may communicate with other security holders when
management is soliciting proxies, either by distributing their own
proxy statements or by including their proposals in the proxy state-
ments sent out by management.
Copies of proposed proxy material must be filed with the Commis-
sion in preliminary form prior to the date of the proposed solicitation.
Where preliminary material fails to meet the prescribed disclosure
standards, the management or other group responsible for its prepara-
tion is notified informally and given an opportunity to avoid such de-
fects in the preparation of the proxy material in the definitive form in
which it is furnished to stockholders.
Statistics Relating to Proxy Statements
During the 1958 fiscal year a total of 1,929 proxy statements in de-
finitive form were filed under the Commission's Regulation 14 for the
solicitation of the proxies of security holders; 1,897 of these were filed
by management and 32 by non-management groups or individual stock-
holders. These 1,929 solicitations related to 1,769 companies, some 110
of which had more than one solicitation during the year, generally
for a special meeting not involving the election of directors.
Of the 1,929 proxy statements filed during the 1958 fiscal year, 1,780
involved the solicitation of proxies for the election of directors, 134
were for special meetings not involving the election of directors and 15
solicited assents and authorizations for actions not involving a meet-
ing of security holders or the election of directors.
In addition to the election of directors, stockholders' decisions were
sought in the 1958 fiscal year with respect to the following types of
matters:
Mergers, consolidations, acquisitions of businesses, purchases and sales
of property and dissolutions of companies___________________________101
Authorizations of new or additional securities, modifications of existing
securities and recapitalization plans (other than mergers, eonsollda-
tlo~ etc)_________________________________________________________ 208
Employee pension and retirement plans (including amendments to e:x:-
istu1g~)--------------------------------------------------_____ 79
Bonus, profit-sharing plans and deferred compensation arrangements

(including amendments to existing plans and arrangements) 30
Stock option plans (including amendments to existing plans)__________ 183
Stockholder approval of the selection by management of independent
auditors 574
Miscellaneous amendments to charters and by-laws and other matters
(excluding those involved in the preceding matters)________________ 402
Stockholder Proposals
During the 1958 fiscal year, 39 stockholders submitted a total of

165 proposals which were included in the 95 proxy statements of 95
companies under rule 14a-8 of Regulation 14.
Typical of such stockholder proposals submitted to a vote of se-
curity holders were resolutions relating to amendments to charters or
by-laws to provide for cumulative voting for the election of directors,
limitations on the granting of options to and their exercise by key
employees and the management group and limitations on salaries
and pensions. Other resolutions related to such matters as the send-
ing of a post-meeting report to all stockholders and the approval by
stockholders of the selection by management of the independent
accountants.
The management of 24 companies omitted from their proxy state-
ments, under the conditions specified in rule 14a-8, a total of 51 ad-
ditional proposals submitted by 32 individual stockholders. The
principal reasons for such omission and the number of times each
such reason was involved were as follows: (a) eight proposals were
not a proper subject matter under state law; (b) twelve proposals
related to the ordinary conduct of the company's business; (c) twelve
proposals involved a personal grievance; (d) six proposals were not
timely submitted to the company; (e) three proposals did not re-
ceive sufficient votes at the previous stockholders' meeting; (f) two
proposals involved the nomination of particular candidates for elec-
tion as directors; (g) two proposals were based on reasons considered
to be misleading; (h) the company determined not to solicit proxies
after receipt of one proposal; and (i) five proposals were withdrawn
by the stockholder.
Ratio of Soliciting to Non-solioiting Companies
Of the 2,236 issuers which had securities listed as of June 30 1958 , ,

2,001 had voting securities so listed. Of these 2,001 issuers, 1,551 or
78 per cent solicited proxies under the Commission's proxy rules for
the election of directors during the 1958 fiscal year.
Proxy Contests
During the 1958 fiscal year, 34 companies were involved in proxy

contests for the election of directors, 22 of which contests were for
control of the company and 12 for representation on the board of
directors. In these contests a total of 968 persons filed detailed state-
ments as participants, or proposed participants, under the require-
ments of rule 14a-ll.
Of the 22 contests where control was involved, the management won
control in 14, the opposition in 3, 3 were settled prior to the meeting
of stockholders, and 2 were pending at June 30, 1958. Of the 12
contests where representation on the board of directors was involved,
the management won control in 8, the opposition in 1, 1 was settled,
and 2 were pending at June 30, 1958.
REGULATION OF BROKER.DEALERS AND OVER-THE.COUNTER

MARKETS
Registration
Section 15 (a) of the Securities Exchange Act of 1934 requires

registration of brokers and dealers using the mails or instrumentalities
of interstate commerce to effect transactions in securities on the over-
the-counter market, except those brokers and dealers whose business
is exclusively intrastate or exclusively in exempt securities. Set
forth below are certain data with respect to registration of brokers
and dealers and applications for such registration during the fiscal
year 1958:
Effective registrations at close of preceding fiscal year 4,771
Applications pending at close of preceding fiscal year___________________ 69
Applications filed during fiscal year____________________________________ 704
Total 5,544
Applications denied___________________________________________________ 5
Applications vvitbdravvn_______________________________________________ 15
Applications cancelled________________________________________________ 0
Registrations withdrawn 609
Registrations cancelled_______________________________________________ 65
Registrations revoked________________________________________________ 38
Registrations effective at end of year 4,752
Applications pending at end of year____________________________________ 60
Total- 5.544
Administrative Proceedings
Under section 15 (b) of the Securities Exchange Act of 1934, the

Commission shall deny broker-dealer registration to an applicant or
revoke such registration if, after appropriate notice and opportunity
for hearing, it finds that such action is in the public interest and that
the applicant or registrant or any partner, officer, director or other
person directly or indirectly controlling or controlled by 'such
486867-59-7
applicant or broker-dealer is subject to one or more of the disqualifica-

tions set forth in the Act. These disqualifications, in general, are
(1) willful false or misleading statements in the application or docu-
ments supplemental thereto, (2) conviction within ten years of a
felony or misdemeanor involving the purchase or sale of securities or
any conduct arising out of the business as a broker-dealer, (3) injunc-
tion by a court of competent jurisdiction from engaging in any prac-
tices in connection with the purchase or sale of securities and (4) will-
ful violation of the Securities Act of 1933 or the Securities Exchange
Act of 1934or any of the Commission's rules or regulations thereunder.
In addition, brokers and dealers may be suspended or expelled by the
Commission from membership in the National Association of Securi-
ties Dealers, Inc. and national securities exchanges for participating
in violations of the various federal securities laws or the regulations
thereunder. The Commission may not deny registration to any person
who applies therefor absent evidence of misconduct of the specified
types enumerated in the Act. Bad reputation or character, lack of
experience in the securities business or even conviction of the regis-
trant of a felony not involving the sale of securities do not constitute
.statutory bars to registration as a broker-dealer.
Below are set forth statistics respecting administrative proceedings
to deny and revoke registration and to suspend and expel from mem-
bership in a national securities association or an exchange.
Proceedings pending at start of fiscal year:
Proceedings to revoke registration ~___________ 22
Proceedings
orexchangesto revoke registration and suspend or expel from NASD 25
Proceedings to deny registration to applicants________________________ 9
Total proceedings pending ~---------------------------------~ 56

Proceedings instituted during fiscal year:
Proceedings to revoke registration__________________________________ 33
Proceedings to revoke registration and suspend or expel from NASD
orexchanges 20
Proceedings to deny registration to applicants________________________ 4
Total proceedings instituted______________________________________ 57

Total proceedings current during fiscal year 113
Proceedings disposed of:

Proceedings to revoke registration:
ltegistratlon revoked___________________________________________23
Dismissed on withdrawal of registration________________________ 8
Begistratlon cancelled, proceedings discontinued_________________ 3
. Dismissed-registration permitted to continue in effecL__________ 1-
TOtal-_______________________________________________________ 85
Proceedings disposed ot-Continued
Proceedings to revoke registration and suspend or expel trom NASD
or exchanges:
Registration revoked and firm expelled from NASD______________ 15
Dismissed on withdrawal of registration_________________________ 1
Dismissed-registration and membership permitted to continue
in effect-____________________________________________________ 1
Suspended for a period of time from NASD_____________________ 3
TOtal________________________________________________________ 20
Proceedings to deny registration to applicant:

Registration denied '-_____________________________ 5
Dismissed on withdrawal of application_________________________ 1
Dismissed-application permitted to become effective_____________ 2
Total-_______________________________________________________ 8
Proceedings pending at end of fiscal year:

Proceedings to revoke registration___________________________________ 20
Proceedings to revoke registration and suspend or expel from NASD
or exchanges____________________________________________________25
Proceedings to deny registration to applicants_______________________ 5
Total proceedings pending at end of fiscal year____________________ 50

Total proceedings accounted for 113
Proceedings in which action was taken during the year included the
following :
The distribution to the public of unregistered securities of Crowell-
Collier Publishing Company Ied to proceedings by the Commission
in which the broker-dealer firm of Elliott & Company was suspended
from the National Association of Securities Dealers, Inc. ior a period
of twenty days," and the firms of Gilligan Will & CO.13and Dempsey
& Company 14 were similarly suspended for periods of five days each.
Elliott & Company had sold convertible debentures on behalf of
Crowell-Collier to a. small group, including Gilligan, Will & Co.
and Dempsey & Company, and had obtained from these purchasers
statements of intention to hold the securities for investment. How-
ever, a number of the original purchasers, including those two firms"
shortly thereafter resold portions of their purchases to additional
persons, who also furnished statements of investment intent. Elliott
& Company claimed the exemption from registration provided by
the Securities Act of 1933 for private offerings, and the other two
firms in addition claimed that they were not underwriters and were
U Securities Exchange Act Release No. 1168S(May 7, 19118).

... Securities Exchange Act Release No. 11689 (May 7, 19118); petition for review of
Commission Order filed May 14, 19118, CA-2 No. 211,171; pending at close of fiscal year.
"'Securities Exchange Act Release No. 11690 (May 7, 1958). -
therefore exempt. The Commission ruled that these exemptions

were not available. Although Elliott & Company denied that it had
had knowledge of the resales, the Commission stated that actual
knowledge of resale was not essential to a finding of violation of sec-
tion 5 of the Securities Act, there being many factors sufficient to put
persons experienced rill securities matters on notice of the probability
of further sales, including the speculative nature of the securities,
the fact that the debentures were issued in bearer form and in small
denominations, the establishment of a conversion price below the
market price of the common stock and the listing of the common
stock on the American Stock Exchange. The Commission 3;180 held
that the basic policy of registration under the Securities Act could
not be frustrated by the technique of mechanically obtaining so-
called ''investment intent" Ietters from successive groups of pur-
chasers.
The firm of Batkin & 00.15 was found by the Commission to have
practiced fraud in the purchase and sale of securities, failed to
comply with bookkeeping and net capital requirements, and sold
unregistered securities. The registration of Batkin & Co. as a broker-
dealer was revoked and 'it was expelled from the National Associ-
ation of Securities Dealers, Inc.
The application of Gregory & Oompany, lno.,I6 a Canadian broker-
dealer, for registration as a broker-dealer was denied by the Commis-
sion and Kenneth H. Gregory, president, director and controlling
stockholder, was found to be the cause of the denial. The Commission
found that Gregory & Company, Inc. had made false and misleading
statements in its application for registration and had been effecting
transactions rill interstate commerce in unregistered securities while
it was not registered as a broker-dealer. The Commission also found
a violation of the antd-fraud provisions of section 17'of the Securities
Act of 1933 in that the applicant and Gregory offered securities to
customers at prices substantially higher than, and bearing no reason-
able relationship to, the market price.
The application for broker-dealer registration of P. J. Gruber &
00., lno.l1 was denied where it was found that the applicant used
the mails and interstate facilities in the sale of 49,500 shares of
Acoustica Associates, Inc. stock when no registration statement was
in effect. In addition, false and misleading entries were found in the
blotters and ledgers maintained by the Gruber office. The Com-
:us Securities Exchange Act Release No. 5709 (June 9, 1958).

14 Securities Exchange Act Release No. 5680 (April 18, 19M).
11 Securities Exchange Act Release No. 5627 (January 15, 1958) ; petition for review of
Commission order lIIed March 17, 1958, C. A. D. C. No. 14,381; pending at close of fiseal
year.
T1VENTY-FOURTH ANNUAL REPORT 85
mission found Peter J. Gruber, controlling stockholder, and Phil
Sacks, president, to be the cause of such denial.
The registrations of four broker-dealer firms were revoked by the
Commission on the basis of injunctions issued against each of these
firms for selling unregistered securities. The broker-dealers so re-
voked were Harold L. Nielsen, doing business as Nielsen Investment
00.,18 Battery Seourities Oorporation,19 W. &: M. Oil Oompany,20
and Percy Dale Lanphere, doing business as Dale Lamphere.": Bat-
tery Securities Corporation was also expelled from the National As-
sociation of Securities Dealers, Inc.
In a number of cases the Commission revoked broker-dealer regis-
trations on the basis of injunctions against further violations of the
Commission's net capital rule which requires that a broker-dealer
maintain for the protection of customers a prescribed ratio between
aggregate indebtedness and net capital. Revocations were based on
such injunctions in the following cases: Milton J. Shuck, doing busi-
ness as M. J. Shuck Oompany/2 Quintin Securities, Inc.,23..4.. J. Gould
&: 00., Inc.,24Foster-Mann, Inc.,25 and W. L. Mast &: 00.26 The last
named broker-dealer firm was also expelled from the National Asso-
ciation of Securities Dealers, Inc. The broker-dealer registration of
Stein, Botwinick &: Oompany,IncP was revoked by the Commission
on a finding that the broker-dealer firm was enjoined from engaging
in the securities business for effecting securities transactions while
insolvent and making false statements in the purchase and sale of
securities.
The broker-dealer registration of Wendell Elmer Kindley, doing
business as Wendell E. Kindley 00.28was revoked for failure to keep
books and records and to comply with the net capital requirements, as
well as for doing business while insolvent. It was found by the Com-
mission that in eight transactions in one month the registrant had pur-
chased securities from broker-dealers through the use of the mails and
other means of interstate commerce when he was not in a position to
:18 Securities Exchange Act Release No. 5545 (July 10, 1957).
,. Securities Exchange Act Release No. 5592 (October 25, 1957).

"" Securities Exchange Act Release No. 5622 (January 13, 1958).
n Securities Exchange Act Release No. 5546 (July 10, 1957).
22 Securities Exchange Act Release No. 5574 (September 13, 1957) ; petition for review
of Commission order filed November 12, 1957, C. A. D. C. No. 14,208; pending at close of
fiscal year.
""Securities Exchange Act Release No. 5654 (March 13, 1958) .
•• Securities Exchange Act Release No. 5606 (November 25, 1957) ; petition by William
Fisher to review Commission order in which petitioner was found to be a cause of the
revocation of broker-dealer registration of ..t. J. Gould <£ 00., Inc., filed December 26, 1957,
CA-2 No. 24957 ; pending at close of fiscal year.
215 Securities Exchange Act Release No. 5613 (December 12, 1957) .
.. securtttes Exchange Act Release No. 5632 (January 27, 1958).

'" Securities Exchange Act Release No. 5542 (July 8, 1957),
.. Securities Exchange Act Release No. 5559 (August 7, 1957).
pay for such securities, that he was unable to pay for them upon de-
livery, and that some sellers suffered losses because of his failure to
consummate the purchases.
The broker-dealer registration of Roberts Securities Corporation. 29
was revoked on the grounds that its president and controlling stock-
holder had 'been enjoined by the Supreme Court of the State of New
York from engaging in the securities business in that state, and that
the firm had failed to disclose the issuance of the injunction by
amendment to its application.
The Commission revoked the registration of Branch. Oarden &: 00.,
Ina.30 and found Branch J. Carden, Jr., its president, to be the cause
of such revocation. The firm and its president had been permanently
enjoined by the U. S. District Court for the Western District of Vir-
ginia from engaging in and continuing certain conduct in connection
with the purchase and sale of securities. The decree entered with the
consent of both defendants enjoined violations of the anti-fraud, net
capital, and bookkeeping provisions of the Act. Following pleas of
guilty, both defendants had been convicted by the same court of viola-
tions of these provisions of the Act.
O. J. Montague, Ina.31 was enjoined by the Supreme Court of the
State of New York from engaging in the securities business in that
state, on the basis of a complaint alleging the firm's insolvency, fraud-
ulent concealment of such insolvency, and misappropriation of cus-
tomer's funds and securities. The Commission revoked the firm's
registration as a broker-dealer on the basis of the injunction, false and
misleading statements in the application for registration, fraud in the
purchase and sale of securities, and failure to comply with the net
capital and bookkeeping rules under the Securities Exchange Act.
Revocations of the broker-dealer registrations of H a7'1"!J B. Simon,
doing business as H. B. Simon 00.,32 William T. Bowler, doing busi-
ness as William T. Bowler &J Oompany,aa a sole proprietorship, Wil-
liam T. Bowler and OompUJny,34a partnership, and Obrietopulo« &:
Nichols Brokerage Oompany, Ina.3s were based on convictions in con-
nection with securities transactions. Simon had been convicted on
April 30, 1957 in the Federal District Court for the Southern District
of New York on his plea of guilty of violating section 17 (a) of the
Securities Act of 1933 and the mail fraud and conspiracy provisions
of the United States Criminal Code by making fraudulent representa-

aoSecurities Exchange Act Release No. 5722 (Juue 26,1958).
"Securities Exchange Act Release No. 5717 (June 17, 1958) .
.. Securities Exchange Act Release No. 5614 (December 12, 1957) •
.. Securltles Exchange Act Release No. 5675 (April 11, 1958).
I. Securities Exchange Act Release No. 5675 (April 11, 1958) •
.. Securities Exchange Act Release No. 5703 (May 27. 1958).
tions in connection with the sale of common stock of Bostona Mines
Company between January 1, 1952and October 1, 1956.
On September 4, 1957 William T. Bowler had pleaded guilty and
was convicted in the Court of Quarter Sessions of McKean County,
Pennsylvania, of (1) embezzlement of a customer's securities; (2)
larceny in failing to return securities held by him as bailee; (3) fraud-
ulent failure to disclose to the Pennsylvania Securities Commission
that he sold certain securities without informing purchasers that
neither he nor the issuer had any authorization from that Commission
to sell them; (4) sale of certain securities without filing a notice of
intention to sell such securities with that Commission; and (5) par-
ticipation and assistance in the sale of certain securities by salesmen
who were not registered with that Commission. It was also found
that both the sole proprietorship and the partnership had violated
the record-keeping requirements of the Securities Exchange Act of
1934and the rules thereunder.
Christopulos & Nichols Brokerage Company, Inc., had been en-
joined from improperly extending credit, failing to send confirmations
of transactions to customers and failing properly to record trans-
actions, in violation of sections 7, 15, and 17 of the Securities Ex-
change Act of 1934,and had also been convicted of criminal contempt
of that injunction.
The revocations of the broker-dealer registrations of Horace Linson
Michener 86 and Cobb and Oompany, hW.,31 were based on findings of
misappropriation of customers' funds and the Commission found that
Michener had bought and sold securities without delivering the securi-
ties sold or paying for the securities purchased, in violation of sections
10 (b) and 15 (c) (1) of the Securities Exchange Act and the rules
thereunder. Cobb and Company, Inc., induced certain persons in 68
transactions to order securities and to make payment therefor, but,
instead. of purchasing the securities ordered, appropriated such pay-
ments to its own use. In connection with six of these transactions
Cobb and Company falsely represented that it had purchased the
securities ordered. 21 of the 68 transactions took place when the firm
was insolvent. In these transactions, registrant accepted monies and
securities upon the false representation that it was able to execute the
orders and appropriated such monies and securities to its own use.
Mclnnes & 00., Ina.,3s a registered broker-dealer, was also found to
have accepted customers' funds and securities without disclosing its
insolvency. The Commission also found, among other things, that in
the sale of securities of Alabama General Insurance Co., the firm made
• Securities Exchange Act Release No. M05 (November 25. 1957) .
., Securities Exchange Act Release No. 5621 (January 7, 1958).
• Securities Exchange Act Release No. 5552 (July 23, 1957).
false and misleading statements, with respect to the return on the in-
vestment in such securities and the government contracts of 'a subsid-
iary of that company, and that it sold unregistered securities of that
company. The Commission revoked the broker-dealer registration of
McInnes & Co., Inc. expelled it from the National Association of
Securities Dealers, Inc. and further found Raymond McInnes to be a
cause of such revocation and expulsion.
The Commission denied the application of F. W. Horne & 00.,
Ina.3D for registration as a broker-dealer because of the methods it
utilized to effect purchases and sales of securities of First New Hamp-
shire Corporation. The Commission found that violations of the
anti-fraud provisions had been committed and that the firm had
effected securities transactions while not registered.
Looper and Oompany40 was found to have induced customer trans-
actions which were excessive in volume and frequency in view of the
character of the accounts, and took secret profits and improperly
extended and arranged for credit in cash accounts, in willful violation
of the Securities Act and Securities Exchange Act and the rules
thereunder. Its broker-dealer registration was revoked.
The application of Indiana State Securities Oorporatioiu" for reg-
istration as a broker-dealer was denied by the Commission upon a
finding that applicant had willfully violated the anti-fraud provi-
sions of the Securities Exchange Act and the Securities Act in sales of
stock of Insurance Corporation of America. Applicant's sales were
made with the use of a prospectus which indicated that the stock was
offered by the issuer at a public offering price of $6.00 per share, but
applicant failed to disclose that there was an over-the-counter market
for the stock at a substantially lower price and that some of the stock
so offered was owned by the applicant and the proceeds of its sale
would not be received by the issuer. The Commission further found
Charles E. Johnson, Marvin H. Weisman, and Rudy Klapper, officers
and directors of subject corporation, to be the causes of the denial.
The application of The Whitehall Corporation.42 for registration
as a broker-dealer was also denied by the Commission upon a finding
that the applicant had been selling unregistered securities, had used
false and misleading statements in connection with such sales, had
submitted as part of its application a misleading financial statement
and had engaged in interstate transactions in securities without being
registered. A petition for rehearing filed by The Whitehall Corpo-
ration was denied .
... Securities Exchange Act Release No. 0097 (November 7, 1907) .

.. Securities Exchange Act Release No. 0676 (April 10, 1908).
41 Securities Exchange Act Release No. 0602 (November 18, 1907) .
.. Securities Exchange Act Release No. 5667 (April 2, 1958).
False and misleading statements on the part of a broker-dealer
representing the prices charged for certain securities to be the market
price and failure to disclose that the market for the securities was
maintained and dominated by it was the basis for the revocation of
the broker-dealer registration of Daniel &: 00., Ltd.43 and its expul-
sion from the National Association of Securities Dealers, Inc.
The registration of Allen E. Beers Oompany 44 was revoked and
Allen E. Beers, the controlling partner, was found to be a cause of
the revocation. The Commission found in part that the company's
salesmen sold stock of Minerals Processing Company to customers by
means of false and misleading representations that, among other
things, the company's profits would be substantial because of the
discovery of rich mica and beryl, there would be increases in the
company's production, profits and earnings, and the value of its
stock and that the company and its stock would be the object of
favorable magazine and television publicity. Registrant was also
found .to have unlawfully extended credit in violation of section
7 (c) (1) of the Securities Exchange Act and Regulation T adopted
thereunder.
The broker-dealer registrations of Alfred D. Laurence &: 00.,45
Kenneth E. Goodman &: 00.,46 Cornelle de Vroedt, doing business
as Oornelu de Vroedt 00mpany47 and Oornelis de Vroedt, Inc.48
were revoked and the broker-dealers were expelled from the National
Association of Securities Dealers, Inc. for failure to comply with
the Commission's net capital rule and because of false entries or
omissions of material facts in records or in papers filed with the
Commission.
The broker-dealer registration of Oharles R. Morgan 49 was re-
voked for failure to file financial reports with the Commission as
required under section 17 (a) of the Securities Exchange Act.
The broker-dealer registrations of Utah Uranium Brokers, Inc. 50
and Joseph Ernest Murray, doing business as Murray &: Oompany,51
were revoked and they were expelled from the National Association
of Securities Dealers, Inc. for failure to make and keep current books
and records.
The broker-dealer registration of Bryan Halbert Kyger, Jr., doing
business as Kyger &: 00.,52was revoked upon findings that it had filed
.. SecurIties Exchange Act Release No. 5549 (July 18, 1957).

(4 Secnrities Exchange Act Release No. 5558 (August 7, 1957) •
.. Securities Exchange Act Release No. 5655 (March 14, 1958) .
.. SecuritIes Exchange Act Release No. 5684 (AprU 23, 1958).
"SecurIties Exchange Act Release No. 5628 (January 17, 1958) .
... Securities Exchange Act Release No. 5628 (January 17, 1958) .
liO Securities Exchange Act Release No. 5579 (September 23, 1957).
111 Securities Exchange Act Release No. 5717 (June 13, 1958) .
.. Securities Exchange Act Release No. 5712 (June 6, 1958).
a false financial report and had failed to deliver securities for which
customers had paid, to comply with net capital requirements and to
maintain required books and records.
The Commission also found it to be in the public interest to revoke
the broker-dealer registration of Harold L. Nielsen, doing business
as Nielsen Investment 00.53 on the basis of an injunction entered
against the registrant prohibiting him from further net capital and
bookkeeping violations as well as from selling unregistered securities
and engaging in business while insolvent. The broker-dealer reg-
istration of Michael Raymond 00., Ina.54 was revoked following a
New York State injunction restraining it from further engaging in
security transactions while insolvent, making fraudulent represen-
tations and defrauding customers.
During the year, the broker-dealer registrations of William Mal-
.oolm. Ellsworth,55 Elmer Allen Haley, doing business as Elmer A.
Haley,56 Maxwell M. Sacks, doing business as Maxwell Brokerage
:00.,51 and Tasch &: 00., Ina.56 were revoked for failure to file the
annual reports of financial condition required by rule 17a-5.
:Net Capital Rule
Rule 15c3-1 adopted under section 15 (c) (3) of the Securities Ex-
'Change Act, commonly known as the net capital ru1e, provides safe-
guards for funds and securities of customers dealing with broker-
dealers. This rule restricts the amount of indebtedness which may be
incurred by a broker-dealer in relation to his capital. Under the
ru1e, no broker-dealer subject thereto may permit his "aggregate
indebtedness" to exceed 20 times his "net capital" as those terms
are defined in the ru1e.
Prompt action is taken by the Commission whenever it appears
that any broker-dealer fails to meet the capital requirements pre-
scribed by the rule. Unless the broker-dealer takes necessary steps
forthwith to correct any capital deficiency found to exist either by
inspection or by reports filed with the Commission, injunctive action
may be taken and proceedings instituted to determine whether or not
the broker-dealer registration should be revoked. During the fiscal
year, violations of the net capital ru1e were alleged in injunctive actions
filed against 15 broker-dealers and in revocation proceedings
instituted against 12.
Where a broker-dealer participates in "firm commitment" under-
writings, a carefu1 check, based upon latest available information, is
A Securities Exchange Act Release No. 5545 (July 10, 1957) •
.. Securities Exchange Act Release No. 5543 (July 9, 1957).
GIS Securities Exchange Act Release No. 5719 (June 19, 1958)-
... Securities Exchange Act Release No. 5719 (June 19, 1958).
Bl Securities Exchange Act Release No. 5719 (June 19, 1958) •
.a Securities Exchange Act Release No. 5719 (June 19, 1958).
made to determine whether he has adequate net capital to be in com-
pliance with the rule. Acceleration of effectiveness of registration
statements under the Securities Act is not permitted if it appears
that any underwriter would as a result of his commitment be in vio-
lation of the net capital rule. In a number of instances during the
past year, broker-dealers who were named as underwriters appeared
to be inadequately capitalized to take down their commitments in
conformity with the rule. The broker-dealers were informed of the
situation and the effect it would have on a pending registration state-
ment, and they thereupon obtained sufficient capital so that full com-
pliance with the rule could be had, reduced their commitments to
the extent to which they could be undertaken without violating the
rule or withdrew entirely as underwriters.
Financial Statements
During the year the Commission adopted an amendment to rule

17a-5 - under the Securities Exchange Act requiring brokers and
dealers to :filereports of financial condition. The amendment became
effective on November 15, 1957 and was deemed necessary (1) to
eliminate administrative difficulties which arose from the requirement
that a report be :filledwithin each calendar year, but that reports for
two consecutive years could not be :filed within less than 4 months
of each other and (2) to provide more protection to customers by re-
quiring that more reports be certified. As amended, the rule now
requires a report to be :filedas follows: (A) as of a date within each
calendar year, except that the first report (other than in the case
of successors) must be as of a date not less than one, nor more than
five months after the broker or dealer becomes subject to the rule,
and a broker or dealer who succeeds to and continues the business
of a predecessor is not required to :filea report if the predecessor has
filed one as of that year; (B) reports may not be as of dates within
four months of each other; and (0) a report must be :filednot more
than 45 days after the date of the report.
Under the amended rule, every report must be certified by a certified
public accountant or a public accountant who is in fact independent
except a report filed by (1) a member of a national securities exchange
who, from the date of his previous report, has not transacted business
in securities directly with or for others than members, has not carried
any margin account, credit balance or security for any person other
than a general partner and has not been required to :filea certified
financial statement with any national securities exchange; (2) a broker
who, from the date of his previous report, has limited his securities
business to soliciting subscriptions as an agent for issuers, has trans-
mitted funds and securities promptly and has not otherwise held
funds or securities for or owed monies or securities to customers; and

(3) a broker or dealer who, from the date of his last report, has limited
his securities business to buying and selling evidences of indebtedness
secured by liens on real estate and has not carried margin accounts,
credit balances or securities for securities customers.
The reports of financial condition filed under rule 17ar-5 serve to
inform the Commission and the public as to the financial responsi-
bility of broker-dealers and they are analyzed by the staff to deter-
mine whether the registrant is in compliance with the Commission's
net capital rule. Revocation proceedings are brought against regis-
trants who fail to make the necessary filing. During the year 4,473
reports of financial condition were filed, representing an increase of
145 over fiscal 1957.
Broker-Dealer Inspections
During 1958, the Commission continued to place increased emphasis

upon its inspection program. Regular and periodic inspections of
registered broker-dealers as provided for in section 17 (a) of the Se-
curities Exchange Act are a vital part of the Commission's activities
for the protection of investors. The purpose of these inspections is to
assure compliance by broker-dealers with the Federal securities acts
and the rules and regulations promulgated by the Commission and to
detect and prevent violations.
An inspe-tion ordinarily includes, among other things, (1) a de-
terminatioi of the financial condition of the broker-dealer; (2) re-
view of pr ,ing practices; (3) review of the treatment of customers'
funds and ecurities ; and (4) a determination whether adequate dis-
closures a made to customers. The inspectors also determine
whether tL required books and records of the broker-dealers are
adequate r ' 1 currently maintained, and whether broker-dealers are
conformir ~ with the margin and other requirements of Regulation
T, as prescribed by the Federal Reserve Board. They also check for
excessive trading in customers' accounts involving "churning" and
"switching," sale of unregistered securities, use of improper sales
literature or sales methods and other fraudulent practices. Inspec-
tions frequently discover situations which, if not corrected, might
result in losses to customers.
The policy inaugurated in fiscal year 1956 of increasing the number
of inspections was continued in fiscal year 1958. Inspections com-
pleted during the year numbered 1,452, an increase of more than 19%
over the previous year.
While an inspection may disclose violations of the Commission's
statutes or rules, formal action is not taken against every broker-
dealer found to be in violation. In determining whether to institute
action against a broker-dealer found as a result of an inspection to
be in violation, consideration is given to the nature of the violation
and to the effect it has upon members of the public. Inspections usu-
ally reveal a number of inadvertent violations which are discovered
before they 'becomeserious and before they jeopardize the rights of
customers. In such situations, where no harm has come to the public,
the matter is usually called to the attention of the registrant and ar-
rangements made to correct the improper practices. Where, however,
the violation appears to be willful and the public interest or the pro-
tection of investors is best served by instituting proceedings against
the broker-dealer, such action is promptly taken.
The following table shows the various types of violations disclosed
as a result of the inspection program during the fiscal year 1958:
Type Number
FInancial dtlticulties__________________________________________________ 130
lIypothecation rules__________________________________________________ 108
Unreasonable prices for secUIities purchases__________________________ 226
Regulation T of the Federal Reserve Board____________________________ 163
Secret proftts__ ~_____________________________________________________ 8
Confirmation and bookkeeping rules 1,016
]{isce1laneous 86
Total indicated violations 1, 737

Total number of inspections 1,452
In addition to the Commission's inspection program, the National

Association of Securities Dealers, Inc. and the principal stock ex-
changes also conduct inspections of their members and some of the
States also have inspection programs. Each inspecting agency con-
ducts inspections in accordance with its own procedures and with
particular reference to its own regulations and jurisdiction. Conse-
quently, inspections by other agencies are not an adequate substitute
for Commission inspections since the inspector will not be primarily
concerned with the detection and prevention of violations of the
Federal securities laws and the Commission's regulations thereunder.
The Commission and certain other inspecting agencies, however, main-
tain a program of coordinating inspection activities for the purpose
of avoiding unnecessary duplication of inspections and to obtain the
widest possible coverage of 'brokers and dealers. This seems appro-
priate in view of the limited number of inspections which it is pos-
sible for the Commission to make. The program does not prevent
the Commission from inspecting any person recently inspected by
another agency, and such an inspection by the Commission is made
whenever reason therefor exists, but it has been necessary because of
budget limitations for the Commission to rely to a considerable extent
upon the inspection programs of the major exchanges, such as the

New York Stock Exchange.
Inspecting agencies now participating in the coordination program
include the New York Stock Exchange, the American Stock Ex-
change, the Boston Stock Exchange, the Midwest Stock Exchange, the
Pacific Coast Stock Exchange, the Philadelphia-Baltimore Stock Ex-
change, the Pittsburgh Stock Exchange and the National Association
of Securities Dealers, Inc.
SUPERVISION OF ACTIVITIES OF NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.
Section 15A of the Securities Exchange Act of 1934 ("the Maloney

Act") provides for registration with the Commission of national se-
curities associations. The statute requires that the ru1es of such asso-
ciations must be designed, among other things, to promote just and
equitable principles of trade, to prevent fraudulent and manipu1ative
acts and practices and to perfect the mechanism of a free and open
market. Such associations serve as a medium for the cooperative self-
regu1ation of over-the-counter brokers and dealers. They operate
under the general supervision of this Commission, which is authorized
to review disciplinary actions and decisions which affect the member-
ship of members or applicants for membership and to consider all
changes in the rules of associations. The National Association of Se-
curities Dealers, Inc. (NASD) is the only association registered with
the Commission under the Act.
In adopting legislation to authorize the formation and registration
of such associations, Congress provided an incentive to membership
by permitting such associations to adopt, and the NASD has adopted,
ru1es which preclude a member from dealing with a non-member, ex-
cept on the same terms and conditions as the member affords the gen-
eral public. As a consequence, membership is necessary to the profit-
able participation in underwritings and over-the-counter trading in
general and for price concessions. Discounts and similar allowances
may properly be granted by members only to other members.
On June 30, 1958, there were 3,820 NASD members, a decrease of 36
during the year as a resu1t of 419 admissions to and 455 terminations
of membership. There were also registered with the NASD as regis-
tered representatives on that same date, 65,314 individuals, including
all partners, officers, traders, salesmen and other persons employed by
or affiliated with member firms in a capacity which involve their doing
business directly with the public. The number of registered represent-
atives increased by 8,211 during the year as a result of 15,278 initial
registrations, 7,246 re-registrations and 14,313 terminations of regis-
trations.
DisciplinarT Actions
The Commission receives from the NASD summaries of decisions on
all disciplinary actions against members and registered representatives
of members. Each such decision is reviewed by the Commission's staff
to determine whether the underlying facts indicate conduct violative
of the statutes administered by the Commission or the rules adopted
thereunder. This consideration often includes an examination of the
Association's files on particular cases. Where the facts appear to
indicate actionable violations of the Commission's rules or statutes,
independent Commission enforcement inquiry or action is initiated
through the appropriate Regional Office.
During the fiscal year the Association reported to the Commission
final action on 116formal complaint cases. Each such action involved
charges that a member firm had violated specified rules of fair practice.
In addition, however, 48 of these complaints included charges that 75
different registered representatives had also violated one or more such
rules.
Of the 116 complaints on which final Association action was taken,
10 were withdrawn or dismissed on findings that the allegations in the
complaints had not been sustained. In the remaining cases, one or
more violations were found as alleged in the complaint and the mem-
bers and registered representatives found to have committed the viola-
tions were subjected to penalty. The penalties imposed covered a
wide range of available sanctions and in many cases more than a single
penalty was imposed on a firm or registered representative. Thus, 32
firms were expelled and six were suspended for periods ranging from
30 days to 3 years; 48 firms were fined amounts ranging from $50 to
$8,240 and aggregating $28,765; and 13 were censured. Moreover,
the registrations of 37 registered representatives were revoked;
one representative was suspended for six months; nine representatives
were fined sums ranging from $50 to $5,000 and aggregating $9,400;
and 16 representatives were censured. In 56 of the complaints, costs
were assessed in amounts aggregating $16,349.61during the year.
In addition to disciplinary action by formal complaint procedure as
described above, action was also taken against members pursuant to
a minor violation procedure as specified in the NASD Code of Pro-
cedure and as described in the last annual report. Under this pro-
cedure, in a disciplinary action where the facts are not disputed and
the matter involves only minor or technical violations of the rules and
no significant damage to customers, other parties or the public inter-
est, the member may waive a hearing and accept a penalty not to ex-
ceed censure and a fine of $100. The respondent is not required to
accept this procedure and may elect to have a hearing as in the case of
a complaint involving more serious violations.
In all, reports were received from the Association descriptive of 47

cases handled by the minor violation procedure. One case was sub-
sequently remanded by the Board of Governors to the District Busi-
ness Conduct Committee of initial jurisdiction for consideration pur-
suant to the ordinary complaint procedure. The remaining 46 cases
resulted in censure in 29 instances, fines in 2 instances, and censure
and fines in 15 instances. The fines ranged from $25 to $100 and
aggregated $1,175.
Commission Review of NASD Disciplinary Action
Section 15A (g) of the Act provides that disciplinary actions of the
NASD are subject to review by the Commission on its own motion or
on the timely application of any aggrieved party. The effectiveness
of any penalty imposed by the Association is automatically stayed
pending determination of any matter before the Commission on re-
view. At the beginning of the fiscal year, three such review cases were
pending before the Commission, and during the year three other ap-
plications for review were filed. One such application, filed by G.
Wayne Gibbs, doing business as Gibbs & Company, was withdrawn
prior to determination. Another application, filed by Daniel M.
Sheehan, Jr., doing business as Sheehan & Company, was considered
unacceptable by the Commission as it had not been filed within sixty
days of the date the action was taken and because there were then
pending against the firm administrative proceedings under section
15 (b) of the Act to determine whether the Commission should find it
in the public interest to revoke the firm's registration as a broker-
dealer. In rejecting this application the Commission advised the firm
that it would reconsider accepting the case for review after com-
pletion of the section 15 (b) proceedings should the firm then decide
to file a new petition. Two review cases were decided by the Com-
mission during the year and two were pending at the end of the fiscal
year.59
The Commission set aside disciplinary action taken by the Board of
Governors of the Association against Samuel B. Franklin & Co. for
alleged violation of the NASD rule of fair practice that requires a
member to observe high standards of commercial honor and just and
equitable principles of trade in the conduct of his business." The
case was an outgrowth of a dispute between Franklin & Co. and
Pledger & Co., Inc., the complainant, and involved a transaction in
stock of Western Oil Fields sold by Franklin & Co. to Pledger & Co.,
'"'The pending cases concerned applications filed by Batkin & Co. (File 16-1A67) and
Churchill Securities Corp. (File 16-1A71). The Batkin appeal was dismissed as moot
shortly after the close of the fiscal year. Securities Exchange Act Release No. 5763 (August
22,1958).
eoSecurities Exchange Act Release No. 5603 (November 18, 1957) and File 16-1A65.
Inc. at $2.70 per share. After delivery and payment, Pledger re-
turned the shares on the grounds that the shares delivered were cer-
tificates which had been the subject of a 1 for 4 reverse stock split.
Pledger refused to cancel the original transaction since the price of
the stock had advanced to 318 per share. Franklin suggested the
purchase of new shares and agreed to pay the attendant loss of about
$225, but Pledger advised against such a purchase at that time since
it believed the price would go down. However, the price of the stock
continued to advance. Pledger subsequently bought the stock in at
4% and requested that Franklin make good an asserted loss to
Pledger of $1,282.50. Pledger first accepted the suggestion of Frank-
lin that the matter be arbitrated, but then withdrew its consent and
filed a complaint before the NASD. The Board of Governors af-
firmed a decision of the District Business Conduct Committee that
Franklin had violated the NASD rule by failing to make a good
delivery of the stock and failing to reimburse the buyer for dam-
ages. The Board of Governors censured Franklin, assessed costs in
the amount of $441.22 and directed the firm to make good the loss
sustained by Pledger.
In its opinion the Commission observed that it was not its function,
nor that of the NASD, in applying the rule, to decide private con-
tract rights between the parties, and that "not every failure to per-
form a contract violates the NASD rule; it must appear that such
failure was unethical or dishonorable." The Commission concluded
that the facts here present did not justify a finding that Franklin
had violated the NASD rule. In support of this conclusion, it
pointed out that there was no evidence of an intention to mislead
Pledger or that the delivery of the old certificates was anything but
an unintentional error. Nor could the Commission find that Frank-
lin sought to evade responsibility arising from the delivery of the
old certificates, as evidenced by its immediate acceptance of the return
of the old certificates and its refund to Pledger of the purchase price,
its prompt offer to buy in shares of the new stock and accept the $225
loss resulting from the increase in the market price thereof, its
reliance on Pledger's advice in not making delivery of new stock at
that time, and its offer to submit to arbitration after Pledger had
bought in new stock at a much higher price some six months after
the return of the old certificates. The Commission noted that its
action reversing the NASD action was in no way a determination
regarding the validity or the amount of Pledger's claim against
Franklin.
In the other decided case, the Commission affirmed a six-month
suspension, $3,000 fine and censure imposed by the National Associa-
tion of Securities Dealers, Inc., upon Graham & Co., of Pittsburgh,
486867-59-8
Pennsylvania, and the censure of E. W. Sterling Graham, its only

active partner, for violation of NASD rules requiring the mainte-
nance of high standards of commercial honor and just and equitable
principles of trade."
The NASD's disciplinary action was based largely upon sales of
securities of Texas Adams Oil Co. by Graham & Co. to its customers
at a price which was "unfair and not reasonably related to the current
market price." The Commission also sustained the additional rulings
of the NASD that Graham & Co. have violated its rules (1) by failure
to register salesmen employed at its Birmingham, Alabama branch
officein 1955, (2) by failure to disclose, in the sale of Bassett Press &
Mailing Co. stock, that that company and Graham & Co. were under
common control and (3) by failure to endorse the records of salesmen's
transactions to show approval of such transactions.
Commission Review of NASD Action on Membership
Section 15A (b) of the Act provides that, except where the Com-
mission finds it appropriate in the public interest to approve or direct
to the contrary, no broker or dealer may be admitted to or continued
in Association membership if he, or any controlling or controlled
person, is under any of the several disabilities specified in the statute.
The disqualifications included in the statute are repeated in the Asso-
ciation's by-laws which, however, also include other disqualifications
permitted by, but not explicitly set out in, the statute. Among other
things, the statutory disabilities include an outstanding order of revo-
cation by the Commission of a broker-dealer registration and the Asso-
ciation's by-laws include conviction within the preceding 10 years of
a felony found by the Association to have involved abuse or misuse
of a fiduciary relationship.
A Commission order approving or directing admission to or con-
tinuance in Association membership, notwithstanding a disqualifica-
tion under section 15A (b) (4) of the Act or under an effective
Association rule adopted under that section or section 15A (b) (3),
is generally entered only after the matter has been submitted by the
member of, or applicant for membership to, the Association. Where,
after consideration, the Association is favorably inclined, it ordinarily
files with the Commission an application on behalf of the petitioner.
A broker-dealer refused Association sponsorship, however, may file
an application directly with the Commission. The Commission care-
fully reviews the record and documents filed in support of the applica-
tion and, if considered necessary, obtains additional evidence bearing
on the matter. At the beginning of the fiscal year, three such petitions
were pending before the Commission; during the year one filed was
a Securities ExchllIlge Act Release No. 5687 (May 1, 1958) lIIId Flle 16-1A66.
and three were disposed of; and one was pending at the year end.
The Commission approved an application filed by the NASD per-
mitting the continuance of Clayton Securities Corporation in Associa-
tion membership with Harold S. Goldberg as an employee and
registered representative." Goldberg had been convicted on May 3,
1955, following a plea of guilty, of violations of the anti-fraud pro-
visions of the Securities Act of 1933 and the mail fraud statute based
on failure adequately to supervise the activities of salesmen who had
induced excessive trading in the accounts of customers to obtain ex-
cessive commissions. In granting the approval requested by the Asso-
ciation, the Commission recognized that none of the charges concerned
Goldberg's own dealings with customers, that he would not be em-
ployed in a supervisory capacity and that he would be subject to
close supervision by officers of the employing firm.
The Commission also approved applications sponsored by the
NASD for the continuation in the Association membership of two
firms each with a revoked person employed as a registered represent-
ative. In approving the employment of Leonard H. Whitaker by
an NASD member firm, the Commission stated: "While the mis-
conduct which led to revocation of Whitaker's registration was serious
in nature, we do not think it should constitute a permanent bar from
the securities business. Upon the basis of our review of the entire
record and giving due consideration to the lapse of time since the
revocation, the close supervision to be exercised over him, and the
- favorable recommendation of the NASD, we conclude that we may
approve the application of the NASD in the public interest provided
that Whitaker is bonded so as to afford additional investor protection
against possible loss as a result of any misconduct by him." 63
In granting similar approval for the employment of David Gordon,
the Commission observed that Gordon's conduct resulting in the
revocation and expulsion of Gordon & Company did not involve his
conduct as a salesman but his activities in directing the affairs of
his firm, and that in his employment as a salesman of the member
firm he will be under close supervision, including supervision of the
type of security he sells, that he will not have custody of funds or
securities of customers and that he will be bonded."
LITIGATION UNDER THE SECURITIES EXCHANGE ACT OF 1934
As a protective measure for the public, the Commission is authorized

to institute actions to enjoin broker-dealers and other persons from
osSecurities Exchange Act Release No. 5554 (July 26, 1957) and File 16-1A63 .
.. Securities Exchange Act Release No. 5581 (September 23, 1957) and File 16-1A64.
IA Securities Exchange Act Release No. 5698 (May 19, 1958) and File 16-1A69.
engaging in conduct which violates the provisions of the Securities

Exchange Act of 1934. Some of the actions brought as a result of
such violations also alleged violations of other statutes administered
by the Commission.
Anti.Fraud Litigation
In discharging its responsibility to protect the investing public

by preventing frauds by broker-dealers, the Commission, during the
fiscal year, obtained injunctions in S. E. O. v. T. G. Anderson, Ine.,e:;
S. E. O. v, J. Arthur Warner & 00., Inc., et al.6fl and S. E. O. v, Louis
E. W olfson:" In the Anderson case the complaint alleged, among
other things, that the defendants induced customers, by false represen-
tations and omissions of material facts, to sell securities of one mining
company and buy securities of another, and at the same time induced
other customers to effect contra transactions in the same securities.
In the Warner case, an injunction was obtained against violations
of the anti-fraud provisions of the Securities Exchange Act, as well
as violations of numerous other sections of that Act and various pro-
visions of the Securities Act of 1933. Its dominant aspect was the
overtrading or "churning" of customers' accounts. The criminal
prosecution arising out of the transactions is described in detail at
page 109 of the 21st Annual Report.
In the Wolfson case, a temporary restraining order was obtained to
enjoin further violation of the anti-fraud and anti-manipulative pro-
visions of the Securities Exchange Act in the purchase and sale of
common capital stock of American Motors Corporation, listed
on the New York Stock Exchange. The Commission's complaint
alleged that Louis E. Wolfson and other persons whose identities
are unknown to the Commission, engaged in acts, practices
and courses of business which operated and would operate as a fraud
and deceit upon the public. The complaint and underlying affidavits
allege and state, among other things, that Wolfson had sold over
200,000 shares of American Motors stock at a time when an article
in a widely circulated financial newspaper quoted him to the effect
that he and his associates owned about 460,000 shares of that stock
and were "perfectly satisfied" with the company's progress. Wolfson
and his agents were also alleged to have later caused a statement to be
published, in a widely circulated newspaper, to the effect that the stock
of American Motors looked fully priced on the basis of the immediate
outlook and that he (Wolfson) was "about one-quarter of the way
esE. D. Washington~No. 1517 (April 8,1957) •

.. D. Massachusetts No. 51-1036. (A t1nalinjunctlon against the last remaining defend-
ant was obtained on February 20, 1958.)
er S. D. New York No. 135-30 (June 24, 1958). SUbsequent to the end of the fiscal
year a permanent injunction was obtained on consent.
home" in disposing of the 400,000 shares of American Motors stock
that he and his immediate family owned, and that the remaining shares
would be disposed of probably in the open market and "should be
cleaned up completely well before the end of the summer." The com-
plaint further charged that in connection with the last mentioned state-
ment Wolfson omitted to disclose that he had sold or otherwise dis-
posed of all of his holdings in American Motors, and that he, together
with his associates, had a very substantial short position in the stock
and was, at the time of the publication of the newspaper article, en-
gaged in purchasing stock of American Motors to cover the short posi-
tion. The complaint also charged that the anti-manipulative provi-
sion of the Act was violated in that the statements made were false
and misleading and Wolfson knew or had reasonable grounds to be-
lieve that such statements were false and misleading.
Cases Involving the Net Capital Rule
As indicated earlier, section 15 (c) (3) of the Securities Exchange
Act and rule 15c3-1 thereunder are designed to provide protection
against loss of customers' securities and monies by reason of financial
difficulties broker-dealers may encounter by requiring registered
broker-dealers to maintain a prescribed ratio between net capital and
aggregate indebtedness.
In numerous cases the Commission resorts to injunctive relief when
broker-dealers are conducting their business in violation of this fi-
nancial requirement. During the fiscal year injunctions were sought by
the Commission to enjoin broker-dealers from further violations of
this net capital rule in S. E. O. v. J. D. Oreqer and 00./68 S. E. O. v.
Tadao I. Watanabe, doing business as Honolulu Securities re Invest-
ment 00./69 S. E. O. v. Sanders Investment 00mpany/70 S. E. O. v.
Owens and O{}'11'/,rJJany/71S. E. O. v. Joseph J. Wilensky & 00.,. 72
S. E. O. v. William H. Keller, r-;
doing business as W. H. Keller,
Stockbroker] 73 S. E. O. v. A. J. Gould &: 00., Ino., et ai.; 74 S. E. O. v.
Lynne B. Fenner and The Fenner Oorporation; 75 S. E. O. v. First
Jersey Securities Oorp. and Mortimer L. Sohult«; 76 S. E. O. v. William
Whitehead/77 S. E. O. v. Tanya Kaye, doing business as The Kaye
.. S. D. California No. 369-57 WB (March 21, 1957) .

... D. Hawaii No. 1585 (October 15. 1957).
'IOD.New Mexico No. 8685 (December 12.1957).
'11 D. Colorado No. 5935 (January 21, 1958) .
.. S. D. Florida No. 8559-M (June 18, 1958) .
.. s. D. Indiana No. IP-58-C-46 (March 30, 1958) .
... S. D. New York No. 118-87 (September 18, 1956).
TG S. D. New York No. 12s-,355 (January 8, 1958).
T. D. New Jersey No. 979-56 (December 21. 1956).
'If D. New Jersey No. 1255-57 (December 31, 1957).
Investing 00.;18 S. E. O. v, Peerless-New York, I'TUJ.;T9S. E. O. v,

Securities Distributors, I'TUJ.and Rolf Wurtz;80 S. E. O. v, Alfred D.
Laurence &, 00.,81 and S. E. O. v. Jean R. Veditz 00., 1'TUJ.82In the
first eleven named cases the appropriate district court in each instance
granted a permanent injunction. The remaining cases were pending
at the close of the fiscal year with preliminary injunctions granted
against Peerless-New York, Inc. and Securities Distributors, Inc.
Operations of broker-dealers while in violation of the net capital
rule, and while insolvent without disclosing such insolvency to cus-
tomers, thus representing that they were ready and able to execute
customers' orders and to meet their liabilities in connection therewith,
were the basis for the actions in SEO v. Laurence W. L. Barrington,
doing business as Barrington Investments,8S SEO v. F. R. Ohatfield
o ompany, I 'TUJ.,
84 S. E. o.
v. T hompson and Sloan, I'TUJ.,et al.85and SE 0
v. George T. Arqero«; et al.86 The complaints in the latter two cases
also included allegations that the defendants had failed to make and
keep the books and records required under section 17 (a) of the Act
and rule 17a-3 thereunder. Permanent injunctions were granted in
all of these cases.
Delisting Cases
In Great Sweet Grass Oils, Ltd. v. S. E. 0.87 the Court of Appeals for
the District of Columbia Circuit, in a per curiam opinion, affirmed
an order of the Commission withdrawing the registration on the
American Stock Exchange of the capital stock of the petitioner,
Great Sweet Grass Oils, Ltd. The Commission "delisted" the securi-
ties under section 19 (a) (2) of the Securities Exchange Act of 1934
because it found that petitioner had made false and misleading state-
ments in reports required to be filed pursuant to section 13 of that
Act. The Commission found the reports to be deficient inter alia
in that they overstated oil and gas reserves, falsely claimed exemption
from the registration requirements of the Securities Act of 1933 in
purported reliance upon rule 133 and failed to indicate contingent
liabilities resulting from the sales of unregistered securities. Peti-
tioner contended unsuccessfully that the Commission had abused its
discretion in delisting the securities without setting forth conditions
upon which listing could be regained, and had erred in holding that
DE. D. New York No. 18,445 (February 6. 1958).
D S. D. New York No. 126-292 (November 7. 1957) •
.. S. D. New York No. 127-136 (November 25, 1957).
81 S. D. Florida No. 7780-M (August 5, 19/1.7).
as. D. New York No. 125-393 (October 18. 1957) •
.. D. Massachusetts No. 57-1010 (October 17, 1957) .
.. D. Massachusetts No. 57-945-S (September 25, 1957).
• S. D. CaUforuta No. 192-58Y (March 3,1958) •
• W. D. New York No. 7892 (June 20,1958).
lIJ256 F. 2d 898 (C. A. D. C., 1958).
petitioner's transactions were not entitled to the exemption provided
by rule 133. The Court of Appeals found no error in the Commis-
sion's opinion.
The Commission delisted the securities of Kroy Oils Limited in the
same proceeding in which it delisted those of Great Sweet Grass.
Kroy brought a separate petition for review of the Commission's
order and withdrew its petition on December 10, 1958, just before
oral argument," The issues involved in both cases were substantially
identical.
Litigation Involving Broker-Dealer Registration and Reporting Requirements
In Peoples Securities Oompany v, Gadsby, et al.,s9 the plaintiff

sought a preliminary and permanent injunction restraining the mem-
bers of the Commission from conducting a hearing to determine
whether Peoples' application for registration as a broker-dealer should
be denied or permitted to becomeeffective, and a permanent injunction
requiring the defendants to enter an order cancelling Peoples' appli-
cation for registration on the ground that it has ceased to do business.
Upon denial of the preliminary injunction, plaintiff applied to the
Court of Appeals for the District of Columbia Circuit for an injunc-
tion pending appeal, which application was denied." The complaint
was ultimately dismissed on defendant's motion, the District Court
finding that it had no jurisdiction.
A petition for review of the Commission's order revoking peti-
tioner's registration as a broker-dealer was filed in M. J. Shuck 00. v.
S. E. 0.,91 claiming that the Commission erred in finding that peti-
tioner's violations of the net capital rule were wilfull and that the
Commission failed to comply with the requirements of section 9 (b)
of the Administrative Procedure Act. The case was argued before
the Court of Appeals and that Court affirmed the Commission's de-
cision on December 4, 1958.
Section 17 (a), and Rule 17a-3 adopted thereunder, require the keep-
ing of books and records by registered broker-dealers and others.
Failure to comply with these requirements led to permanent injunc-
tions being entered, upon the Commission's application, in S. E. O. v.
Perkins &: Oompany, Inc.,92S. E. O. v. Sherwood &: Oompany, et 01.,98
and S. E. O. v. William Be» Oromwell, doing business as Oromwell &:
Oompany.D4 In a similar action, S. E. O. v. William Douglas Brad-
ford,9s a preliminary injunction was entered during the year .
.. K,.01/ Oils,Limited v. SeCUrities and B:echaflue Oommil8ion, C. A. D. C. No. 13920.
80 District ot Columbia No. 574-58 (March 5. 1958) •
.. People8 Securitie8 Oompaflll v. Gad8by et al., CA DC No. 14380.
PI CA DC No. 14208.
""D. Massachusetts No. 57-1164A (December 3.1957).
II N. D. California No. 37-lli! (March 18. 1958).
"N. D. !reus No. 7798 (April 4. 1958).
liS. D. California No.1T9-58 PH (Febl11lll7 26. 1958).
Proxy Litigation
The Commission intervened as a plaintiff in Barker v, McPhail,96

and filed a complaint against the defendants McPhail and certain
other officers and directors of Transue & Williams Steel Forging
Corporation. The Commission's complaint alleged in essence that
defendants in violation of the proxy rules engaged in the solicitation
of proxies without having previously or concurrently furnished the
stockholders with a proxy statement, without having filed prior
thereto certain information with respect to the identity, background
and interest of the participants in the solicitation and without identi-
fying on the forms of proxies the persons on whose behalf they were
to be used. Further, the complaint charged that McPhail in violation
of the proxy rules had sent out soliciting material without having
.first filed preliminary copies with the Commission and that such ma-
terial contained false and misleading statements and omissions. The
Court granted a temporary restraining order, to which the parties
consented, enjoining the defendants from voting proxies already ob-
tained and directing that the stockholders' meeting be adjourned, to
give opportunity for a proper resolicitation to be made, including
material correcting misrepresentations in previous soliciting material.
At the adjourned meeting McPhail and other management nominees
were elected directors over the slate of Harold O. Barker, President
and Chairman of the Board, and the Stockholders' Committee Against
Control of Transue & Williams Steel Forging Corporation by Russell
McPhail.
Subsequent to the end of the .fiscalyear a motion for summary judg-
ment was filed by the Commission requesting that defendants be
permanently enjoined from further violations of the proxy rules.
Argument was had and the Court has not as of December 1st rendered
an opinion.
In Hott et al. v, Ostergren et al.91 an appeal was taken from the
judgment of the District Court enjoining appellants and one Josiah
Kirby from soliciting and voting proxies with respect to the common
stock of Lakey Foundry Corporation." The District Court had
found, inter alia, that Kirby was a "participant" in the solicitation
by the defendants, whose proxy statement had not included the re-
quired information with respect to Kirby, and that Kirby had not
.filed with the Commission the information required by Schedule 14B.
The appeal from the District Court's judgment was subsequently dis-
missed upon stipulation of the parties, the Commission agreeing to
the dismissal since the injunction issued by the District Court re-
mained in full effect.
.. S. D. New York No. 131-139 (March 19, 1958).
1>7 C. A. 6, No. 13310.
Il8N. D. Ohio 33393 (February 15, 1957).

InS. E. O. v. Sidney Gondelmam, et aL,99 the Commission took action
to enjoin Gondelman and other shareholders of the Central Foundry
Company from voting proxies at the annual meeting of shareholders
of the Corporation unless they furnished the shareholders an oppor-
tunity to revoke their proxies after furnishing information needed
to correct misstatements which had been made in previous proxy so-
liciting material. The Commission's complaint alleged that the de-
fendants had made misrepresentations about the status of efforts by
Gondelman, a disbarred lawyer, to obtain reinstatement to the New
York Bar. The Commission's action was joined, for purposes of trial,
with a suit brought by the Management of the Central Foundry Com-
pany alleging several violations of the proxy rules and requesting the
complete invalidation of all proxies obtained by Gondelman prior to
the suit. Since the close of the fiscal year, the United States District
Court for the Southern District of New York held that the defendant
stockholders had violated the proxy rules and invalidated the proxies
which -they had obtained. The Court also ordered the correction of
misleading statements.
For proxy litigation under the Public Utility Holding Company
Act of 1935 involving Union Electric Co., see p. 119, infra.
Participation as Amicus Curiae
In Greene, et al, v. Dietz, et alYIO the United States Court of Appeals

for the Second Circuit in June, 1957',handed down a decision in which
it expressed doubt as to the Commission's power to promulgate Rule
X-16B-3, which exempts certain bonus, profit sharing, retirement and
similar plans from the provisions of section 16 (b) allowing recovery
by the issuer of profits realized by officers, directors and controlling
persons in transactions in the securities of the issuer. The Commission
promptly moved for leave to file a brief amious curiae and for a clarifi-
cation of the opinion and a rehearing. In a per curiam decision, one of
the three judges dissenting, the Court denied the petition for rehear-
ing, stating that". . • [the] Commission understands, without further
clarification, the content of our opinion ... " and that pending modifi-
cation of the rule, any reliance upon it by persons entitled to exercise
options under plans substantially similar to the one in issue "would
be ill-advised." 101
09 S. D. New York No. 133-314 (May 19, 1958).

100 247 F. 2d 689 (C. A. 2, 1957).
>01 In Emerson Electric Manufacturing Oompany v. O'Neill, et al. (E. D. Mo. No. 58C
307 (2», the Court held, on November 10, 1958; that officers and directors who relied
on the Rule after the per curiam decision in Greene v. Dietz could do so without liabil-
ity. The case involved otllcers who were not familiar with the decision in Greene v. Dietz,
and the Court did not consider the question of the validity ,., the Rule or liability of
persons familiar with the Greene v. Dietz opinion.
Since the end of the fiscal year, the Commission has filed briefs
amicus curiae in support of the validity of Rule X-16B-3 in Va;n
Aalten v. Hurley, et al, and Perlman v. Timberlake, et al.; both arising
in the United States District Court for the Southern District of New
York. Both cases are presently under consideration by the Court.
In addition, since the end of the fiscal year the Commission has ob-
tained permission to participate amicus curiae in Ellerin. v, M assaohu-
setts MufJluil Life Insurance Oompany, et al. (C. A. 2 No. 25352), a
case arising under section 16, and its office of the General Counsel is
studying the record in Ferraiolo v. Ashland Oil Oompany, 259 F. 2d
342 (C. A. 6, 1958) to determine whether to recommend participation
in the plaintiff's petition for certiorari to the Supreme Court.
PART VI
ADMINISTRATION OF THE PUBUC UTIUTY HOLDING

COMPANY ACT OF 1935
The Public Utility Holding Company Act of 1935provides for the
regulation by the Commission of interstate public-utility holding
company systems engaged in the electric utility business or in the
retail distribution of gas. The matters dealt with embrace intricate
and complex questions of law and fact, and generally involve one or
more of three major areas of regulation. The :first embraces those
provisions of the Act, contained principally in Section 11 (b) (1),
which require the physical integration of public-utility companies
and functionally related properties of holding company systems, and
those provisions, contained principally in Section 11 (b) (2), which
require the simplification of intercorporate relationships and :finan-
cial structures of holding company systems. The second area of reg-
ulation covers the :financing operations of registered holding com-
panies and their subsidiaries, the acquisition and disposition of securi-
ties and properties, and certain accounting practices, servicing ar-
rangements and intercompany transactions. The third area of reg-
ulation includes the exemptive provisions of the Act, the provisions
covering the status under the Act of persons and companies, and those
regulating the right of a person affiliated with a public-utility com-
pany to acquire securities resulting in a second such affiliation.
The staff functions under the Act are performed in the Branch of
Public Utility Regulation of the Division of Corporate Regulation.
COMPOSITION OF REGISTERED HOLDING COMPANY SYSTEMS-
SUMMARY OF CHANGES
On June 30, 1958, there were 22 registered holding company sys-

tems subject to the regulatory provisions of the Act. Of these 22,
four systems, namely, (1) Central Public Utility Corporation, (2)
Cities Service Company, (3) Electric Bond and Share Co., and (4)
Standard Shares, Inc., do not own as much as 10 percent of the voting
securities of any public-utility company operating within the United
States. The remaining 18 systems are referred to herein as "active
registered systems."
Included in the 18 active registered systems there were 19 registered
holding companies of which 13 function solely as holding companies
and 6 function as operating companies as well as holding companies,"
Inaddition, in these systems there are 100 electric and gas utility sub-
1In one ot these systems there are two companies each ot which is a registered holding
company.
107
sidiaries, 42 non-utility subsidiaries, and 15 inactive companies, total-

ing 176system companies.
The following tabulation shows the number of holding companies,
electric and gas utility companies and non-utility companies in each
of the 18 active registered systems as at June 30, 1958, and their ag-
gregate assets, less valuation reserves, as of December 31, 1957:
Classification of companies as of June 30, 1958
Solelyreg- Reg- Electric Aggregate
!stered !stered and gas Non- In- Total system 1
System holding holdlng- utlllty utllity active com- assets, less
com- operating subsidl- subsldl- companies valuation
panies com- aries aries panies reserves at
panies Dec. 31, 1957
--- ---- --- ---
I. American Electric Power
Co., Inc __________________ 1 ---------- 13 10 1 25 $1,283,250,199
2. American Natural Gas Co__ 1 ---------- 2 5 0 8 689,784,979
3. Central and South West
Corp _____________________
1 -.--.----- 6 0 1 8 1 585,059,686
4. Columbia Gas System,
Inc., The _________________ 1 9 8 0 18 852,342,000
5. Consolidated Natural Gas
----------
Co________________________
1 ------.-.- 4 2 0 7 614,499,242
6. Delaware Power & Light
Co..... __________________
---------- 1 2 0 0 3 180,200,857
7. Eastern Utlllties Assoolates. 1 ---------- 5 0 2 8 89,892,898
8. General Pubhc Utlhtles
Corp _____________________ 1 7 2 0 10 789,297,209
--------.-
9. Granite CIty Generating
Co. (Voting Trust) _______ 1 ---------- 1 0 0 2 '459,672
10. Middle South Utilities, Inc, 1 ------_.-- 6 0 5 12 669,301,581
11. National Fuel Gas Co______ 1 ---------- 3 6 0 10 183,336,148
12. New England Electric
tem ___•_________ Sys-
. ________ 1 ---------- 23 1 4 29 576,354,206
13. Ohio Edison Co. ___________ ---------- 1 3 0 0 4 532,815,000
14. Phlladelphla Electric
Power Co________________ 1 0 43,107,292
15. Southern Company, The. __
---------- 1 1 3
1 5 2 1 9 1,037,407,021
16. Union Electric Co__________ 1 3 1 0 5 524,864, 889
17. Utah Power & Light Co____---------- 1 2 0 0 3 213,939,205
18. West Penn Electric oo.,
The ________ •___._ •_______ I 1 12 6 1 21 519,667,697
Subtotals ________________ ---
13
--- ---- ---- ---
107 43
6 16 185 9,385,579,781
Less: Adjustment to eliminate
duplication In count resulting
from 5 companies being sub-
sldlarles In 2 systems and 2
companies being subsidtartes
In 3 systems.' •••• ____________---------- ---_.----- -7 -1 -1 -9 --------------
Add: Adjustment to Include
the assets of these 7 jointly
owned subsidiaries and to re-
move the parent companies'
Investments therein which
are Included In the system
assets above__________________
---------- ---------- ---------- ---------- -------- --~---- 662,057,598
Total companies and as-
--- --- ---- ---
sets In active systems __ 13 6 100 42 15 176 9,947,637,379
1 Represents the consolldated assets, less valuation reserves, of each system as reported
to the Commission on Form U5S. except as otherwise noted.
• Does not include Companla Electrica de Matamoras, S. A. which, as at December 31,
1957, had assets, less valuation reserves, amounting to 13,754,490 Mexican Pesos (equlva-
lent to approximately 1,100,359 United States dollars at the official exchange rate). Cen-
tral and South West's investment in this company Is carried at one dollar.
3 Represents the corporate assets of Granite City Generating Co. at March 31, 1958-
Assets of the Voting Trustees of Granite City Generating Co., the holding company parent
of the Generating Co., have not been reported.
• These 7 companies are Beech Bottom Power Co., Inc. and Windsor Power House Coal
Co., which are Indirect subsidiaries of American Electric Power Co. and The West Penn
Electric Co.; Ohio Valley Electric Corp. and Its subsidiary, Indiana-Kentucky Electric
Corp., which are owned 37.8 percent by American Electric Power Co., 16.5 percent by Ohio
Edison Co., 12.5 percent by The West Penn Electric Co., and 33.2 percent by other compa-
nles; Electric Energy Inc. which Is owned 10 percent by Middle South Utilltles, Ine., 40
percent by Union Electric Co., and 50 percent by 3 other companies; Mississippi Valley
Generating Co. which Is owned 79 percent by Middle South UtlIltles, Inc., and 21 percent
by The Southern Co.; and Arklahoma Corp. which is owned 32 percent by Central and
South West Corp. system, 34 percent by Middle South UtUltles, Inc. system and 34 percent
by a third company.
In the active systems four new corporations were organized during
the fiscal year of which one was a gas utility company and three
were non-utility companies. In addition, two going concerns were
acquired one of which was an electric utility company and one of
which was a non-utility company. One non-utility subsidiary was
dissolved and two electric 'Utility companies were merged. These
changes resulted in a net increase of three in the total number of com-
panies comprising the active systems. While there were net decreases
during fiscal 1956 and 1957 of 32 and 11, respectively, in the number
of companies comprising the active systems, certain systems are
carrying out realignment programs and it is too early to state whether
a leveling off has occurred tin the total number of companies subject
to regulation under the Act.
While most of the Section 11 problems existing at the time of the
passage of the Act have been resolved, there still remain a number of
issues which have not as yet been determined. Examples are: In
its order under Section 11 (b) (1) with respect to The Columbia
Gas System, Inc., the Commission reserved jurisdiction concerning
the retainability tin the system of the properties of ten companies
(subsequently reduced to six) and in this connection there is a pro-
ceeding pending before the Commission which is discussed at
page 114 of this Report. In addition, this registered holding
company has an overall plan for the realignment of its properties
which likewise is discussed at page 114. There is a problem under
Section 11 (b) (1) of the Act with respect to Consolidated Natural
Gas Co. relating principally to the retainability of non-utility pipe
line properties. With respect to Delaware Power & Dight Co. there
exists the question of whether the gas and electric facilities are
retainable under common control. The Commission, by order dated
April 14, 1950,directed the disposition of the gas properties of Black-
stone Va:11eyGas & Electric Co., a subsidiary of Eastern Utilities
Associates, This system has pending before the Commission an
application-deelaeation covening several transactions designed to ac-
complish the disposition of the gas properties required to be divested.
That matter is discussed at page 114 of this Report. National Fuel
Gas Co. system has oil, real estate, and gas transmission businesses, the
retention of which has not been determined. With respect to New
England Electric System there is pending before the Commission a
proceeding under Section 11 (b) (1) of the Act to determine whether
the gas properties of the subsidiary companies are retainable. That
proceeding is discussed at page 116 of this report. In its application
pursuant to Section 3 (a) (2) of the Act requesting an exemption
from wll of the provisions of the Act, Union Electric Co. also re-
quested that the Commission release jurisdiction previously reserved
by the Commission over the retainability of the gas properties owned

by system companies. There is also a problem under Section 11 (b)
(1) of the Act whether Utah Power & Light Co. may retain its sub-
sidiary, The Western Colorado Power Co. Those problems have not
as yet been resolved.
The maximum number of companies subject to the Act as com-
ponents of registered holding company systems at anyone point of
time was 1,620 in 1938. Since that time additional systems have
registered and certain systems have organized or acquired additional
subsidiaries, with the result that 2,385 companies have been subject
to the Act as registered holding companies or subsidiaries thereof
during the period from June 15, 1938, to June 30, 1958. Included
in this total were 216 holding companies (holding companies and
operating-holding companies), 1,021 electric and gas utility com-
panies and 1,148 non-utility enterprises. From June 15, 1938 to
June 30, 1958,2,046 of these companies have been released from the
active regulatory jurisdiction of the Act or have ceased to exist as
separate corporate entities. Of this number 922 companies with
assets aggregating approximately $13 billion as at their respective
dates of divestment have been divested by their respective parents
and are no longer subject to the Act as components of registered
systems. The balance of 1,124 companies includes 776 which were
released from the regulatory jurisdiction of the Act as a result of
dissolutions, mergers and consolidations and 348 companies which
ceased to be subject to the Act as components of registered systems
as a result of exemptions granted under Sections 2 and 3 of the Act
and deregistrations pursuant to Section 5 (d) of the Act.
DEVEWPMENTS IN INDIVIDUAL REGISTERED SYSTEMS
There is discussed below each of the active registered systems and

the other systems in which there occurred during the fiscal year 1958
significant developments other than financing transactions. The
financing activities of registered holding companies and their sub-
sidiaries are treated below in a separate section of this report.
A. DEVELOPMENTS IN ACTIVE REGISTERED SYSTEMS
American Electric Power Company

During the fiscal year American Gas and Electric Co. changed its
corporate name to American Electric Power Co. At December 31,
1957, the system had consolidated assets, less valuation reserves, of
some $1,283,000,000 and net dependable generating capacity of
4,585,000 Kw. The system had consolidated operating revenues of
about $283,755,000for the calendar year 1957.
Although no significant corporate changes took place in the system
during the fiscal year, there was substantial activity with respect to
its expansion program and the financing arrangements therefor, new
developments in respect of a service agreement and the acquisition of
additional utility assets. This system is the largest holding company
system subject to the Act. Six additional generating units of
225,000 K w each or a total of 1,350,000 K ware expected to be com-
pleted during the calendar year 1958.
The system carries on research along many avenues of technology
and, during the fiscal year, continued to concentrate on nuclear re-
search and development with a view to providing power at a cost
competitive with that of a conventional power plant. Three system
companies are members of the East Central Nuclear Group which
consists of 14 utility companies in the general Ohio Valley area.
This group is in the process of developing a program involving
research and development of a high-temperature, gas-cooled, heavy
water-moderated, pressure-tube reactor of 50,000Kw capacity. Amer-
ican Electric Power Co. is also a member of Nuclear Power Group,
Inc. and, as such, continues to derive technological and practical
experience from the research and design activities in Commonwealth
Edison Company's 180,000 K w boiling water reactor being installed
at Dresden, TIl.
The system's service corporation, which during the fiscal year
changed its name to American Electric Service Corp., designed and
engineered the power plants of Ohio Valley Electric Corp. Ameri-
can Electric owns 37.8% of the voting securities of OVEC which,
with its wholly-owned subsidiary, Indiana-Kentucky Electric Corp.,
furnishes electric power to an installation of the Atomic Energy
Commission near Portsmouth, Ohio. There is pending before the
Commission the issue of whether the acquisition of OVEC's stock
by American Electric and other sponsoring companies meets the
standards of Section 10 of the Act. This issue and the organization
and financing of OVEC and Indiana-Kentucky Electric Corp. are
discussed on page 126 of the Commission's 23rd Annual Report.
American Natnral Gas Co.

This registered holding company and its subsidiary companies, as
at December 31, 1957, had consolidated assets, less valuation reserves,.
of $689,780,000. The system had consolidated operating revenues of
$192,036,000 for the calendar year 1957. In the latter part of 1957,.
American Natural Gas Production Co. was organized as a subsidiary
of this registered holding company for the purpose of exploring for
gas and acquiring and operating gas-producing properties.
In September 1957, American Natural filed a declaration requesting

permission to acquire from time to time additional shares of its 6%
non-redeemable preferred stock without regard to the limitations
imposed by Rule 42 under the Act and 'at such prices as might be
considered by the company's management to be reasonable," In No-
vember 1957, the Commission instituted a proceeding under Section
11 (b) (2) of the Act to determine whether the continued existence
of such stock in this holding company system's corporate structure
unduly and unnecessarily complicates such structure or unfairly and
inequitably distributes voting power among the security holders of
such system," The proceedings were consolidated and, in April 1958,
the Commission issued its Findings and Opinion denying effective-
ness to American Natural's declaration seeking to purchase its non-
redeemable preferred stock and ordered the company to take
appropriate steps to eliminate such preferred stock from the holding
company system.' Subsequent to the close of the fiscal year Amer-
ican Natural filed a plan to eliminate the preferred stock by a
payment of $32.50 per share to the holders thereof. Before the plan
can be effectuated it must be found by the Commission to be fair and
equitable to all affected persons.
In June, 1958, hearings began on a declaration filed by Milwaukee
Gas Light Co. This subsidiary proposed to issue and sell promissory
notes to banks in an aggregate principal amount not exceeding $15
million. After hearing, the Commission issued its Findings and
Opinion and Order permitting the Company's declaration to become
effective,"
Central and South West Corp.
This registered holding company and its subsidiaries, as at Decem-
ber 31, 1957, had 1,850,900 Kw of effective generating capability and
its consolidated assets, less valuation reserves, amounted to $_585,-
000,000. The system had total consolidated electric operating reve-
nues of $137,300,000 for the calendar year 1957.
During the fiscal year Southwestern Gas and Electric Co., a
system subsidiary, was authorized, after hearing, to acquire, at a
cost of $36,000, shares of the preferred stock of First Arkansas De-
velopment Finance Corporation, a non-profit company organized un-
der the laws of Arkansas for the purpose of promoting the location
of new businesses and new industries in the State of Arkansas,"
• Holding Company Act Release No. 13565 (October 18,1957).

• Holding Company Act Release No. 13600 (November 18, 1957).
• Holding Company Act Release No. 13726 (April 7, 1958).
• Holding Company Act Release Nos. 13813 (August 29, 1958) and 13828 (September 22,
1958).
• Holding Company Act Release No. 13777 (June 12, 1958).
Three system subsidiaries are members of Texas Atomic Energy

Research Foundation which consists of a group of 11 electric utility
companies in Texas. The Foundation was organized early in the year
1957 for the purpose of engaging in research in the atomic energy
field as applied to the generation of electric power. These system
subsidiaries are committed to contribute a total of about $1 million,
of a combined total of $10 million, for the four-year research program
which has for its object studying heavy hydrogen or fusion reactions
at high temperature under controlled conditions. Two system sub-
sidiaries have joined with 13 other electric utility companies in the
formation of Southwest Atomic Energy Associates which, over the
next four years, will contribute a total of $5,354,000, including about
$800,000 by the two system subsidiaries, for research and development
of an epithermal thorium power reactor undertaken by Atomics
International, a subsidiary of North American Aviation, Inc.
The CoIU!J1bia Gas System
This registered holding company and its subsidiaries, at December

31, 1957, had consolidated assets, less valuation reserves, of about
$8521;2million. The consolidated gross operating revenues for the
calendar year 1957 were approximately $376 million. The total sales
of gas by the system during the calendar year 1957 amounted to
646,402 million cubic feet. Of this total 268,383 million cubic feet
(41.5%) were sold at wholesale to 112 non-affiliated companies for
resale.
Since the close of the last fiscal year there has been an increase of
3 in the number of the system's operating subsidiaries. The first ad-
ditional company, Columbia Hydrocarbon Corp., was incorporated in
Delaware on August 20, 1957, for the purpose of owning and operat-
ing a fractionating plant at Siloam, Ky., including a 35-mile pipeline
to transport a mixed stream of hydrocarbons from which ethane,
propane, butane and natural gasoline will be processed and marketed.
On November 27,1957, the Commission granted the company's appli-
cation to sell its stock and promissory notes to its parent and
authorized the parent to acquire such seourities,"
The second company, Columbia Gulf Transmission Co., was in-
corporated on May 28, 1958, for the purpose of acquiring substantially
all of the assets of Gulf Interstate Gas Co. which until recently was a
non-affiliated company owning and operating a pipeline which trans-
ports gas purchased and used by system companies. Columbia has
entered into an agreement for the acquisition by Transmission Com-
pany of the assets of Gulf Interstate in exchange for shares of common
f Holding Company Act Release No. 13610 (November 27,1957).

486867-59-9
stock of Columbia and the assumption by Transmission Co. of the

liabilities of Gulf. In June, 1958, the Commission authorized Colum-
bia to acquire shares of preferred and common stock of Gulf Inter-
state," There was pending at the close of the fiscal year an application
of Transmission Company to acquire the assets of Gulf Interstate.
The third new operating subsidiary is The Ohio Valley Gas Co.
which was organized on August 28,1956. In June, 1958, the Commis-
sion approved the transfer to Valley of nearly all of the assets and
properties of United Fuel Gas Co. in the State of Ohio which it uses
in connection with the retail distribution of natural gas," This pro-
posal is part of and was in furtherance of the system's realignment
program discussed at page 109 in the 23rd Annual Report. During
the fiscal year the Commission approved another proposal whereby
United Fuel Gas Co., a subsidiary, transferred all of its retail distribu-
tion properties in Kentucky to Central Kentucky Natural Gas CO.10
This is also in furtherance of the system's realignment program.
As indicated at page 132 of the 22nd Annual Report there is pend-
ing before the Commission a motion filed by Columbia requesting the
release of jurisdiction with respect to the retainability of certain prop-
erties controlled by the system. During this fiscal year both the Divi-
sion of Corporate Regulation and Columbia filed proposed findings
of fact and conclusions of law. The Division recommended that the
Commission should not, on the basis of the record so far made in the
proceeding, find the properties involved are retainable. Columbia
submitted that the properties involved are properly a part of its inte-
grated gas system or are reasonably incidental thereto and are retain-
able. The matter is pending.
Eastern Utilities Associates
This registered holding company and its subsidiary companies, as at

December 31, 1957, had consolidated assets, less valuation reserves, of
$89,900,000 and its consolidated operating revenues for that year were
$32,230,000.
In February 1957, EUA and its subsidiary, Blackstone Valley Gas
and Electric Co., filed with the Commission an application-declaration
covering several transactions, including the issuance of 25 year debt
securities by EUA, designed to effectuate the Commission's order of
April 4, 1950, directing EUA to sever its relationship with the gas
properties of Blackstone." Valley Gas Co. was incorporated as a
subsidiary of Blackstone for the purpose of acquiring and operating
such gas properties. Public hearings have been held and the Division
• Holding Company Act Release No. 13781 (June 26, 1958h

• Holding Company Act Release No. 13779 (June 18,1958).
10 Holding Company Act Release No. 13607 (November 22,1957).
3131 S. E. C. 329 (1950).
of Corporate Regulation has opposed the issuance of the debt secu-
rities. Briefs and reply briefs have been filed and the Commission
has heard oral argument. The matter is now under advisement for
decision.
General Public Utilities Corp.
This registered holding company and its subsidiary companies, as
at December 31, 1957, had consolidated assets, less valuation reserves,
of $789,297,209. For the calendar year 1957 the system's total con-
solidated operating revenues amounted to $202,445,930.
During the .fiscal year Manila Electric Co., an electric subsidiary
operating in the Republic of the Philippines, increased the number of
shares of its authorized common stock from 1,000,000 shares of 40
pesos par value per share to 10 million shares of 10 pesos par value
per share and reclassified its outstanding common stock from 1 million
shares to 4 million shares. In addition, a common stock dividend
of 2 million shares was declared and paid to Gpu.12 At December
31, 1957, all of Manila's outstanding debentures were called for re-
demption and a new series of first mortgage bonds was authorized.
The holders of the debentures were offered new bonds in exchange
for their debentures and GPU acquired 8 million pesos principal
amount of the new issue and contributed cash to cover the cost of the
adjustment in the interest differential."
Also during the .fiscal year GPU amended its certificate of incor-
poration regarding the preemptive rights of its shareholders in con-
nection with the issuance of additional shares of common stock.>
The system has abandoned its contemplated project of constructing
and operating an atomic power plant in the Philippines where the
cost of conventional fuel is twice the average for the domestic sub-
sidiaries. At present, the system is exploring the feasibility of adding
a small water-type reactor at one of the generating stations of
Pennsylvania Electric Co., one of the system's domestic subsidiaries.
Middle South Utilities, Inc.

This registered holding company and its subsidiaries, as of Decem-
ber 31, 1957, had 2,281,000 K w effective generating capability and its
consolidated assets, less valuation reserves, amounted to $669,301,581.
The system had total consolidated operating revenues for the year
1957 of $171,573,439.
Middle South owns 10 percent of the voting securities of Electric
Energy, Inc., an electric generating company which has a long-term
contract for the sale of firm power to an installation of the Atomic
12 Holding Company Act Release No. 18538 (September 4,1957).
II Holding Company Act Release No. 13641 (December 27,1957) .
.. Holding Company Act Release No. 13689 (February 21, 1958).
116 SECURITIES .QTJ) EXCHANGE COM:MJ:SSION
Energy Commission. There is pending before the Commission a con-

solidated proceeding with respect to a contract between Middle South
and Kentucky Utilities Co. for the sale of Middle South's 10 percent
interest in EEl and with respect to previously reserved issues under
Section 10 of the Act which prescribes standards applicable to the
acquisition of securities by companies subject to the Act. This con-
solidated proceeding is discussed at pages 126-128 of the 23rd An-
nual Report and was pending at the close of the fiscal year.
In 1953 the Commission ordered Louisiana Power & Light Co., a
system subsidiary, to dispose of its non-electric properties. The pro-
posal of Middle South and this subsidiary to effectuate compliance
with this order and Court actions in connection therewith are dis-
cussed at page 116 of the 22nd Annual Report. On November 22.
195'7, the Commission approved a plan filed under section 11 (e) of
the Act for the disposition of such property," and on January 14~
1958, the United States District Court for the Eastern District of
Louisiana issued an order enforcing the provisions of the plan."
In 1955 the system's four major operating subsidiaries became mem-
bers of Southwest Atomic Energy Associates, a non-profit organization
which has embarked upon a four-year $5.5 million research and devel-
opment program with respect to an advanced design power reactor, the
construction of which has been undertaken under contract by North
American Aviation, Inc.
New England Electric System
This registered holding company and its subsidiaries, as at Decem-

ber 31, 195'7,had consolidated assets, less valuation reserves, of $5'76,-
354,206 and, for that year the consolidated operating revenues amount-
ed to $158,934,305.
During the fiscal year, the Commission instituted a proceeding in
respect of NEES and its subsidiaries for the purpose of determining
the extent to which the electric, gas, and other business operations of
the NEES holding company system satisfied the integration standards
of section 11 (b) (1) of the Act.17 The hearing was initially devoted
exclusively to the issue of whether or not the electric operations of the
NEES system constitute those of a single integrated public-utility sys-
tem as permitted by section 11 (b) (1). On February 20, 1958, the
Commission issued its findings and opinion and order in which it held
that the electric properties of the NEES holding company system
satisfied the standards delineating an integrated public-utility sys-
tem.IS There is pending for further hearings and determination the
10 Holding Company Act Release No. 13606 (November 22,1957).
18 Louisiana Gas Service 00., et a!., Civ. No. 7316.
17 Holding Company Act Release No. 13525 (August 5, 1957).
J8 Holding Company Act Release No. 13688 (February 20,1958).
question of whether the NEES system may retain all or any of its gas
properties.
In July, 1958, NEES filed a plan under section 11 (e) of the Act to
eliminate the minority interests in the common stocks of its subsidiaries
engaged solely in the electric business. Subsequent to the close of the
fiscal year, the Commission issued an order for hearing on NEES'
plan and also instituted a proceeding under section 11 (b) (2) for the
purpose of determining whether the existence of the public minority
interests in the System's electric subsidiaries constitute an unfair and
inequitable distribution of voting power. The two proceedings were
consolidated for hearing and determination."
The system holds a 30% stock interest in Yankee Atomic Electric
Company, which is constructing an atomic electric plant. The organ-
ization of Yankee and its initial financing transactions are discussed
at pages 162-164 of the 22nd Annual Report, and discussions and
transactions regarding the formulation of Yankee's overall financing
program are discussed on page 131 of the 23rd Annual Report. The
Atomic Energy Commission has issued a construction permit for Yan-
kee's power plant and the plant is scheduled for completion in 1960.
Yankee has secured Commission approval to issue and sell to its stock-
holder companies additional common stock and non-interest bearing
promissory notes making its total capitalization $13 million, consisting
of $8 million par value of capital stock and $5 million of such notes."
Ohio Edison Co.
Ohio Edison is a registered holding company and an operating elec-
tric utility company. The system consists of 1 holding-operating
company and 3 electric utility subsidiaries. Included in the 3 electric
utility subsidiaries are Ohio Valley Electric Corp." and its wholly-
owned subsidiary, Indiana-Kentucky Electric Corp., which are dis-
cussed at pages 126-128 of the 23rd Annual Report. The other sub-
sidiary is Pennsylvania Power Co., all of the common stock of which
is owned by Ohio Edison.
Ohio Edison and its subsidiary, Pennsylvania Power Co., had con-
solidated assets, less valuation reserves, of $532,815,000 at Decem-
ber 31, 1957, and their consolidated operating revenues for the year
1957 amounted to $135,862,000.
Ohio Edison and Pennsylvania Power are two of the 15 electric
utility companies that sponsored the organization of Ohio Valley
Electric Corp. which supplies the power requirements of a gaseous
diffusion plant of the Atomic Energy Commission located near
,. Holding Company Act Release No. 13799 (August 1, 1958).
,., Holding Company Act Release Nos. 13580 (November 1, 1957), 13740 (April 29, 1958),
and 13811 (August 26,11158).
III Ohio Edison owns 16.5% equity interest in Ohio Valley Electric Corp.
Portsmouth, Ohio, and their power participation ratios are 16.2%

and 2.2%, respectively. Further details with respect to OVEC are
set forth at pages 126-8 of the 23rd Annual Report. In the Commis-
sion's order authorizing the acquisition of OVEC's securities, juris-
diction was expressly reserved to determine at an appropriate future
time whether the companies subject to the Act could retain such se-
curities." On November 19, 1956, the Commission reopened the pro-
ceeding and ordered a hearing in respect of the reserved issues."
Hearings have been completed and the matter is in process of prepara-
tion for submission to the Commission.
Ohio Edison and Pennsylvania Power and 12 other electric utility
companies are members of East Central Nuclear Group formed about
a year ago to formulate plans for undertaking a program of nuclear
research and development. In December 1957, this group and Flor-
ida West Coast Nuclear Group presented a proposal to the Atomic
Energy Commission for research and development on a partnership
basis with that agency of a 50,000 Kw prototype high temperature,
gas-cooled, heavy-water-moderated reactor of the pressure-tube type.
It will be designed as a prototype of a natural uranium 200,000 K w
reactor. Subject to necessary regulatory approvals, Ohio Edison and
Pennsylvania Power may be obligated to expend approximately
$425,000 per year over the 1958-62 period in connection with pre-
operational research and development.
The Southern Company
This registered holding company and its subsidiaries had, at

December 31, 1957, consolidated assets, less valuation reserves, of
$1,037,407,021 and for that year the consolidated operating revenues
totaled $254,535,680.
Southern and its subsidiaries have continued their participation in
research and development of nuclear power through Power Reactor
Development Co., a non-profit corporation in the process of construct-
ing an experimental fast breeder atomic reactor in Michigan. The
system's service company is one of the 21 member companies which
formed PRDC. Further details with respect to it are set forth at
pages 164-166 of the 22nd Annual Report and at pages 129-30 of the
23rd Annual Report. The four direct subsidiaries of Southern have
agreed to contribute $2.4 million over a six-year period toward the
construction of this atomic reactor and Southern has guaranteed the
payment of 8 percent of the principal and interest of the borrowings
made from various banks by PRDC under a loan agreement provid-
ing for such borrowings of $15 million by the end of 1958.24
.. Holding Company Act Release No. 11578 (November 7, 1952).

II Holding Company Act Release No. 13313 (November 19,1956) •
.. Holding Company Act Release No. 13383 (Febrnary 12, 1957).
Union Electric Co.
Union Electric Co. is a registered holding company and an operating

electric utility company. As at December 31, 1957, the consolidated
assets, less valuations reserves, of Union and its subsidiaries amounted
to $524,865,000 and their consolidated operating revenues for 1957
totaled $129,178,000.
Union owns 40 per cent of the capital stock of Electric Energy, Inc.
There is pending for decision by the Commission the question of the
retain ability by Union and the other sponsoring companies subject
to the Act of their stock interest in Electric Energy, Inc. Further
details in connection with this proceeding are discussed at page 102
of the 17th Annual Report and at page 128 of the 23rd Annual Report.
During the fiscal year Union filed a declaration and amendments
thereto pursuant to Section 12 (e) of the Act and Rules 62 and 65
thereunder, in which it proposed to solicit proxies from its preferred
and common stockholders for use at the regular annual stockholders
meeting for the year 1958. The declaration was filed pursuant to a
Commission order issued on October 25, 1957, which prohibited Union
and all other persons from soliciting proxies or other forms of au-
thorization in connection with this meeting unless authorized by the
Commission to do SO.25 .T. Raymond Dyer, a stockholder of Union,
in response to the Commission's notice," requested a hearing thereon.
A hearing was held in March, 1958,27and thereafter the Commission
permitted Union's declaration to become effective upon the filing of
an amendment making certain changes in the company management's
solicitation material. 28 The stockholders' motion for rehearing was
denied." The stockholder has filed a petition to review the action
of the Commission in the Court of Appeals for the Eighth Circuit,
where the matter is now pending.
Dyer had similarly sought review of a Commission order under
Section 12 (e) of the Act authorizing Union Electric to solicit proxies
in connection with its 1957 annual meeting of stockholders. In that
case, Dyer v. 8. E. 0.,251 F. 2nd 512 (C. A. 8, 1958), although the
Commission and the other parties had briefed and argued the case
on the merits, the Court of Appeals on its own motion dismissed the
case as moot, since the stockholders' meeting had been held and the
proxies voted.v Dyer filed a petition for a writ of certiorari in the
United States Supreme Court. In its memorandum the Commission
... Holding Company Act Release No. 13575 (October 25, 1957).
l!e Holding Company Act Release No. 13671 (February 7, 1958).
2'1 Holding Company Act Release No. 13696 (February 25,1958).
2S Holding Company Act Release No. 13710 (March 21, 1958).
:!9 Holding Company Act Release No. 13712 (March 25,1958) •
... Petition for rehearing was denied on February 25, 1958.
agreed that the case was not moot but recommended that the Supreme
Court defer action on the petition until the Court of Appeals for the
Eighth Circuit had an opportunity to rule on Dyer's petition seeking
review of the Commission's March 21 and 25, 1958, orders permitting
Union Electric Company to solicit proxy votes for its 1958 stock-
holders' meeting. By order entered on April 18, 1958, the Court of
Appeals denied Dyer's request for a stay pending review of the
Commission's March 1958 orders, but granted "leave to brief and argue
the question of mootness" of the review as related to the Court's
holding with respect to the same issue in Dyer v. S. E. 0., 251 F. 2d
512.
A related lawsuit was involved in S. E. O. v, Dyer.if! In this case
the Commission brought suit on April 9, 1957, to restrain Dyer from
violating Section 12 (e) and the order of the Commission which pro-
hibited Union Electric and all other persons from soliciting proxies
for the 1957 annual meeting of stockholders except pursuant to a
declaration which the Commission permitted to become effective. The
basis of the Commission's complaint was the mailing of a postcard
which, under the circumstances, the Commission believed constituted
soliciting material. After the 1957 meeting was held, the Commis-
sion sought a voluntary dismissal of the case, but its notice of dis-
missal was vacated by the court on Dyer's motion."
Utah Power & Light Co.
Utah Power & Light Co., a Maine corporation, is a registered

holding company and an electric utility company.
As of December 31, 1957, Utah Power and Western Colorado Power
Company, then its only subsidiary, had consolidated assets, less valua-
tion reserves, of $213,939,205. For the year ending that date their
consolidated operating revenues amounted to $43,320,377.
On May 6, 1958 the Commission authorized Utah Power & Light
to acquire the common stock of Telluride Power Company, a neigh-
boring non-affiliated electric utility company, by exchange of one
share of Utah common stock for eleven shares of Telluride common
stock." In addition Utah was authorized to acquire for cash the
second preferred stock of Telluride at its redemption price of $1 per
share plus accrued dividends. Telluride's net utility assets aggre-
gated approximately $3,595,000. Utah issued 52,940 shares of its
common stock in exchange for the common stock of Telluride.
31 E. D. Missouri, Civil Action No. 57 C 201 (1).

33 On July 28, 1958, after a trial on the merits, the District Court dismissed the case
as moot on the authority of Dyer v. S. E. 0.,251 F. 2d 512 (C. A. 8, 1958). Dyer's peti-
tion to vacate and for a new trial Is pending.
33 Holding Company Act Release No. 13748.
B. DEVELOPMENTS IN OTHER SYSTEMS
Central Public Utility Corp.
Central Public Utility Corp. ("Cenpuc") is solely a holding com-

pany and is registered as such under the Act. As indicated above,
it no longer has any public utility subsidiaries operating in the United
States. As at December 31, 1957, the consolidated assets of the
system, less valuation reserves, amounted to $25,495,211 and for
the year 1957 the system's consolidated operating revenues totaled
$10,659,854;14
By order dated June 13, 1952, the Commission directed, among
other things, that Cenpuc, under section 11 (b) (2) of the Act, take
appropriate steps to terminate the existence of its subsidiary, The
Islands Gas and Electric Co., which was found by the Commission
to serve no useful purpose." On June 1, 1955, Cenpuc filed an appli-
cation requesting modification of this order and further requesting
an order of exemption pursuant to section 3 (a) (5) of the Act.
Shortly thereafter a large block (about 30 percent) of Cenpuc's capi-
tal stock was acquired by certain new investors, thereby creating
several additional tiers of holding companies in the system's structure.
This complication delayed the Commission's determination of Cen-
puc's application for an exemption.
On May 2, 1957, Cenpuc filed an amendment to its application re-
newing its request for an exemption and stating, upon information
and belief, that N. V. Amsterdamsche Bankierskantoor V/H Mendes
Gans Co., through Burnham and Co., as agent, purchased 259,492
shares of Cenpuc's capital stock and that Burnham and Co. is the
holder of record of 431,924 shares all of which, except 1,000 shares,
are subject to commitments of sale to approximately 33 Dutch and
Belgian investors. Accordingly, a large block of Cenpuc's stock has
been or is in the process of being transferred from domestic to foreign
investors. On July 15, 1958 Cenpuc filed a further amendment to
its application. Hearings on the amended application were com-
menced on September 10, 1958.36
Cities Service Co.
At the beginning of the fiscal year there was a total of 79 37 com-
panies in this system and its only remaining public-utility subsidiary,
'" Cenpuc owns, directly and indirectly, 100 percent of the voting securities of 8 of its
subsidiaries and 92.9 percent of another, all of which are included in consolidation except
3 Which are carried on the consolidating balance sheet as investments. Of the remaining
5 companies in the system, Cenpuc's indirect interest therein is 50 percent or less .
.. Holding Company Act Release No. 11311 (June 13,1952) .
.. Holding Company Act Release No. 13803 (August 5, 1958).
IT The total of 79 companies includes 10 companies reported as inactive. The system's
mutual service company is not included; nor is West Texas Gulf Pipe Line Co. in which
a system subsidiary owns an 11.34 percent voting interest. Holding Company Act Release
No. 11215 (May 1,1952).
as defined by the Act, was Dominion Natural Gas Co., Ltd. During
the fiscal year Dominion sold substantially all of its assets, including
all of its utility assets, to a non-affiliate 8S and thereby completed
Cities' liquidation of its investments in public-utility companies in
compliance with the Commission's order of May 5, 1944.89
A consolidated proceeding involving an exemption application by
Cities pursuant to section 3 (a) (5) of the Act and a section 11 (b)
(2) proceeding instituted by the Commission pertaining to the ex-
istence of a publicly held 48.5 percent minority interest in Cities'
subsidiary, Arkansas Fuel Oil Corp. ("Ark Fuel"), is described at
pages 108-109 of the 23rd Annual Report. With respect to such
consolidated proceeding, the United States Court of Appeals for
the Second Circuit on July 15, 1957 affirmed the Commission's denial
of Cities' application for exemption from the Act, 247 F. 2d 646 (C. A.
2, 1957), and the Supreme Court on January 6, 1958 denied certiorari.
Thereafter the Commission, by order, directed Cities and Ark Fuel
to comply with section 11 (b) (2) of the Act by eliminating the public
minority interest in Ark Fuel, or by disposing of the 51.5 percent
stock interest held by Cities in Ark Fuel,4° Both companies and a
stockholder of Ark Fuel appealed the Commission's order to the
United States Court of Appeals for the Third Circuit, which, on July
22,1958, affirmed the order of the Commission.w- Cities on March 28,
1958 filed an application pursuant to section 5 (d) for an order declar-
ing it not to be a holding company." A hearing on this application
was held on May 13, 1958, and oral argument was heard by the
Commission on June 5, 1958. However, thereafter Cities withdrew its
application requesting the section 5 (d) order and the Commission, by
order, discontinued the proceeding."
Electric Bond and Share Company
Electric Bond and Share Company, which no longer holds as much
as 5 percent of the outstanding voting securities of any domestic pub-
lic utility company, has pending before the Commission an application
for exemption from all provisions of the Act except section 9 (a) (2)
thereof, pursuant to section 3 (a) (5) of the Act. In the event such
exemption is granted, it is the intention of the company to convert
its status to that of an investment company and register under the
II Notice of sale filed April 16, 1958 •
.. Holding Company Act Release No. 5028 (May 5, 1944) •

.. Holding Company Act Release No. 13549 (September 20, 1957). After the close of the
fiscal year Cities filed a plan pursuant to section 11 (e) of the Act for the purpose of
ellminating the minority Interest in Ark Fuel. Briefly, the plan provides for the division
of the assets of Ark Fuel into two new companies, one to be owned by Cities and the other
to be owned by the minority interest. Hearings on this plan commenced on December
2,1958. Holding Company Act Release No. 13840 (October 6,1958) •
... Oities Service 00. v. S. E. a., et al., 257 F. (2d) 926.
C1 Holding Company Act Release No. 13736 (April 21, 1958) .
.. Holding Company Act Release No. 13836 (September 29,1958).

Investment Company Act of 1940. This proceeding involves a number
of very difficult and complex issues, among which are the questions
whether Bond and Share, through its wholly-owned engineering and
consulting service company subsidiary, Ebasco Services, Incorporated,
exercises controlling influence over, or is affiliated with, certain public
utility and holding company clients of Ebasco which formerly were
controlled by Bond and Share. Further hearings are scheduled for
the purpose of developing a more complete record with respect to
these matters.
Standard Shares, Inc.
At the beginning of the fiscal year Standard Shares, Inc., formerly
known as Standard Power and Light Corp., was a registered holding
company and had outstanding only one class of stock, namely, com-
mon stock. It then owned and still owns 45.6 percent of the common
stock of Standard Gas and Electric Co., a registered holding company,
which, in turn, owns 100 percent of the common stock of Philadelphia
Co., also a registered holding company. Both of these subsidiary
registered companies are required by orders issued under section
11 (b) (2) of the Act to liquidate and dissolve 43 and each is in a posi-
tion to effectuate dissolution except that there exist undetermined
questions relating to Federal income taxes for the years 1942 through
1950.
During the fiscal year Standard Shares filed an application under
section 5 (d) of the Act for an order declaring it not be a holding
company and its registration as such under the Act not be in effect.
After public hearings, the Commission, by order, on September 23,
1958, granted the application." The order became effective upon
issuance and, thereupon, the company's registration under the Act
ceased to be in effect. Immediately after the issuance of this order,
the company completed its registration under the Investment Com-
pany Act of 1940 and, as an investment company, is subject to the re-
quirements of that Act and to the Commission's jurisdiction
thereunder.
Other Matters
As previously reported at pages 114-115 of the 23rd Annual Report,
International Hydro-Electric System ("IRES") was reorganized
pursuant to section 11 (d) of the Act and mES is now registered as
an investment company under the Investment Company Act of 1940
and subject to the Commission's jurisdiction thereunder. The only
remaining matters under the Holding Company Act are fees and ex-
penses to be awarded in connection with the reorganization. Final
applications are on file for fees aggregating $1,211,000 and $28,805
4128 S. E. C. 35 (1948); 28 S. E. C.944 (1948); and 32 S. E. C. 545 (1951) .

.. Holding Company Act Release No. 13824.
for expenses. In December, 1957, the Commission approved interim

payments of $241,200 for fees and $14,645 for expenses." Hearings
have been concluded on the applications and the Commission has un-
der consideration the final amounts to be awarded."
There are also pending before the Commission supplemental and
final applications for the allowance of fees and expenses in connection
with a plan filed and consummated by the United Corporation pur-
suant to section 11 (e) of the Act for its conversion into an investment
company. Applications for fees aggregate $159,000 and for expenses
$42,800. Hearings on this matter were held at various times and
were concluded on September 10, 1958.47 The case is in the process of
preparation for presentation to the Commission for ultimate disposi-
tion. United is now registered as an investment company under the
Investment Company Act of 1940 and subject to the Commission's
jurisdiction thereunder.
FINANCING OF REGISTERED PUBLIC UTILITY HOLDING COMPANY

SYSTEMS-TRENDS IN ELECTRIC AND GAS UTILITY INDUSTRIES
During the fiscal year 1958, registered holding companies and their
subsidiaries issued and sold to the public and to financial institutions,
pursuant to authorizations granted by the Commission under Sections
6 and 7 of the 1935 Act, 36 issues of their stock and long term debt
securities with aggregate gross sales value of $583 million. Of this
amount two issues totaling $36 million were issued for the purpose of
refunding outstanding debt securities carrying higher rates of in-
terest. In the fiscal year 1957, registered systems issued and sold 39
issues of such securities with total gross sales value of $637 million.
All of the proceeds of these securities were used to provide new capital.
Table I shows the amounts of various types of securities sold by regis-
tered systems in the fiscal years 1958 and 1957 and the percentages
.. Holding Company Act Release No. 13637 (December 20,1957) .

.. Holding Company Act Release No. 13691 (February 21,1958) .
., Findings of the Commission and litigation resulting therefrom with respect to previous
fee applications by Randolph Phillips and others are described in the Twenty-third Annual
Report, page 125. On May 19, 1958, Phillips filed a petition in the United States District
Court for the District of Delaware, seeking an order adjudging the Commission in civil
and criminal contempt for an alleged willful violation of the order of the District Court,
entered after remand by the Court of Appeals, which had reversed in part the order of the
District Court affirming and enforcing the Commission's order with respect to fees. The
District Court order on the remand had contained a provision directing the Commission to
modify its previous findings, opinion and order as to fees in accordance with the deter-
mination of the Court of Appeals. The Commission had not done this until May 7, 1958,
after the matter had been called to its attention by Phillips (Who had received his full
compensation as soon as the District Court's order on the remand had been entered). In
the interim, certain portions of the Commission's opinion had been used in a proxy contest
in which Phillips was engaged respecting another company. On motion of the Commission,
Phillips' petition was dismissed by order dated September 19, 1958, the Court finding that
there was "no basis for civil contempt" nor any "showing of probable cause" warranting
criminal contempt proceedings.
T~ENTY-FOURTH ~AL REPORT 125
of increase or decrease in volume of each type of security during the
period.
TABLE I.-Securities sold for cash and issued in connection with refunding exchanges
to the public and financial institutions by registered holding companies and sub-
sidiaries, fiscal years 1958 and 1957
(Millions of dollars]
Percent
Increase or
1958 1957 (decrease)
In 1958
Bonds______________________________________________________________
Debentures_________________________________________________________$448 $335 33.7
85 86 (1.2)
Notes (5 years or longer)____________________________________________
------------
Preferred Stocks____________________________________________________ 26 (100 0)
Stocks____________________________________________________ 9 11 (18.2)
Common 41 179 (77.1)
Totals________________________________________________________
583 637 (8. 5)
The decline of $54 million, or 8.5 percent, in the volume of ex-

ternal financing completed by registered holding company systems
in fiscal 1958 as compared with fiscal 1957 can be attributed to two
factors. In the first place, the installment issuances of securities by
subsidiaries of registered holding companies pursuant to long term
construction loan commitments, which had figured significantly in
the totals for earlier years, were completed in 1957. These install-
ment borrowing arrangements were authorized by the Commission
several years ago and resulted in substantial amounts of private
placements of debt securities directly with institutional investors
each year through 1957.48
Another development which contributed to the decline in volume
of registered system financing was the sharp drop in the volume of
common stock financing completed by these systems from $179 million
in the fiscal year 1957 to $41 million in 1958. This represented a
decline of 77.1% and marked the lowest level of common stock financ-
ing by registered holding company systems under the 1935 Act in 6
years. Declines also were recorded in debenture, note, and preferred
stock financing during the year. Sales of mortgage bonds increased
$113 million or 33.7% in 1958.
The decline in registered system financing in fiscal 1958 does not
reflect the impact of any divestments of non-retain able subsidiaries
by registered holding companies in recent years. No sales of long-
.. In the fiscal year 1957, Ohio Valley Electric Corporation issued and sold $498,669 of
notes and American Louisiana Pipe Line Company issued and sold $26 million of notes
and $20.5 million of pipeline mortgage bonds pursuant to sueh construction loan com-
mitments. The financing plans of Ohio Valley Electric and American Louisiana PIpe Line
are described at page 86 of the 20th Annual Report and page 54 of the 21st Annual Report,
respectively.
term securities by companies subsequently divested out of holding

companysystemsare included in the total volumeof external financing
recorded for registered holding company systems in the fiscal years
1956,1957or 1958.
In addition to passing upon the 36 issues of long term securities
totaling $583 million which were issued and sold by registered sys-
tems in the fiscal year 1958,the Commission in that year also au-
thorized the issuance and sale of 67 issues of securities aggregating
$210million by subsidiaries of registered holding companies to their
parents. In fiscal 1957subsidiaries sold 78 issues of securities with
dollar volumeof $219million to their parents.
All other companies in the electric and gas utility industries, (ex-
clusive of companies associated with registered holding company
systems), issued and sold $3,447 million of long-term securities to
the public and to financial institutions in the fiscal year 1958. This
represented an increase of $524 million, or 17.9%, over the totals
recorded by these companies in 1957. All but $27 million of the
permanent financing completed by these companies in 1958 was for
new money purposes. Table II shows the amounts of bonds, deben-
tures, notes, preferred stocks and common stocks sold by such com-
panies in the fiscalyears 1958and 1957.
TABLE n.-Securities sold for cash and issued in connection with refunding ex-
changes to the public and to financial institutions by companies in the electric and
gas utility industries, not associated with registered holding company systems;
fiscal years 1958 and 1957
[Millions of dollars 1
Percent
Increase or
1958 1957 (decrease)
In 1958
Bonds _____•__. ____•_____' ______._. _____________ . ___._. _________ . -._ $2,135 $1,582 35.0
Debentures _________ . _. ___________ • _. _____. _. ____' _. __. ____' _______ . 505 460 9.8
Notes. ____________. _______________________
. .• ___________ . ____. ______ 108 40 170.0
Preferred Stocks _____ • _. ______
• _____ • ________ • ___• ________ • __•• __•• _ 354 344 2.9
Common Stocks ___• ___• ________• _., _" __•__• _____•• __• - ____• - ______ 345 497 (30.6)
Totals. _. ___. __________________

. _., ___. -__. __•___• _. __-. ___- - 3,447 2,923 17.9
In contrast with the pattern of financing of registered holding

company systems, other companies in the electric and gas utility
industries sold increasing amounts of all types of securities except
commonstocks in 1958. Bond financing increased 35% as compared
with the 33.7% increase reported by registered systems. The com-
mon stock financing completed by these companies in 1958 totaled
$345 million, reflecting a decline from 1957of 30.6%. This decline
was not nearly as great proportionately, however, as the 77.1% de-
TWENTY-FOURTH ~AL REPORT 127
cline in common stock financing reported by registered systems in
1958.
The volume of external financing of 'registered systems in fiscal
1958 accounted for 14.5% of the total volume of permanent financing
by the entire electric and gas utility industries. The corresponding
percentage for :fiscal 1957 is 17.9%. Table III compares the amounts
of various types of securities issued and sold in :fiscal 1958 by regis-
tered systems with the amounts issued and sold by aJll companies in
the electric and gas 'Utility industries (including registered systems).
TABLE IH.-Securities sold for cash and issued in connection with refunding eo-
changes to the public and to financial institutions by registered holding com-
panies and subsidiaries, and by all other companies in the electric and gas
utility industries; 1 fiscal years 1958 and 1957
[Millions of dollars I
All companies Registered Percent regis-

electric and holding com- tered system
Fiscal year gas utlllty pany systems financing to
industries Industry
totals
1958
Bonds ________________________________________________________
Debentures ___________________________________________________$2,583590
$448 17.3
N otes ______________________________________________- ___- ____-- 85 14.4
108 --~--- -------------
Preferred Stocks ___________________________________ - ___-______ 363 9 2.5
Common Stocks ____-- ___- ____-____- ____--___-- -__-- - -_-- - -_- 386 41 10.6
4,030 583 14. 5
1957
Bonds _______________________________________
- ____-- ___- -- - - 1,917 335 17.5
Debentures __________________________________
- _____- ___- _- __- 546 86 15.8
Notes ______________________________
- _________
- _- __--- - _- ____- 66 26 39.4
Stocks _____________________________
- _____- ___- ______
Preferred Stocks _______________________________
- ___- ________ - 355 11 3. 1
Common 676 179 26.5
3,560 637 17.9
I Includes electric utility companies, gss distribution companies, natural gas transmission companies and
holding companies.
The decline in the proportion of total industry permanent financing

accounted for by registered holding company systems in :fiscal 1958
reflects the decline in debenture, note, and preferred stock issues by
registered systems in contrast with the increases in sales of such
securities by all other companies in the electric and gas utility in-
dustries. The proportionately greater decline in common stock
financing by registered systems in fiscal 1958 were wlso a factor.
All but 2 of the 36 issues of long term securities totaling $583 mil-
lion which were sold externally by registered systems in 1958 were
offered for sale at competitive bidding pursuant to the requirements
of Ru1e 50. Brockton Edison Company, a 'Public 'Utility subsidiary
of Eastern Utilities Associates, a registered holding company, issued
and sold 30,000 shares of its $100 par value cumu1ative preferred
stock by means of a negotiated underwritten public offering on De-
cember 2, 1957. Brockton had publicly invited bids for the purchase
of this issue in October, 1957. Two groups of underwriters qualified

but no bids were received. The negotiated public offering was made
pursuant to an exemption from the competitive bidding require-
ments of Rule 50 granted by the Commission on November 29,1957.49
The second issue not sold through competitive bidding channels
was a private sale of common stock by Yankee-Atomic Electric Com-
pany, a subsidiary of New England Power Company, which in turn
is a public utility subsidiary of New England Electric System, a
registered holding company. The balance of $1,965,000 was sold to
the remaining 10 sponsor companies, no one of which is associated
with a regulated holding company system. This salle of stock by
Yankee was automatically exempt from the competitive bidding
requirements of Rule 50 pursuant to paragraph (a) (1) thereof,
because it was a pro rata issuance of securities to existing security
holders of Yankee.
The $1,035,000 of stock sold to New England Power and to Mon-
taup Electric is included in the 67 issues of securities totaling $210
million sold by subsidiaries to their registered holding company
parents, as described more fully at page 126 above. The balance
of $1,965,000 sold to the other 10 sponsoring public utility companies
is included in the totals of external financing by registered systems."
The amounts of external financing completed by registered systems
in 1958 as described above do not include the issuance in 1958 by
Utah Power & Light Company, a registered holding company, of
52,940 shruresof its common stock with an approximate market value
of $1.7 million in exchange on the outstanding common stock of
Telluride Power Company, as referred to at page 120, supra.
PROTECTIVE PROVISIONS OF FIRST MORTGAGE BONDS AND

PREFERRED STOCKS OF PUBLIC UTILITY COMPANIES
In passing upon issuances of first mortgage bonds and preferred

stocks of public utility companies, the Commission examines the
mortgage indenture and charter provisions to determine whether or
not there is substantial conformity with the applicable Statements of
Policy which were adopted by it in 1956.51 These Statements of
Policy represent substantially a codification of certain principles
or policies prescribed for the protective provisions of these securities
announced on a case-by-case basis over a period of years, as modified
.. Holding Company Act Release No. 13613 .

.. For statistical purposes in complllng the tables used in this report, the $1,035,000 of
Yankee common stock sold to New England Power Co. and Montanp Electric Co. is treated
as one issue; and the $1,965,000 of Yankee common stock sold to the other 10 sponsor
companies is treated as another issue .
•, Holding Company Act Release No. 13105 (February 16, 1956) as to first mortgage
bonds and Holding Company Act Release No. 13106 (February 16, 1956) as to preferred
stock.
in the light of experience and comments received from interested
persons who had been invited to submit their views. During fiscal
year 1958, applications or declarations were filed by public utility
companies under the Act with respect to 27 first mortgage bond issues
aggregating $459,700,000 principal amount and two preferred stock
issues with a total par value of $9,000,000.52
Of the 27 first mortgage bond issues, 14 issues, with a total principal
amount of $236,500,000,included provisions, as set forth in the State-
ment of Policy, imposing additional restrictions on the distribution
of earned surplus to the common stockholders, thereby assuring the
investing bondholders of a greater degree of safety of their invest-
ment through the maintenance of an appropriate common stock equity.
In respect of the other 13 issues with a total principal amount of
$223,200,000, no additional restrictions were required since the in-
dentures already conformed in this regard to the Statement of Policy.
The additional restrictions on earned surplus distributions were pro-
posed by the companies themselves or were inserted as a result of in-
formal discussions between the staff of the Commission and repre-
sentatives of the issuing companies. In the interest of flexibility, the
restriction on earned surplus distributions was generally coupled with
a further provision to the effect that additional "amounts of earned
surplus could be distributed upon application of the issuer to, and
approval by, the Commission.
A further provision contained in the Statement of Policy regarding
first mortgage bonds relates to the renewal and replacement of de-
preciable utility property which is subject to the lien of the mortgage.
It requires, in essence, that the issuer construct additions to its prop-
erty, or else deposit cash or bonds with the indenture trustee, in an
amount which on a cumulative basis will provide for the replacement
in cash or property of the dollar equivalent of the cost of the depreci-
able mortgaged property during its estimated useful life. The State-
ment of Policy provides that the requirement be expressed as a
percentage of the book cost of depreciable property, except that if
the existing indenture provision expresses the requirement on a differ-
ent basis, as, for example, in terms of operating revenues, no change
will be required if the company can demonstrate that the existing
provision provides an amount at least equal to a requirement based
on the book cost of depreciable property. As in the case of earned
surplus restrictions, the Commission, in the interest of flexibility, has
permitted the issuer to insert a provision under which the issuer, upon
application to, and approval by, the Commission may modify the
percent of depreciable property requirement .
.. For a discussion of the application of the Statement of Policy to filings from the
effective date thereof to June 80, 1957, see pages 141-148 of the Twenty-Third Annual
Report.
486867-59-10
Of the 27 issues of first mortgage bonds, the indentures of 22,

having an aggregate principal amount of $384,700,000,expressed the
renewal and replacement fund requirement as a percent of depreciable
property, while the indentures in the remaining 5 issues, having a
principal amount of $75,000,000, expressed the requirement as a
percent of revenues. The renewal and replacement fund require-
ments in the indentures of these latter 5 issues were not required
to be restated in terms of a percent of depreciable property since they
appeared substantially to afford no less protection to the bondholders
than would be afforded by an appropriate percentage of property
formula.
Another provision contained in both the bond and the preferred
stock Statements of Policy requires that the securities be redeemable
at the option of the issuer at any time upon reasonable notice upon
the payment of a reasonable redemption premium, if any. The intent
of this provision is to ensure that public utility companies subject to
the Act shall not be prevented, if money rates decrease materially,
from refunding their bonds or preferred stock. This is in keeping
with the intent of the Act as expressed in Section 1 (b) (5) to ensure
economies in the raising of capital. While no formula is set forth in
the Statements of Policy as to what constitutes a reasonable redemp-
tion premium, the working policy of the Commission has been that
the initial redemption price shall not exceed the initial public offer-
ing price plus the interest rate on the bonds or the dividend rate on
the preferred stock. For example, in the case of bonds, if the initial
public offering price is at 101% of principal amount and the bonds
bear a 4"%% interest rate, the initial redemption price may not exceed
105"%% of the principal amount, and the 5% point premium must
thereafter be reduced pro rata to maturity.
The Commission has continued to receive informally a number of
requests from issuing companies to relax its requirements so as to
permit bonds to be nonrefundable for a period after issuance, gener-
ally five years, or to permit the initial redemption price to be higher
than that provided by the working formula. No showing was made
that nonrefundability or a requirement to pay higher premiums on
refunding would reduce the interest cost sufficiently to warrant the
loss of future refunding flexibility. On the contrary, studies made
by the staff of the Commission, at the direction of the Commission,
indicate that there does not appear to be any especially significant,
let alone a controlling, influence of restriction on refundability upon
the interest cost, or the number of bids received at competitive bid-
ding by the issuer or the retail marketability of the bonds. Accord-
ingly, the Commission considers its present working policy on refund-
ability to be justified on the basis of available data.
In connection with this policy on refund ability, it is to be noted
that during fiscal year 1958 two public utility companies subject to
the Act refunded an aggregate of $35,000,000 principal amount of
first mortgage bonds, of which $20,000,000principal amount had been
issued during the same fiscal year and $15,000,000 had been issued
during the immediately preceding fiscal year. The refunding of the
$20,000,000 issue resulted in an annual saving in interest cost (before
deducting expenses) of 0.73%, or $146,000 per annum, while the an-
nual interest cost saving (also before deducting expenses) from the
$15,000,000 refunding was 0.72%, or $108,000 per annum.
By reason of the great importance of the question of refundability
to investors and consumers and the general public in periods of
high interest rates, the Commission in fiscal year 1957 authorized a
member of the staff of its Division of Corporate Regulation to serve
as a member of a committee organized by the "Wharton School of
Finance and Commerce of the University of Pennsylvania, which
is conducting a broad study of redemption provisions. The study is
under the sponsorship of the Life Insurance Association of America
and is expected to be concluded during fiscal year 1959.
In the two issues of preferred stock having an aggregate par value
of $9,000,000, one, involving $3,000,000 par value, had charter pro-
visions conforming substantially to the provisions of the Statement
of Policy; in the other, involving an issue of $6,000,000 par value,
the Commission, with the consent of the issuer, conditioned its order
permitting the issue to provide, among other things, for limitations
on dividends on junior classes of stock, on issuances of additional
shares of preferred stock, on mergers or consolidations that might
be effectuated without the consent of preferred stockholders, on the
acquisition of its outstanding preferred stock which may fall into
arrears and on the authorization or issuance of any prior preferred
stock. These conditions supplanted conditions contained in a pre-
vious order of the Commission and supplemented the company's
preferred stock charter provisions.
PART VII
PARTICIPATION OF THE COMMISSION IN CORPORATE

REORGANIZATIONS UNDER CHAPTER X OF THE BANK-
RUPTCY ACT, AS AMENDED
Chapter X of the Bankruptcy Act provides a procedure for re-
organizing corporations in the United States District Courts. At
the request of the judge or on the Commission's own motion, if
approved by the judge, the Commission participates in the proceed-
ings in order to provide independent, expert assistance to the court
and investors on matters arising in such proceedings and, where the
Commission considers it appropriate, files advisory reports on re-
organization plans. The role of the Commission under Chapter X
differs from that under the various statutes which it administers in
that the Commission does not initiate the proceedings or hold its own
hearings. It has no authority to determine any of the issues in a
proceeding. The facilities of its technical staff and its disinterested
recommendations are simply placed at the service of the judge and
the parties, affording them the views of disinterested experts in a
highly complex area of corporate law and finance, and the Commis-
sion pays especial attention to the interests of public security holders,
who may not otherwise be effectively represented.
Section 172 of Chapter X provides that if the scheduled indebted-
ness of a debtor corporation does not exceed $3 million, the judge may,
before approving any plan of reorganization, submit such plan to
the Commission for its examination and report. However, if the
indebtedness exceeds $3 million, the judge must submit the plan to
the Commission before he may approve it. The Commission has no
authority to veto or require the adoption of a plan of reorganization
and is not obligated to file a formal advisory report on a plan.
Where the Commission does file a report, copies of it, or a summary
thereof, must be sent to all security holders and creditors when they
are asked to vote on the plan.
While the Commission's advisory reports on plans of reorganiza-
tions are usually widely distributed and serve an important function,
they represent only one aspect of the Commission's activities in cases
in which it participates. As a party to a Chapter X proceeding,
the Commission is actively interested in the solution of every major
issue arising therein and has found that adequate performance of
132
its duties requires that it undertake in most cases intensive legal
and financial studies. Even in cases where the plans are not sub-
mitted to the Commission and no report is filed, it is necessary that
the Commission consider and discuss various reorganization proposals
of interested parties while plans are being formulated, and be pre-
pared to comment fully upon all plans that are the subject of hearings
for approval or confirmation.
In the exercise of its functions under Chapter X the Commission
has endeavored to assist the courts in achieving equitable, financially
sound, expeditious, and economical readjustments of the affairs of
corporations in financial distress. To aid in attaining these objec-
tives the Commission has stationed lawyers, accountants, and financial
analysts in its New York, Chicago, and San Francisco regional
offices who keep in close touch with all hearings and issues in the
proceedings and with the parties and are readily available to the
courts. Supervision and review of the regional offices' Chapter X
work is the responsibility of the Division of Corporate Regulation
of the Commission, which also handles the actual trial work in cases
arising in the Atlanta and Washington, D. C., regional areas.
SUMMARY OF ACTIVITIES
During the past fiscal year the Commission actively participated in

39 reorganization proceedings involving 58 companies (39 principal
debtor corporations and 19 subsidiaries of those debtors) .1 The stated
assets of the 58 companies involved in these proceedings totaled ap-
proximately $561,794,000 and their indebtedness totaled approxi-
mately $536,509,000. The proceedings were scattered among district
courts in 19 states. During the year the Commission entered its ap-
pearance in 9 new proceedings, which involved the rehabilitation of
companies engaged in such varied businesses as industrial loans, steel
manufacturing, horse racing, drugs, investments, oil and gas produc-
tion, and breweries. Proceedings involving 4 principal debtor cor-
porations were closed during the year. At the end of the fiscal year
the Commission was actively participating in 35 reorganization pro-
ceedings.
THE COMMISSION AS A PARTY TO PROCEEDINGS
The Commission has not considered it necessary or appropriate that

it participate in every Chapter X case. Apart from the fact that the
administrative burden of participating in everyone of the over 80
cases instituted during the fiscal year would be unsurmountable with
our present staff, many of the cases involve only trade or bank creditors
1 The appendix contains a complete list of reorganization proceedings in which the

~ommlsslon participated as a party during the fiscal year ended June 30. 1958.
and a few stockholders. As a general matter, the Commission has

sought to participate principally in those proceedings in which a sub-
stantial public investor interest is involved. This is not the only cri-
terion, however, and in some cases involving only limited public in-
vestor interest, the Commission has participated because an unfair
plan had been or was about to be proposed, the public security holders
were not adequately represented, the reorganization proceedings were
being conducted in violation of important provisions of the Act, other
facts indicated that the Commission could perform a useful service or
the judge requested the Commission to participate.
PROCEDURAL MATIERS
Usually the Commission does not enter a case until the court has
approved the petition for reorganization. However, developments
in a particular case may impel the Commission to move to appear as
soon as practicable, without awaiting approval of the petition. Dur-
ing 1958 there were a number of such cases.
An involuntary petition was filed by creditors in the United District
Court for the Southern District of California at Los Angeles for the
reorganization of the Equitable Plan Company," an industrial loan
company having approximately $10,000,000 in Thrift Certificates out-
standing. The affairs of the company had previously been taken over
by the California Commissioner of Corporations and were being ad-
ministered by a Conservator under the jurisdiction of the state court
pursuant to the provisions of the California Industrial Loan Company
Act. The State and the Conservator opposed the petition contending,
among other things, that the pending proceedings in the state court
provided adequate relief. The Commission filed its appearance and
urged that the District Court approve the petition because Chapter X
and the machinery available under the Bankruptcy Act provided su-
perior facilities for the administration of the assets, a large part of
which consisted of loans and receivables owed by non-residents of
California, and because Chapter X provides superior facilities for the
evolution of a plan of reorganization. On May 29, 1958, after ex-
tended hearings, the judge approved the petition.
Another case which required the Commission's participation prior
to approval of the petition for reorganization involved Magnolia Park,
Inc. 8 Magnolia is a race track operator which leases land upon which
its race track and improvements are located. The lease contained a
forfeiture clause which provided that upon default by Magnolia, title
to the race track and the improvements passed to the landlords.
When Magnolia was in arrears on its rent payments to the extent of
21n the Matter 0/ EquitabZe Plan 00., S. D. car., Ceo. Dlv .• No. 86,096--B. H.
31n the Matter 01 MagnoZia Park. Inc., E. D. La., New Orleans Dlv .• No. 9010.
about $35,000, the landlords attempted to evict Magnolia in the Louisi-
ana state court suit and thus obtain possession of Magnolia's property
which had cost over $2,000,000. However, a voluntary petition for
reorganization was filed under Chapter X and the District Court
issued an order restraining the proceedings in the state court. The
landlords objected to approval of the petition and hearings were held
before a Referee in Bankruptcy acting as Special Master. The Com-
mission participated in the hearings as the sole representative of the
substantial number of public security holders and filed a memorandum
supporting approval of the petition.
The Special Master in a report filed on January 17, 1958, recom-
mended that the petition be disapproved because it was not filed in
good faith in that it was unreasonable to expect that a fair and feasible
plan of reorganization could be effected within the framework of the
corporation itself. The Commission filed objections to the Special
Master's report and on February 12, 1958, participated in oral argu-
ment before the judge at which time the Commission pointed out that
good faith of a petition does not require the expectation of an internal
reorganization but that a merger, consolidation or an investment of
new capital from an outside source are other acceptable forms that a
reorganization can take. The judge denied a motion by the landlords
to adopt the report of the Special Master and instead followed the
Commission's advice and approved Magnolia's petition.' An appeal
by the landlords was pending in the United States Court of Appeals
for the Fifth Circuit at the close of the fiscal year,"
The Commission has at all times sought to be of assistance to the
disinterested trustee appointed by the district court in carrying out his
responsibilities and to make available to him the fund of experience
and information accumulated by the Commission through its partici-
pation in hundreds of cases. Throughout the proceedings the staff
consults with the trustee and his counsel as to the steps to be taken
in the reorganization, the timing of those steps and the appropriate
method of taking them. This often results in substantial savings of
time and expense to the estate. The Commission, however, has been
alert to protect against attempts at encroachments by parties or even
the trustee upon the orderly operation of the statute. Typical of the
Commission's approach is a situation which arose in the reorganization
proceedings involving General Stores Corporation."
• A similar problem existed In South Texas on and Gas Company-USDC, S. D., Tex.
No. 607, where the Commission took substantially the same position as In the Magnolia
ease. The judge followed the Commission's recommendation and denied the motions of the
secured creditors to discuss the debtor's petition.
"In re Magnolia Park Ino., No. 17,312.
'In the MlJtter 01 General Stores Oorp., S. D. N. Y., No. 90954. See Twenty-third Annual
Report, pp. 150-151.
After the reorganization trustee prepared a Section 16'7report and

transmitted it to the creditors and stockholders, the trustee received a
plan proposal from a substantial stockholder of the debtor. The major
secured creditor of the debtor, dissatisfied with the treatment which
the proposal provided, moved the district court to vacate the injunctive
provisions of the order approving the petition for reorganization in
order to allow him to sell securities pledged by General Stores under a
trust agreement as collateral to secure the debtor's obligations to him.
At about the same time questions had been raised with respect to the
secured creditor's handling of the collateral under the trust agree-
merit," The Commission opposed the secured creditor's motion to va-
cate the injunction and the judge entered an order denying the motion
on the ground that plan proceedings were pending and the application
was premature. In addition the district court entered an order re-
quiring that the secured creditor give the Reorganization- Trustee ten
days' notice of transactions not in the ordinary course of business
which involved substantial amounts of money and providing that
upon objection by the Reorganization Trustee the transaction would
not proceed without leave of the court.
The collateral trustee and the secured creditor appealed from both
orders. The Commission supported the district court's determina-
tions. The Court of Appeals in a per curiam opinion affirmed, hold-
ing that " . . . the petitioner's attempt to end the reorganization by
foreclosing the lien is premature. Until the district court has had
an opportunity to evaluate these assets, it can be in no position to
judge the propriety of any contemplated plan of reorganization."
As to the order respecting the conduct of the subsidiaries' business,
the Court of Appeals held that the district court had the power to
issue the order, stating that "The court simply took qualified posses-
sion of the stock pledged in order to preserve the debtor's possible
equity in it." s
TRUSTEE'S INVESTIGATIONS
One of the primary duties of the trustee is to make a thorough
study of the debtor to assure the discovery and collection of all assets
of the estate, including claims against directors, officers, or controlling
persons who may have mismanaged the company's affairs, diverted its
funds to their own use or benefit, or been guilty of other misconduct.
A complete accounting for the stewardship of corporate affairs by the
old management is a requisite under the Bankruptcy Act and Chapter
X. The staff of the Commission participates in the trustee's investi-
1 The collateral was all the stock of the debtor's subsidiaries, two drug chains in the
Chicago area the businesses of which under the trust agreement were in the control of the
secured creditor.
s RU8kin v. Griffiths, 250 F. 2d 875, 877 (C. A. 2, 1958).
gation so that it may be fully informed as to all details of the financial
history and business practice of the debtor. The Commission views
its duty under Chapter X as requiring it to call the attention of the
trustee, or the court if necessary, to any matters which should be acted
upon. Thus, during the course of the trustee's investigation in the
reorganization proceedings involving Automatic Washer Company,"
the staff of the Commission found that there had been certain insiders
who appeared to have profited from the purchase and sale of the stock
of the debtor which was listed on the Midwest Stock Exchange.
These transactions appeared to be subject to the provisions of Sec-
tion 16 (b) of the Securities Exchange Act of 1934 which provides
that under certain circumstances such profits of insiders shall inure to
the benefit of the corporation. This information was called to the at-
tention of the trustee. Thereafter the trustee filed civil actions
against these insiders seeking recovery of more than $1,500,000.
The trustee in the Automatic Washer proceedings in the District
Court for the District of Iowa after his investigation reported that
those who had been in control prior to his appointment had misman-
aged the debtor. Many of those persons subject to the charge of mis-
management were also stockholders of the debtor. In view of these
facts the Commission advised the trustee that it would not be equi-
table if the insiders were allowed to participate in the estate on a
ratable basis with public stockholders, and that the stock of insiders
guilty of mismanagement should therefore be subordinated or dis-
allowed. To prevent the stock of those insiders from being sold be-
fore appropriate action could be taken by the court, the Commission
filed a motion to enjoin all of these insiders from selling or trans-
ferring their stock. The court granted the motion, thus halting
transfers of approximately one half of the 2,000,000 outstanding
shares of the debtor's stock. Shortly thereafter the trustee filed a
motion to subordinate or disallow the stock of these insiders. This
motion was pending at the close of the fiscal year.
PROBLEMS REGARDING PROTECTIVE COMMITTEES
The Commission has constantly been alert to insist upon the hon-
esty of fiduciaries in their relationship to the estate and to investors,
and has always sought to disqualify security holder committees sub-
ject to a conflict of interest from acting in Chapter X proceedings.
During 1958 in the Automatic Washer Oompany proceedings the
Commission moved to disqualify a committee attempting to represent
stockholders, because the committee members were almost wholly
former insiders of the debtor who had been charged by the trustee
• In the Matter of Autom.atic W(J8her Oompany, s. D. Iowa, Cen. D1v., No. 5--426.
with mismanagement. The court granted the motion of the

Commission.
The Commission scrutinizes material mailed out to security holders
by other security holders, their representatives and other persons, and,
where such material appears to be misleading, undertakes to obtain
curative and preventive relief. In the Stardust case 10 the Commis-
sion obtained an order to show cause why a security holder of the
debtor should not be required to distribute a communication retract-
ing misleading statements sent out in a general communication to
stockholders. The district court required that this be done and en-
joined him from sending further misleading communications.
In the Selected Investments Oorporation. proceedings," pending in
the United States District Court for the Western District of Okla-
homa, the Commission brought information to the attention of the
court which indicated that two committees, both of which were in the
process of being formed, had mailed soliciting material containing
misleading information to 10,000 security holders of the debtor. The
court enjoined further solicitation of authorizations pending com-
pliance with the provisions of Chapter X governing the formation of
committees and caused the committees to retract or clarify their previ-
ous statements. In addition, one of the committees had solicited contri-
butions from individual security holders for representing them. The
Commission urged, the court to order that the money collected be re-
turned and that future collections be enjoined on the ground that the
solicitation of :funds violated the spirit of committee representation
since the committee had a duty to represent all security holders and
not only those making contributions. Moreover, since the monies had
been solicited for the purpose of paying a fee to an attorney, the solici-
tation infringed on the reorganization court's discretion to allow rea-
sonable compensation for services and reimbursement for costs and
expenses incurred by the committee and its attorney. The judge
ordered the committee to return the monies to the contributors.
ACTIVITIES WIm REGARD TO AUOW ANCES
Every reorganization case ultimately presents the difficult problem
of determining the allowance of compensation to be paid out of the
debtor's estate to the various parties for services rendered and ex-
penses incurred in the proceeding. The Commission, which under
Section 242 of the Bankruptcy Act may not receive any allowance
from the estate for the services it renders, has sought to assist the
courts in protecting reorganized companies from excessive charges and
at the same time equitably allocating compensation on the basis of the
,. In the Matter 01 Stardust, Ine., D. Nev. No. 955 (September 16, 1957).
11 In the Matter 01 Selected Investments Trust Fund and Se"teotedInvl/stments Oorpora-
tion, W. D. Okla •• No. 10680.
TVVENTY-FOURTH ~AL REPORT 139
claimants' contribution to the administration of the estate and. the
formulation of a plan.
During the fiscal year important determinations respecting the
granting or withholding of allowances were made by the District
Court for the Southern District of N ew York in the reorganization
proceedings involving Third Avenue Transit Corporation.> During
the course of the proceedings an attorney for a committee of bond-
holders pledged with a bank as-collateral for a loan $25,000 of bonds
of the same class as represented by his committee, together with other
securities. Approximately eight months later when the market value
of the collateral, including the $25,000 of Third Avenue bonds, had
declined, the bank communicated with the attorney and advised that
some steps would be required to rectify the situation. The attorney
directed his broker to sell the Third Avenue bonds. The bonds were
released from the collateral to effect the transaction and substantially
all of the proceeds of the sale were used to reduce the loan. When the
attorney applied to the court for an allowance, the Commission urged
. that the transaction constituted a sale of securities by the attorney
within the contemplation of Section 249 of the Bankruptcy Act, thus
disqualifying him from receiving a fee. It was noted that there were
other substantial securities in the collateral account which could. have
been sold in order to correct the situation without necessitating the
sale of the Third A venue bonds. The district court held that the at-
torney was disqualified from receiving a fee, notwithstanding the fact
that both the Commission and the court recognized that substantial
services had been rendered."
In another phase of the same proceeding it developed that the wife
of co-counsel for a committee had during the course of the proceed-
ing sold $5,000 of Third Avenue Bonds of the same class represented
by the committee. It was cleaa- that the attorney had knowledge of
the transaction by his wife and had in fact participated in its me-
chanics, and benefitted thereby through the filing of a joint tax return
with his wife. The Commission advised the court that Section 249
of the Act barred compensation to an attorney where a sale of se-
curities was made by his wife with his knowledge and to his benefit.
The Commission relied upon cases in the Court of Appeals for the
First and Fourth Circuits," The district court disagreed with the
Commission, feeling constrained by certain decisions of the Court of
Appeals for the Second Circuit which the Commission had contended
were distinguishable on their facts.
urn tM Matter 01 Third Avenue Transit oors., S. D. N. Y., NOB.85851, 86410, 86413,
86412, 86537.
urn the Matter a! Third Avenue Tranait aorp.,15~F. Snpp. 440 (1~5S).
"SEO v. Dumaine, 218 F. 2d 380, 315 (C. A. 1, 1~54) ; In re Central States Electrlc
Oorp., 206 F. 2d 70,71 (C. A. 4, 1953).
Yet another determination of significance was made in connection

with the allowances in the Third Avenue proceeding. This involved
the court's power to review arrangements for allocations of fees made
among attorney applicants. The Commission urged that the broad
powers to supervise allowances granted by the Bankruptcy Act in-
cluded the power to review allocations of fees in appropriate cir-
cumstances in order to prevent an attorney from receiving excessive
or inadequate compensation. The Commission relied upon Canon 34
of the Canons of Professional Ethics, which provides in substance
that allocation of fees by attorneys shall be based on a division of
service or responsibility, and Section 62 (c) of the Bankruptcy Act
which prohibits the sharing of compensation "for ... services with
any person not contributing thereto . . . " The district court agreed.
It found that in the particular instance the parties had agreed that
their arrangement for equal division of compensation was based upon
a contemplated equal contribution of services and that it would be
subject to court approval. The court held that even in the absence
of such agreement "The broad supervisory powers accorded the court
under those provisions [Sections 241-250 of The Bankruptcy Act]
necessarily include the power to disregard the terms of attorneys'
agreements which are contrary to the terms and policy of the Act." 15
Respecting Section 62 (c) of the Bankruptcy Act the court held that
"It would be a clear evasion of the intent of this section if the court
were to sanction a fee-sharing arrangement whereby an attorney
having performed some service, received an allowance far in excess
of that to which his contribution to the estate entitled him." 16
As to still another request for compensation, the court followed the
Commission's recommendation in denying an application by a poten-
tial underwriter of an unsuccessful plan of reorganization. The
Court expressed serious doubt as to whether the allowance provisions
of Chapter X were intended to cover as a possible applicant one
"whose interest in the debtor was solely to obtain the profits from
underwriting a plan of reorganization." 17 Even assuming that the
applicant did qualify as "a party in interest", the district court found
that there was no basis for a finding that any of the services rendered
contributed to a plan approved by the judge. .
As for the allowances generally, the Commission had recommended
an aggregate of approximately $1,818,000. The court found that the
reorganized company could afford to and should pay allowances ap-
proximately $250,000 greater than the aggregate recommended by
the Commission. In making the individual awards, the district court
1G In the Matter of Third Avenue 'I'raneit Corporation, - F. SUPp. - (S. D. N. Y.,
1958). CCH paragraph 59,259, page 65,873.
1. Ibid., p, 65,874.
17 Ibid., p. 65,882.
substantially increased the allowances recommended to certain appli-
cants, reduced somewhat certain of the recommendations and left
the balance unchanged." Several petitions for leave to appeal have
been filed in the United States Court of Appeal for the Second Circuit
and the matters were pending at the close of the fiscal year.19 The
Commission has taken the position that certain of these petitions
should be granted and that it would not oppose the granting of the
other petitions.
ADVISORY REPORTS ON PLANS OF REORGANIZATION
An advisory report of the Commission provides the district court

with an expert independent appraisal of a plan indicating the extent
to which, in the opinion of the Commission, the plan meets or fails
to meet the standards of fairness and feasibility. After the report is
filed, the judge considers whether the plan should be approved or dis-
approved. If the judge approves the plan, it is sent to the affected
security holders for acceptance or rejection accompanied by a copy
of the judge's opinion and a copy or summary of the report of the
Commission.
Since 1938 the Commission has issued 38 advisory reports and 36
supplemental advisory reports. They represent the principal means
by which the Commission has recorded its views publicly. Generally
speaking, an advisory report is prepared only in a case involving a
large public investor interest and in which significant problems exist.
However, there have been occasions where even though a case is of
significant size and importance, because of the exigencies of time or
for other reasons, no written report has been filed but instead, Com-
mission counsel has made a detailed oral presentation of the Com-
mission's views and the reasons therefor. Customarily, in the smaller
cases the Commission's views are presented orally by counsel.
An example of a case in which the Commission participated during
1958 where the Commission's views were presented orally instead of
by written report was the reorganization proceeding involving Star-
,. In commenting upon the role of the Commission in the allowance proceeding and in the
proceeding generally, the court stated:
"Though I have been forced to dl1l'er from the recommendations of the SEC in
many of the instances, I wish to pay tribute to the careful and helpful analysis that
the Commission made of the claims. Indeed, I take this opportunity to express my
gratitude for the active and intimate participation of the Commission and its counsel
in the reorganization proceedings. If any proof were needed of the wisdom of Con-
gress in providing for representation of the pubIlc by the Securities and Exchange
Commission in reorganization proceedings, it has been furnished in this case. I
would have felt helpless without the aid given, unstintingly by . . . counsel for the
Commission. Each has cheerfully rendered, at the usual modest salary of a public
servant, services equal in value to those of any to whom awards are made by this
decision." In the Matter of Third Avenue Tran8it Corporation - F. SuPP. -
(S. D. N. Y. 1958).
" In the Matter of Third Avenue Tratl8it Oorporaium, Nos. 85851, 85410, 86413, 86412,
86537. Consolidated.
dust, Inc. in the United States District Court for Nevada. In that
case the Commission reviewed five proposed plans of reorganization
and offered comments and criticisms to the court. The Commission
contended that an essential element of feasibility in a plan of re-
organization which contemplates the purchase of all the debtor's
assets or the investment of new capital in the debtor is the firm assur-
ance that the money will be forthcoming when the plan is consum-
mated. The Commission recommended that before any plan was ap-
proved by the judge the plans should be amended to make provision
for a substantial deposit by proponent of the plan, forfeitable if the
plan was confirmed and the new money was not paid. Only one
plan with firm provisions for the new financing was forthcoming.
It was approved by the judge and after acceptance by the creditors
and the preferred stockholders of the debtor was confirmed.
During the fiscal year the Commission submitted formal advisory
reports in two proceedings. .A brief summary of these proceedings
follows:
Northeastern Steel Corporation-The debtor was a non-integrated
steel producer with its plant located in Bridgeport, Connecticut.
Since it commenced operations in 1955 the company had had sub-
stantial losses. .At the time of filing a voluntary petition for re-
organization in the United States District Court for the District of
Connecticut, the company's working capital was less than the amount
required by its first mortgage indenture and the company had failed
to pay the interest due on its first mortgage bonds. Operations were
continued by the trustees after their appointment in the belief that
maximum realization would come only by continued operation and
that cessation would result in a loss of the labor force and generally
in greater depreciation of the assets.
The plan of reorganization proposed by the trustees was based on an
offer by Carpenter Steel Company, a New Jersey corporation which
manufactures specialty steel products. In general, the plan provided
for the recapitalization of Northeastern so that it would still have
outstanding $6,000,000 principal amount of First Mortgage Bonds
with defaults cured and 1,000,000 shares of new common stock. The
1,000,000 shares of stock were to be issued to Carpenter in exchange for
not less than 40,000 shares of Carpenter's own common stock, the
specific number to be determined by formula. The Carpenter stock
was to 'be distributed, also on the basis of a formula, to a bank holding
a claim of $250,000, to holders of general unsecured claims, and to
debenture holders, in satisfaction of their claims. To the extent cash
was available after satisfaction of prior claims, it was to be used to
discharge a note held by the bank. The plan did not provide for the
participation by stockholders, warrant holders or option holders.
The Commission's report concluded that the plan or reorganization
was unfair in that the formula for determining the allocation of the
Carpenter stock was discriminatory and the stock did not represent
fair compensation for the interest in the assets and facilities being
acquired by Carpenter." However, the Commission considered the
exclusion of stockholders, warrant holders and option holders from
participation to be fair since the indicated value of the debtor was
less than the full claim of the creditors. The Commission's report
further concluded the plan was feasible in view of Carpenter's debt-
free capitalization and working capital position. The plan was
amended to eliminate the discriminatory formula, but not to increase
the amount of Carpenter stock to be issued to the trustees. As thus
amended, the plan was approved by the court.
Inland Gas Corp., Kentucky Fuel Gas Corp., and American Fuel
& Power Co.21-Inland Gas Corporation, which was in equity receiv-
ership from 1930 to 1935 and has been in reorganization under Section
77B and Chapter X since 1935, produces, transmits, and sells natural
gas principally to industrial customers in Kentucky.
The plan of reorganization proposed by the Trustees of Inland
Gas Corporation and its non-operating parents, Kentucky Fuel Gas
Corporation and American Fuel & Power Company, provided for pay-
ment in cash of all priority and administrative claims and of the
claims to principal and full interest of public creditors of American
Fuel & Power Company. The Trustees' plan further provided for
payment in cash to the public holders of Kentucky Fuel bonds and
debentures of principal, but not of interest except for a single interest
coupon on the debentures which was in default prior to receivership.
The plan also provided for the reorganized company to borrow an
estimated $4,000,000 from a bank and to use the proceeds for payment
of a portion of the claims of the public creditors. All the new com-
mon stock of the reorganized company was to be issued to The C0-
lumbia Gas System, Inc., as holder of subordinated claims against
Inland.
The Commission's Third Advisory Report concluded that the Trus-
tees' Plan was fair to the public creditors of American Fuel in accord-
ing them the full amount of their claims including interest;" How-
ever, the Commission considered the plan to be unfair to the public
holders of Kentucky Fuel bonds and debentures because the plan gave
no recognition to the interest which accrued on their claims between
December 1, 1930, when the equity receivership proceeding com-
110Corporate Reorganization Release No. 101. August 26, 1957.
Sl See the Twenty-FIrst Annual Report. pp. 174-175, and the Twenty-Third Annual
Report, p. 155.
.. Corporate Reorganization Release No. 109, May 1, 1958.
menced, and October 15, 1935, when the bankruptcy proceeding was
instituted; and because the plan would give compensation to Columbia
for post-bankruptcy interest on the subordinated claims of Columbia
before post-bankruptcy interest was paid on the publicly held claims
against Kentucky Fuel.
The Commission concluded that the plan was feasible but pointed
out that if the plan was amended to make it fair, in accordance with
the principles enunciated in the Report, the proposed capital struc-
ture of the reorganized company would have to be further modified
to make the plan feasible.
The district judge did not accept the Commission's conclusion and
approved the plan. Several appeals from the judge's ruling were
pending in the United States Court of Appeals for the Sixth Circuit
at the close of the fiscal year.23
23 In the Matter of Inland Ga8 Oorporatton, Kentucky Fuel Gas Corporation, American
Fltel d' Power Company, Nos. 13,657-13,664.
PART VIII
ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939
The Trust Indenture Act of 1939 requires that bonds, notes, de-
bentures and similar securities publicly offered for sale, except as
specifically exempted by the Act, be issued under an indenture which
meets the requirements of the Act and has been duly qualified with the
Commission. The Act requires that indentures to be qualified include
specified provisions which provide means by which the rights of hold-
ers of securities issued under such indentures may be protected and
enforced. These provisions relate to designated standards of eligi-
bility and qualification of the corporate trustee to provide reasonable
financial responsibility and to minimize conflicting interests. The
Act outlaws exculpatory provisions formerly used to eliminate all lia-
bility of the indenture trustee and imposes on the trustee, after de-
fault, the duty to use the same degree of care and skill "in the exercise
of the rights and powers invested in it by the indenture" as a prudent
man would use in the conduct of his own affairs.
The provisions of the Trust Indenture Act are closely integrated
with the requirements of the Securities Act. Registration pursuant
to the Securities Act of securities to be issued under a trust indenture
subject to the Trust Indenture Act is not permitted to become effective
unless the indenture conforms to the requirements of the latter Act,
and necessary information as to the trustee and the indenture must be
contained in the registration statement. In the case of securities is-
sued in exchange for other securities of the same issuer and securities
issued under a plan approved by a court or other proper authority
which, although exempted from the registration requirements of
the Securities Act, are not exempted from the requirements of the
Trust Indenture Act, the obligor must file an application for the
qualification of the indenture, including a statement of the required
information concerning the eligibility and qualification of the trustee.
Indentures filed under the Trust Indenture Act of 1939 during the fiscal year ended
June 30, 1958
Number Aggregate
ofmden- dollar amount
tures
Indentures pending June 30,1957- ______ - - - -- - - - - - - - - - - - - - ~

- - - -- -- -- - - - - --- -- 17 $386, 420, 000
Indentures filed during fiscal year __- --- ------------------------------------- 252 7,066,157,386
TotaL ____________________
-. --- -- -- -- - --- - - -- - -- -- .-- - -- --. -- ---- - - -- --- 269 7,452, 577,386
Dls~~~~~~:_~al~~-:~~~------ _________. ____. _____. ___________

' _________ 237 6,413,997,586
Indentures deleted by amendment or withdrawn. ___---------- .. ----.---- 2 36,315,200
Indentures pending June 30,1958 _____________________________________. ____ 30 1,002,264,600
Total _____-
. ____-- - -- - -- -. - -- - -. - -- -. -' ---- - -- - - -. - -- -- -- -- - -- -- -- - -- -- - 269 7,452.577,386
486867-59-11 145
PART IX
ADMINISTRATION OF THE INVESTMENT COMPANY

ACT OF 1940
The Investment Company Act of 1940provides for the registration
and regulation of companies engaged primarily in the business of in-
vesting, reinvesting, holding and trading in securities. The Act re-
quires, among other things, disclosure of the finances and investment
policies of these companies, prohibits such companies from changing
the nature of their business or their investment policies without the
approval of their stockholders, regulates the means of custody of the
companies' assets, prohibits underwriters, investment bankers and
brokers from constituting more than a minority of the directors of
such companies, requires management contracts to be submitted to
security holders for their approval, prohibits transactions between
such companies and their officers, directors and affiliates except with
the approval of the Commission and regulates the issuance of senior
securities. The Act requires face-amount certificate companies to
maintain reserves adequate to meet maturity payments upon their
certificates.
The securities of investment companies which are offered to the
public are also required to be registered under the Securities Act,
and the companies must file periodic reports. Such companies are
also subject to the Commission's "proxy" and "insider" trading rules.
The Division of Corporation Finance and the Division of Corporate
Regulation both assist the Commission in the administration of the
statute, the former being concerned with the disclosure provisions
and the latter with the regulatory provisions.
COMPANIES REGISTERED UNDER THE Ac.r
As of June 30, 1958, there were 453 investment companies registered
under the Act, and it is estimated that on that date the aggregate mar-
ket value of their assets was $17 billion. These figures represent an
increase of 21 registered companies and an increase of roughly
$2 billion in the market value of assets over the corresponding totals
at June 30, 1957. These companies were classified as follows:
~anagernent open-end 238
~anagernent closed-end 111
Unit investment trusL_________________________________________________ 92
Face-amount certificate_________________________________________________ 12
Total____________________________________________________________ 453
146
NEW COMPANIES REGISTERED AND REGISTRATIONS TERMINATED
During the fiscal year ending June 30, 1958,42 new companies regis-
tered under the Act while the registrations of 21 companies were
terminated. These companies were classified as follows:
Reglstra-
Registered tton ter-
during the mlnated
fiscal year durmgthe
fiscal year
Management open-end __________________________________________________________

Management closed-end _________________________________________________________ 20 11
4
10
Unit investment trust, -_____- -_- ___- -- _____- _______-______- -_______
certificate companles
- ____________
_______________________________________________ 11 6
Faee-amount 0 1
TotaL_. ___________________________________________________________________ 42 21
Of the 42 new registrations, three were deregistered during the year.

All of the unit investment trusts registered were organized to furnish
periodic payment plans for the accumulation of shares of open-end
.funds.
GROWTH OF INVESTMENT COMPANY ASSETS
The striking growth of investment company assets during the past

seventeen years, particularly in the most recent years, is shown in the
following table:
Number at
investment companies registered under the Investment Company
Act and the eetimated. aggregate assets at the end of each fiscaZ year, 1941
through 1958
Number of companies Estimated

aggregate
market value
FIscal year ended June 30 Registered Registered Regtstra- Registered of assets at
at begtn- during non terml- at end of end of year
Ding of year nated dur- year (in millions)
year ingyear
1941___________________________________ 436
1942___________________________________ 0 450 14 $2,500
1943 ___________________________________ 436 17 46 407 2,400
1944___________________________________ 407 14 31 390 2,300
390 8 27 371 2,200
1945___________________________________ 3,250
371 14 19 366
1946 __• _________________• ______________ 13 18 361 3,750
1947 ________________ • __________________ 366
1948 _____ • _____________________________ 361 12 21 352 3,600
352 18 11 359 3,825
1949 ____ • ______________________________ 13 358 3,700
359 12
1950_. _____~__________• __________• _____ 26 18 366 4,700
1951 ____________________ • ______________ 358
366 12 10 368 0,600
1952 ___________________________________ -368 13 14 367 6,800
1953 __• ________________________________ 7,000
367 17 15 369
1954 ___________________________________ 20 0 384 8,700
369
1955 _____________________ • __________• __ 37 34 387 12,000
1956 ___________________________________ 384
387 46 34 399 14, 000
1957 ___________________________________ 432 15,000
399 49 16
1958___________________________________ 432 42 21 453 17,000
TotaL ___________________________ 820 367 ------------ ----- ----------
------------
STUDY OF SIZE OF INVESTMENT COMPANIES
In the preceding fiscal year the Commission pursuant to section

14 (b) of the Investment Company Act instituted an inquiry into the
problems created by the growth in size of investment companies and,

as part of this inquiry, received a preliminary report containing a
general research plan for the study of the effects of investment com-
pany growth (23rd Annual Report, p. 159). In furtherance of this
study the Commission in the past fiscal year retained the Securities
Research Unit of the Wharton School of Finance and Commerce,
University of Pennsylvania, to make a fact-finding survey and report
on certain aspects and practices of registered investment companies.
This survey is under the supervision of Dean Willis J. Winn of the
Wharton SchooP
The general problems which will be examined are: (a) The man-
ner and extent to which investment policies may be affected by the
size of investment companies; (b) the relationship between the size
of investment companies on the one hand and the character of man-
agement, cost of operation, and performance of investment companies
on the other; (c) the relationship between the size of the investment
companies and the manner in which blocks of securities are pur-
chased and sold and the effects of such purchase and sales on the
security markets and the marketing channels for securities; and (d)
the extent to which large companies control or influence the policies
and decisions of portfolio companies. The immediate inquiry of
the study will be primarily directed to the question of the effects
of size on investment policies and comparative performance of in-
vestment companies, although other aspects of the inquiry will be
developed to the extent possible.
It is expected that the report of the Wharton School will enable the
Commission to determine whether the increased size of investment
companies has created any problems which require specific remedial
legislative recommendations by the Commission to the Congress.
INSPECTION PROGRAM
As indicated in the 23rd Annual Report, the Commission has initia-

ted a regular program for the periodic inspection of investment com-
panies pursuant to its statutory authority under section 31 of the
Investment Company Act. In pilot operations under this program,
nine companies were inspected during fiscal year 1957,2and seven in
fiscal year 1958. These inspections were undertaken by staff teams
consisting of one attorney or analyst from the Division of Corporate
Regulation and one securities investigator from the appropriate field
office. In this way, the specialized training and knowledge of the
1 The Wharton School will limit the scope and manner of conducting the study to accord
with the Commission's determinations with respect thereto. A preliminary questionnaire
has been prepared by the staff of the Wharton School and has been transmitted to selected
investment companies for test checking.
2 At page 160 of the 23rd Annual Report It was erroneously stated that only six Inspec-
tions were completed in tlscal year 1957.
TWENTY-FOUR'l'H ANNUAL REPORT 149
staff concerning the regulatory requirements of the Investment Com-
pany Act has been combined with the field experience and investiga-
tive expertness of field office personnel for more expeditious and
thorough review of the investment company.
These inspections, although involving only a very small fraction
of the total number of registered investment companies, have revealed
the need for continuous field supervision. The Commission's studies
ascertained that in several cases there was non-compliance with regu-
latory provisions of the Investment Company Act with respect to such
matters as (1) the affiliations of directors in violation of section 10
of the Act; (2) security purchases by registered investment company
during an underwriting where an affiliate relationship exists between
the underwriter of such security and the company in violation of sec-
tion 10 (f) of the Act; (3) receipt of a commission for the sale of
property by an affiliated person contrary to section 17 (e) of the Act;
and (4) the failure to file an appropriate fidelity bond covering an
officer having access to portfolio securities pursuant to the require-
ments of rules under section 17 (g) of the Act.
In addition to non-compliance with various regulations and stand-
ards under the Act, some situations where books and records were
inadequate or lacking were noted by the staff. Thus, there were in-
stances where a company failed to record the date and time of requests
for redemption which resulted in an inability to determine whether the
investors had received their correct net asset value. In other instances
a company failed to maintain journals reflecting purchases and sales
of securities, to maintain ledger accounts for broker-dealers used by
the company for its portfolio security transactions and to keep proper
vouchers for out-of-pocket expenses. In one case, an inspection re-
vealed that the custodian did not adhere to the terms of the custodian-
ship agreement and that there was a failure to comply with the
Commission's regulations regarding the safekeeping of portfolio
securities.
In several cases the staff observed that there was considerable delay
by dealers selling investment company shares in the transmission of
funds received by them to the investment companies or their custo-
dians. It also creates a risk for the purchasers who have paid dealers
for their shares but to whom shares of stock are not delivered until
funds are actually received by the companies. This practice is un-
desirable because investment companies are deprived of the use of
such funds even though the sales of securities have already been
recorded on the books of the companies.
During the course of one inspection, in examining certain trans-
actions of the investment company, the staff discovered the existence
of another investment company which had not registered under the
Act. As a result of further inquiry, this company was compelled to

register.
In cases where deficiencies are noted, they are brought to the atten-
tion of the investment companies involved so that corrective action
may be taken. The Commission's experience to date indicates that
this aspect of the inspection program will prove to be particularly
helpful to the newly organized or the smaller investment company,
and of benefit to the investing public.
CURRENT INFORMATION
The basic information contained in notifications of registration and
in registration statements of investment companies ds required by
rules promulgated under the Act to be kept up-to-date, except rID
cases of certadn inactive unit trusts and face-amount companies.
During the 1958 fiscal year the ~dllowing current reports and docu-
ments were filed :
~ualreports_______________________________________________________ 305
Quarterly reports____________________________________________________ 163
Periodic reports to stockholders (containing financial statements)_______ 887
Copies of sales literature 2,416
While not reflected in the foregoing statistics, dn the course of every

fiscal year, open-end mutual funds making a continuous offering of
their securities make frequent filings of revised prospectuses showing
material changes which have occurred in the operations of such com-
panies since the effective date of the prospectuses on file. In this
respect the registration of the securities of such companies is essen-
tially different from the registration of the usual corporate securities.
APPLICATIONS AND PROCEEDINGS

Processing applications for exemptions constitutes one of the prin-
cipal regulatory activities of the Commission under the Act. Under
Section 6 (c) the Commission is empowered, either upon its own
motion or by order upon application, to exempt any person, security
or transaction from any provision of the Act ii and to the extent
such exemption is necessary or appropriate in the public dnterest and
consistent with the protection of investors and the purposes faJirly
intended by the policy and provisions of the Act. Various other
sections, such as 6 (d), 9 (b), 10 (f), 11 (a), 17 (b), and 23 (c) con-
tain specific provisions and standards pursuant to which the Commis-
sion may grant exemptions from particular sections of the Act or may
approve certain types of transactions. Under certain provisions of
Sections 2, 3 and 8 the Commission may also determine the status of
persons and companies under the Act.
During the 1958 fiscal year 159 applications on various matters
under the Act were pending before the Commission. Of these, 115
were disposed of leaving 44 pending on Jnne 30, 1958. The various
sections of the Act with which these applications were concerned
and their disposition during the fiscal year are shown in the following
table:
Applications filed with and acted upon by the Commission under the Investment
Company Ad of 1940 during the fiscal year ended June 30, 1958
Pending Pending
Sections Subject in volved July I, Filed Closed June 30,
1957 1958
3 and/or 6______ Status and Exemption" _______________________

--- --- ---
8 13 17 4
87 ~d)-----------
0-- _________ Registration of foreign investment compantes, 1 2 1 2
TerminatIon of reglstration _____________ - ______ 23 18 21 20
10, 16__________Regulation of affiliations of director:', officers, 2 25 24 3
employees, investment advisers, under-
11_____________ writers and others.
Regulation of security exchange offers and re- O 1 1 0
organization matters.
12,15 __________Regulation of functions and activities of in- 0 10 9 1
vestment
17_____________Regulation of eompames.
transactions with affiliated per- 8 15 15 8
sons.
18,22,23 _______ Requlrements as to capital structures, loans, 5 24 24 5
secunty sales and redemptions, and related
28 _____________ matters.
Regulation of face-amount certificate com- 1 1 1 1
panles,
32 _____________ Accountmg supervision ________-___-- -- -- -- -- 0 2 2 0
Totals ___ --- ---115 ---44
---- -- --- - - -- --- - - -- ------ - -- - - - - - - - - - - - - - - - - - - 48 111
"Includes only those section 6 (c) cases in which exemption is requested from'l:u(provislons of the Act
Applications for exemption or exception from the various provisions

of the Act and other proceedings for relief are for the most part
processed without the aid of formal hearings. In the past year, how-
ever, hearings were held in 9 cases. Four of these involved exemp-
tions from the Act pursuant to section 6 (C); 3 two involved excep-
tions under section 3 (b) (2); 4 one involved a deregistration order
pursuant to section 8 (f) ; 5 one involved an order under section 'l (d)
permitting a foreign company to register under the Act; 6 and one,
instituted by the Commission pursuant to section 35 (d) of the Act,
involved the use of a name," In two of these cases the applicants
requested in the alternative general exemptions from all the provi-
sions of the A.ct pursuant to sections 6 (c) or 6 (d). Six of the cases
are described below.
~Insu,..ed Accounts Fund, Investment Company Act Release No. 2539 (May 27, 1957) ;
Ira Haupt ef 00., Investment Company Act Release No. 2559 (July 17, 1957) ; Dow Theory
Investment Fund, Ine., Investment Company Act Release No. 2627 (Nov. 14, 1957);
Inter-Oanadian Oorp. (Name changed to Great Northern Inoestmente, Inc.), Investment
Company Act Release No. 2735 (June 25,1958).
'National Department Stores, Investment Company Act Release No. 2708 (April 30,
1958) and McPhail Oandy ooro., Investment Company Act Release No. 2644 (Dec. 18,
1957) •
• The Great American Life Underwriter8, tne., Investment Company Act Release Nos.
2542 (June 10, 1957), 2561 (July 22, 1957), and 2607 (Sept. 27, 1957) .
• American-South African Investment' Oompany, Ltd., Investment Company Act Release
No. 2739 (.JUly 3,1958).
'Oivil ef Military Investors Mutual Fund, Inc., Investment Company Act Release No.
2593 (Sept. 9, 1957).
In Dow Theory Investment Fund, Inc., the applicant was granted

an order exempting it from the requirements of section 22 (d) of the
Act so as to permit it to continue to sell redeemable securities to
existing subscribers under an accumulation plan at a price including
a sales load of 5%, which was at variance with a 71;2% sales load
proposed to be charged to new shareholders. In a divided opinion,
the Commission pointed out that its decision to grant the application
was based on the specific facts in the case and that the type of ex-
emption granted would at most have only a very limited application
in other situations. It declared that the decision "is not intended as
an adoption of a general policy of approving differing sales loads
based on differences in selling costs, or to restrict our discretion to
further define or revise our policy concerning exemptions from section
22 (d) if our continuing study should indicate that to be necessary." 8
In Insured Accounts Fund,9 the Commission denied an application
for an exemption pursuant to section 6 (c) from the requirements
of sections 16 (a) and 18 (i) of the Act. Section 16 (a) provides that
the directors (defined by section 2 (a) (12) of the Act to include
trustees) of a registered investment company be elected by the holders
of the outstanding voting securities, and section 18 (i) provides that
every share of stock issued by a registered management company
shall be a voting stock having equal voting rights with every other
outstanding voting stock.
The Company proposed to invest 80% of its funds in insured ac-
counts of savings and loan institutions and its remaining assets in
federally insured bank accounts, government securities, and cash. To
have the benefit of this insurance to the extent contemplated, appli-
cant represented that its trust form of organization was necessary
and that to grant its security holders voting rights would destroy its
status as a trust for this purpose. It further contended that there
was no need for the control over the trustees which would flow from
voting rights since their discretion was limited to investments among
insured institutions.
The Commission refused to grant the exemption, stating that it
would be inconsistent with the policy of the Act that the owners of
investment companies have the power to elect the management to the
end that such companies are operated in the investors' interests and
not in the interests of other persons. The Commission found that the
discretion to invest among various savings and loan companies with
differing risk factors and earnings was an important area of man-
agement discretion. The Commission further found that since sub-
8 Investment Company Act Release No. 2694 (April 14, 1958). Subsequently the com-
pany decided not to avail Itself of the exemptIon.
• Investment Company Act Release No. 2630 (November 22, 1957).
stantially all such investments would be made in savings and loan
institutions which were members of the organization which promoted
the investment company, there would be a potential conflict of interest
between the management and investors.
In Ira Haupt &: 00., the applicant as sponsor and depositor of a
unit investment trust, requested an exemption from sections 2 (a) (3),
4 (2) and 22 (e) of the Act to the extent that those sections require
the securities issued by a unit trust to be redeemable either by the
trust or its agent. Upon the conclusion of the hearings on the appli-
cation which were held during the fiscal year, the applicant requested
that the matter be temporarily held in abeyance and the case has
therefore not yet come before the Commission for disposition."
Great Northern Investments, Imo, (formerly Inter-Canadian Cor-
poration), a closed-end investment company, filed an application pur-
suant to section 6 (c) to permit it to acquire all the voting stock of
Northwestern Fire and Marine Insurance Company and to finance
such acquisition by the issuance of up to $3,200,000 of bank notes.
The stock was to be acquired pursuant to a general offer to North-
western's stockholders at a price of $41 per share. It was contem-
plated that after the acquisition Northwestern would be caused to be
liquidated promptly. The exemption was required because section
12 (d) (2) makes it unlawful for a registered investment company
to acquire more than 10% of the total outstanding voting stock of
an insurance company and section 18 (a) (1) makes it unlawful for
a registered closed-end investment company to issue debt obligations,
with certain exceptions, unless the asset coverage for the debt im-
mediately after such issuance is equal to at least 300%, and Great
Northern's assets could not meet this 300% test after it borrowed
$3,200,000. In addition, since the proposal also involved transactions
between affiliates an exemption from the provisions of section 17 (a)
pursuant to section 17 (b) was requested. The Commission granted
the requested exemption," finding among other things that the pur-
pose of the acquisition of the insurance company's stock was to obtain
. the assets of a corporation to be liquidated and not to control a going
insurance company, and that the asset coverage requirements of the
Act would be complied with through repayment of the note as a result
of the liquidation of Northwestern, or the distribution by it of sub-
stantial dividends. It also found that the transactions between
affiliates were fair and reasonable and involved no overreaching."
10 Investment Company Act, File No. 812-1091.

11 Investment Company Act Release No. 2751 (JUly 28,1958).
12 Notice of appeal from tbe Commission's order was filed In tbe United States Court of
Appeals for the Eighth Circuit on August 16, 1958, by an insurance company stockholder
who had opposed the application but was subsequently withdrawn by the appellant.
Schmit v. S. E. 0., Civil No. 16072.
In The Great American Life Underwriters, Ino., applicant, a regis-

tered face-amount certificate company, sought an order pursuant to
section 6 (c) of the Act exempting it from the Act from and after
January 1, 1941. In the alternative, it requested an order pursuant
to sections 8 (f) and 6 (c) of the Act declaring that applicant is not
or has ceased to be an investment company and exempting from the
provisions of the Act transactions since January 1941 to which it or
any person controlled by it was a party." Applicant's request for
an exemption is based on the contention that it discontinued the sale
of face-amount certificates in the latter part of 1940, and that since
its inception in 1929 it has been primarily and continuously engaged
in the life insurance business through various controlled subsidiaries,
including, since 1939, Franklin Life Insurance Company, presently
its only life insurance subsidiary. The request for an order under
section 8 (f) of the Act is based on the contention that since 1953
more than 90% of the value of its investment securities has been
represented by its investment in the stock of Franklin Life Insurance
Company and that, accordingly, it is entitled to the exception from the
definition of an investment company contained in section 3 (c) (8) of
the Act.14 '
The transactions for which exemption has been sought under sec-
tion 6 (c) involved applicant or its controlled companies and their
affiliates and, although subject to the prohibitions of section 17 (a)
of the Act, were carried out without prior Commission approval under
section 17 (b) of the Act. The various questions involved in this case
were explored during hearings which resulted in over 3,200 pages of
testimony and the introduction in evidence of 300 exhibits. The
parties in the case were engaged in completing the post-hearing pro-
cedures after the close of the fiscal year.
In ouu and Milita7"!JInvestors Mutual Fund, Ina., the Commission
decided that the name of a registered investment company "Civil and
Military Investors Mutual Fund, Inc.", inherently implies that such
company's securities have special investment and other advantages for
the civil and military government personnel to whom it was intended
to offer such securities, that such advantages do not in fact exist, and
that therefore the name was deceptive and misleading under section
35 (d) of the Act. The Commission found, however, that the name
111 Investment Company Act Release No. 2607.

.. Section 3 (c) (8) of the Act excepts from the deflnition of an investment company any
company, 90% or more of the investment securities of which are represented by securities
of a single issuer included within a class of persons enumerated in sections 3 (c) (5). (6)
or (7). The persons enumerated in section 3 (c) (7) include any company primarily
engaged. directly or through majority-owned subsidiaries, in one or more businesses de-
scribed in sections 3 (c) (3), (5) and (6) of the Act. Section 3 (c) (3) excepts insurance
companies from the definition of an Investment company.
did not violate section 35 (a) of the Act 15 since it was not likely to
carry an implication that the company or its securities were sponsored,
recommended or approved by the United States."
REGISTRATION OF FOREIGN INVESTMENT COMPANIES
An application filed during the past fiscal year by American-South
Africa Investment Company, Ltd. for an order under Section 7 (d)
of the Act permitting its registration under the Act and for the sale
of its securities in the United States was the first such application
presented to the Commission by a non-Canadian, foreign investment
company. The company was organized as a closed-end investment
company, chartered under the Companies Act of 1926 of the Union
of South Africa.
Section 7 (d) of the Act, among other things, prohibits a foreign
investment company from selling its securities to the public by use of
the mails or any means or instrumentalities of interstate commerce
. unless the Commission, upon application, issues a conditional or un-
conditional order permitting such company to register under the Act
and to make a public offering of its securities in the United States. To
issue such an order the Commission must find that, by reason of special
circumstances or arrangements, it is both legally and practically fea-
sible effectively to enforce the provisions of the Act against such com-
pany and that the issuance of such order is otherwise consistent with
the public interest and protection of investors.
Rule N-7D-1 under the Act sets forth the specifications, conditions
and arrangements for Canadian management investment companies
requesting orders for registration," but makes no provision for en-
.. This section provides that "It shall be unlawful for any person, in issuing or sell1ng
any security of which a registered investment company is the issuer, to represent or imply
in any manner whatsoever that such security or company has been guaranteed, sponsored,
recommended, or approved by the United States or any agency or officer thereof."
18 Investment Company Act Release No. 2723 (June 9, 1958). On August 5, 1958, the
Fund filed a petition for review in the United States Court of Appeals for the District of
Columbia Circuit, which was dismissed upon agreement of the parties on September 19,
1958.
1f Since the rule was adopted on April 27, 1954 and up to June 30, 1958, ten Canadian
companies have obtained orders granting permission to register. These include: Resources
of Canada Investment Fund, Ltd., Investment Company Act Release No. 1974 (April 27,
1954) ; Scudder Fund of Canada, Ltd., Investment Company Act Release No. 1975 (April
27,1954) ; United Funds Canada, Ltd., Investment Company Act Release No. 2003 (August
4, 1954) ; New York Capital Fund of Canada, Ltd., Investment Company Act Release No.
2006 (August 11, 1954) ; Canada General Fund (1954) Ltd., Investment Company Act
Release No. 2007 (August 16, 1954) ; Keystone Fund of Canada, Ltd., Investment Company
Act Release No. 2008 (August 18, 1954,); Templeton Growth Fund of Canada, Ltd.,
Investment Company Act Release No. 2020 (October 7, 1954) ; Investors Group Canadian
Fund, Ltd., Investment Company Act Release No. 2124 (Afarch 30, 1955); Canadian
International Growth Fund, Ltd., Investment Company Act Release No. 2386 (JUly 6,
1956) ; and MnItnomah Canadian Fund, Ltd., Investment Company Act Release No. 2641
(December 10, 1957). One of these companies, Resources of Canada Investment Fund,
Ltd., did not register under the Act. Templeton Growth Fund of Canada, Ltd. subse-
quently c1Illnred its name to Axe-Templeton Growth Fund of Canada, Ltd.
abling investment companies organized in other foreign countries to

register. Processing the application in this case, therefore, required
extensive research into South African corporate law to determine
whether it would be legally feasible to apply and enforce the standards
of the Act with respect to this company.
In support of its request, applicant agreed to abide by the under-
takings and agreements provided for by rule N-7D-1 applicable to
Canadian investment companies as well as numerous additional under-
takings and agreements to give assurance of the enforceability of the
Act. A hearing on the application was held in July, 1958, shortly
after the close of the fiscal year, and the Commission's Findings and
Opinion and Order approving the application was issued on August
13, 1958.1s
UNREGISTERED INVESTMENT COMPANIES-SECURING COMPLIANCE

WITH THE INVESTMENT COMPANY ACT
In the course of administering the Investment Company Act, the
Commission must frequently take steps to require the registration of
companies. Such instances often arise with respect to companies
which have been engaged in industrial or other activities and which
over periods of time substantially reduce their regular business activi-
ties and sell large portions of their assets and invest the proceeds in
securities. Thus, these companies bring themselves within the pur-
view of section 3 (a) (3) of the Act, which defines an investment com-
pany, among others, as one which is engaged in the business of owning
or holding, or proposing to own or hold, investment securities having
a value exceeding 40 per centum of the value of their total assets.
Companies which fall within this definition must register under sec-
tion 8 (a) of the Act, or they may, before or after such registration,
apply for an order under section 3 (b) (2) declaring that they are
primarily engaged in a business or businesses other than the invest-
ment business.
In the usual case, companies which find themselves in, or approach-
ing an investment company status seek the advice of the Commission's
staff as to the application of the Act. Others, however, through in-
advertence or erroneous interpretation of the Act fail to register until
notified by the Commission to do so. The discovery of such situations
presents a serious administrative problem. It is obviously impossible
and undesirable to attempt to scrutinize the operations of the myriad
of business enterprises in this country to determine their status under
the Act. The Commission and its staff are dependent for informa-
tion upon newspapers and other reportorial services, complaints of
stockholders or other interested persons and examination of reports or
" Investment Company Act Release No. 2756.

other documents required to be filed with the Commission under other
Acts which it administers.
Companies which the staff and the Commission dealt with during
the past fiscal year involving registration and status problems under
the Act included the following: National Department Stores Corpo-
ration, McPhail Candy Corporation, New York Dock Company,
Portsmouth Steel Corporation, Dempster Investment Company, Real
Silk Hosiery Mills, Inc., American-Hawaiian Steamship Company
and Bankers Southern, Inc. All of these companies, with the ex-
ception of Bankers Southern, Inc., which is a newly organized com-
pany, had in recent years disposed of substantial portions or all of
their other business assets and purchased securities with the proceeds,
with the result that they fell within the presumptive test of an invest-
ment company contained in section 3 (a) (3). Prior to, or shortly
after, the close of the fiscal year all of these companies, with the ex-
ception of National Department Stores and American-Hawaiian
. Steamship, had registered under the Act. Hearings on National De-
partment Stores application under section 3 (b) (2) had not been
concluded at the year's end. American-Hawaiian Steamship, upon
being advised by the Commission that its operations were subject to
the Investment Company Act, refused to register, claiming, among
other things, that it was not an investment company nor subject to
the Act. Thereupon, after the close of the fiscal year, the Commission
initiated proceedings in the United States District Court to enforce
compliance with the Act.
The problems of administration and enforcement encountered in
this type of case are illustrated by the McPhail Candy Corporation
matter. In early 1955 the staff learned, through a newspaper ac-
count, that a derivative stockholder's action had been instituted
against McPhail Candy Corporation in which it was alleged, among
other things, that the company was an investment company and that
its officers had, in effect, been guilty of a breach of trust. Reports
filed by the company with the Commission pursuant to the Securities
Exchange Act indicated that over a period of years the company's
candy operations had been declining, that assets had been liquidated
and the cash, together with borrowings, had been invested in securi-
ties and that candy operations had been conducted at a loss while se-
curity transactions and dividend receipts were providing an increas-
ingly important source of income. Security holdings constituted a
substantial portion of the company's total assets. Because of these
and other facts, it appeared that the company might have already
undertaken to be an investment company and that further inquiry
was warranted.
Informal investigation of the affairs of McPhail Candy Corpora-
tion proceeded during the spring of 1955. Examination of the annual
audited report of the company's operations, which was filed on Au-

gust 15, 1955, served to strengthen the earlier tentative conclusion of
the company's status as an investment company and the company
was advised of this conclusion and further factual information was
sought from the company on a voluntary basis. By the end of the
year it became apparent that the company would not voluntarily
register under the Act and that an Investigation of its affairs would
have to be conducted to determine its status and if necessary, to com-
pel registration. As a result of further investigation it appeared
that the company was and had been an investment company and
should register as such and that it had engaged in a series of trans-
actions with its principal officer and stockholder and otherwise used
its assets for his personal benefit under circumstances which, it ap-
peared, might involve fraud and gross abuse of trust. Ultimately, on
October 28, 1957, the company registered but concurrently filed an
application under section 3 (b) (2) to be declared excepted from the
definition of an investment company, or in the alternative to be ex-
empted pursuant to section 6 (c). During the hearing on this appli-
cation the company requested its withdrawal and this request was
granted on April 24, 1958.19
LITIGATION UNDER THE INVESTMENT COMPANY ACT OF 1940

During the fiscal year the Court of Appeals for the District of
Columbia Circuit, in S. E. O. v, Variable Annuity Life Insurance
Oompany of America et al.,20affirmed the dismissal by the district
court of the Commission's complaint charging violations of the regis-
tration provisions of the Investment Company Act and the Securities
Act of 1933. As noted on page 164 of the 23rd Annual Report, the
district court had dismissed the Commission's complaint after trial
on the ground that the McCarran Act placed exclusive regulatory
jurisdiction over the defendants in the insurance authorities of the
States and the District of Columbia. The Court of Appeals based
its decision on different grounds, holding that the variable annuity
contracts sold by defendants are exempt from registration pursuant
to section 3 (a) (8) of the Securities Act and that the defendants are
insurance companies falling within the provisions of section 3 (c) (3)
of the Investment Company Act.
111 On July 7, 1958, the Commission lIled a complaint In the United States District Court
for the Southern District of New York against the directors of the company for gross
abuse of trust under section 36 of the Investment Company Act. The complaint alleges,
among other things, that the corporation was an Investment company on or before April 1,
1953; that between 1953 and 1957, the corporation, under the control and direction of its
omcers and directors carried on Its activities In violation of Section 7 of the Investment
Company Act and that Russell McPhail fraUdulently diverted the corporation's assets to
himself at prices substant1aIly below their market value. 8. B, O. v. RUBBell MoPhail, fit al.,
S. D. N. Y., CIvil Action No. 135-203 •
.. 257 F. 2d 201 (C. A. D. C. 1958). A petition for certiorari was granted on October
13, 11158.
In 8. E. O. v, Oryan,21 the Commission is seeking an injunction pur-
suant to section 36 of the Investment Company Act permanently bar-
ring Frank: M. Cryan, former president and director, and John Set-
rian and Joseph Aversa, purported to be the new president and
secretary-treasurer, respectively, from acting as directors and officers
of Jefferson Custodian Fund, Inc., an open-end registered investment
company, the appointment of a receiver, and other relief. The Com-
mission's complaint alleges that Cryan sold to Setrian and his asso-
ciates the stock of Jefferson Research Foundation, Inc., the Fund's
investment adviser, at an aggregate price of $261,000, its net book
value being about $2,300. The assets of the Fund at about that time
were approximately $1,270,000.
The complaint further alleges that the price agreed upon was "for
the surrender of the fiduciary and management positions with respect
to the Fund in favor of the defendant, John Setrian and his asso-
ciates," and that "the purchasers of the stock did not have funds to
pay the price and that the intention was to use the Fund's resources
to finance the purchase." A receiver was appointed, and the receiver
and the Fund's custodian were directed by the Court to honor re-
demptions at net asset value less 5% of the redemption price which
was to be credited to a contingent reserve for receivership expenses."
During the course of the proceedings, upon the recommendation of
the receiver and a vote of the stockholders, the Court approved a
transfer of the assets of the company to another mutual fund.
In 8. E. O. v. Insurance Seourities, 11UJ.,23 the Court of Appeals
affirmed the district court's dismissal of the Commission's complaint
which alleged. that the defendants were guilty of gross abuse of trust
within the meaning of section 36 of the Investment Company Act
because they, as directors, officers and controlling stockholders, had
sold stock control of an investment adviser for a registered investment
company at about 25 times the net asset value of the stock." The
Court of Appeals held that there was no breach of trust because no
funds of the investment company were involved. and Congress pro--
vided a remedy in section 15 of the Act under which an investment
advisory contract is terminated when stock control of the investment
adviser is sold."
.. S. D. New York, No. 131-57 (March 13, 1958).

1lI A stockholder action against Cryan and others Is also pending in the same Court.
Ploerke v. Organ, S. D. N. Y., Civil Action No. 133-331.
.. 254 F. 2d 642 (C. A. 9, 1958).
'" A more detailed description of the allegations of the complaint and the litigation in the
district court appears at pages 164-165 of the 23rd Annual Report .
.. A petition for II. writ of certiorari was denied on October 13, 1958.
PART X
ADllfINISTRATION OF THE INVESTMENT ADVISERS

ACT OF 1940
A person engaged for compensation in the business of advising
others with respect to securities is required by the Investment Ad-
visers Act of 1940 to register as an investment adviser. There are
certain exemptions from the requirement of registration such as in
the case of an investment adviser all of whose clients are residents
of the state of his principal business officeand whose activities do not
include advice or analysis with respect to securities listed Or ad-
mitted to unlisted trading privileges on any national securities ex-
change. The Act makes it unlawful for investment advisers to engage
in practices which constitute fraud or deceit. The Act also requires
investment advisers to disclose"the nature of their interest in trans-
actions which they may effect for their clients, prohibits profit-
sharing arrangements and, for all practical purposes, prevents the
assignment of any investment advisory contract without the consent
of the interested client.
The Commission is not empowered by the Investment Advisers
Act to inspect the books and records of an investment adviser nor
to deny or revoke the registration of an investment adviser unless
he has been convicted of certain offenses involving securities or aris-
ing out of his conduct as an investment adviser or in certain other
specified capacities, or has been enjoined by a court of competent juris-
diction on the same grounds or has falsified his application.
The number of registered investment advisers continued to in-
crease and at the end of the fiscal year the total was 1,562,represent-
ing an increase of nearly 10% over the previous year. The follow-
ing tabulation reflects certain data with respect to registration of
investment advisers and applications for such registration during
fiscal year 1958:
Investment adviser registrations and applications
Effective registrations at close of preceding fiscal year 1,431
Applications pending at close of preceding fiscal year__________________ 22
Applications filed during fiscal year__________________________________ 212
Total 1,665
Registrations cancelled Or withdrawn during year .,.________ 77

Registrations denied or revoked during year___________________________ 2
Applications withdrawn during year_________________________________ 2
Registrations effective at end of year 1,562
Applications pending at end of year___________________________________ 22
Total 1,665
160
ADMINISTRATIVE PROCEEDINGS
The Commission revoked the investment adviser registration of

Ralph Seipel, doing business as Investors Surety Oompany/ on the
ground that the registrant had been permanently enjoined by a United
States District Court, in an action instituted by the Commission, from
employing any device, scheme or artifice to defraud a client or prospec-
tive client or from engaging in any transaction, practice or course of
business which operates or would operate as a fraud or deceit upon
any client or prospective client in violation of Section 206 of the Act,"
The injunction was based on findings by the court that Seipel had
violated that section by falsely representing to persons responding to
his newspaper advertisements inviting requests for stock market in-
formation, that he absolutely guaranteed clients against loss in the
stock market, that he maintained branch officesand a foreign exchange
department, and that he had twenty-five years of trading experience
and many clients, when in fact he had no office,organization, associates
or customers. Seipel contended that the injunction did not constitute
a basis for revocation, since he had no clients and was enjoined only
from making misrepresentations in an effort to attract clients and not
from engaging in any conduct connected with investment advisory
activities. This contention was rejected by the Commission.
James Oordas, doing business as The Oanadian Stock Letter.' a regis-
tered investment adviser, filed an amendment to his registration appli-
cation with the Commission which wilfully misstated his business ad-
dress as being in one state when in fact it was located in another state,
where he was enjoined from acting as an investment adviser. The
Commission held it to be in the public interest to revoke his registration
as an investment adviser.
LITIGATION UNDER mE INVESTMENT ADVISERS ACT OF 1940
The Commission is authorized by the Investment Advisers Act to

obtain an injunction where violations of the Act have occurred or
appear to be imminent.
Pursuant to that authority the Commission secured a permanent in-
junction in 8. E. O. Y. Security Forecaster 00., Inc. and lIIelvin A.
Johnson 4 restraining further violations of the anti-fraud provisions
of the Investment Advisers Act. The Commission charged that
Security Forecaster Co., Inc., Melvin A. Johnson, its president, and
James M. Barnes, a Canadian resident, in a paper called "The Finan-
1 Investment Advisers Act Release No. 93 (March 31, 1958).
• S. D. N. Y., No. 120-364 (May 24, 1957).

3 Investment Advisers Act Release No. 90 (October 21,1957).
• S. D. N. Y., No. 130-239 (February 28, 1958).

486867--59----12
162 SECURITillS AND EXCHANGE COMMISSION
cial Forecaster", which the company published and distributed, urged

clients and prospective clients to buy shares of Anacon Lead Mines,
Ltd., by means of the following misleading and fraudulent state-
ments, among others: (1) the projected recovery by Anacon of an
estimated $50,000 per acre from certain of its gold mining holdings
would result in a recovery potential to Anacon of $50 million;
(2) the value of each outstanding share of Anacon was approximately
$3 per share, when in fact it was approximately 40 cents per share;
(3) millions of dollars were realized within days by traders, specu-
lators and investors in other stocks managed by Johnson; (4) large
and extremely quick profits would be made as a result of a purchase of
Anacon stock; and (5) dividends had been paid in the past by Anacon,
without disclosing that no dividends have been paid since 1952.
The Commission filed memoranda amicus curiae and presented
oral argument in Hull v. Newman, Kennedy & 00.,5 an action to declare
an investment contract void, and for damages for violations of the
Investment Advisers Act. The Commission, addressing itself solely
to the questions of law involved, contended that a private civil action
may be brought for violation of the Act, regardless of the non-existence
of any express statutory provision authorizing it. The case was sub-
sequently settled.
• s. D. N. Y., No. 118-283.

PART XI
OTHER ACTIVITIES OF THE COMMISSION
COURT PROCEEDINGS
Civil Proceedings
At the beginning of the fiscal year 1958 there were pending in the
courts 43 injunctive and related enforcement proceedings instituted
by the Commission to prevent fraudulent and other illegal practices
in the sale or purchase of securities. During the year 65 additional
proceedings were instituted and 54 cases were disposed of, leaving 54
such proceedings pending at the end of the year. In addition the
Commission participated in a number of corporate reorganization
cases under Chapter X of the Bankruptcy Act, in 7 proceedings in
the district courts under section 11 (e) of the Public Utility Holding
Company Act and in 14 miscellaneous actions. The Commission also
participated in 35 civil appeals in the United States Courts of Appeals.
Of these, 17 came before the courts on petition for review of an admini-
strative order, 6 arose out of corporate reorganizations in which the
Commission had taken an active part, 9 were appeals in actions brought
by or against the Commission, 1 was an appeal from an order
entered pursuant to section 11 (e) of the Public Utility Holding Com-
pany Act and 2 were appeals in cases in which the Commission ap-
peared as amicus curiae. The Commission also participated in 4
appeals or petitions for certiorari before the United States Supreme
Court resulting from these or similar actions.
Complete lists of all cases in which the Commission appeared before
a Federal or State court, either as a party or as amicus curiae, during
the fiscal year, and the status of such cases at the close of the year, are
contained in the appendix tables.
Certain significant aspects of the Commission's litigation during the
year are discussed in the sections of this report relating to the statutes
under which the litigation arose.
Criminal Proceedings
Fifteen new cases were referred to the Department of Justice

for prosecution during the past fiscal year. From 1934 to June 30,
1958, 2,376 defendants have been indicted in United States district
courts in 575 cases developed by the Commission. These figures in-
clude 14 indictments returned during the past fiscal year against 42
163
defendants. Also during the fiscal year there were 30 convictions in

14 cases, making the total 1,295 convictions in 546 cases. There were
6 appeals in criminal cases. In 3 of these cases the defendants un-
successfully attempted to have their convictions set aside and the re-
maining cases were pending on appeal at the end of the year. There
were 4 criminal contempt proceedings during 1958, 2 of which were
instituted during the fiscal year. In 1 of these cases 3 defendants
were convicted, leaving 3 cases pending at the end of the year.
As in the past, defendants in the criminal cases developed and prose-
cuted during the year contrived a variety of fraudulent schemes, in-
cluding broker-dealer frauds and fraudulent promotions involving
inventions, mining and oil and gas ventures, finance and insurance
companies and various other types of businesses. The defendants in
some of the cases were also charged with violations of the registration
provisions of the Securities Act of 1933 and violations of other non-
fraud provisions.
A seven-year prison term was imposed on Eldridge S. Price (N. D.
Ga.) following his conviction on all 14 counts of an indictment charg-
ing violations of the anti-fraud and registration provisions of the
Securities Act and the Mail Fraud Statute in connection with the sale
of oil and gas interests and stock of the Dark Canyon Uranium Cor-
poration and other securities. The indictment charged, among other
things, that the defendant knowingly made false promises of great
wealth to prospective investors, including misrepresentations that the
lands covered by the oil leases had already been proven for oil and were
highly productive; that there was no risk; and that the defendant
Price was a highly qualified and successful oil operator who had never
drilled for oil without bringing in a producing well when, in :fact, wells
drilled by Price were dry holes or yielded no oil in commercial quanti-
ties. It was further charged that the defendant falsely represented
that the land covered by the leases was the best oil land in Texas and
that the defendant owned large interests in the leases and drilling
equipment having a value of hundreds of thousands of dollars. The
indictment also alleged that the defendant concealed from prospective
investors the fact that he was in bankruptcy; that he had never been
successful as an oil operator; and that his profits had been made
wholly as a result of promotional activities. Mrs. Edith Wynne Price,
a co-defendant, was acquitted by the court prior to the submission of
the case to the jury and Price was released on $10,000 bail pending
appeal.
Mining and oil and gas ventures were also involved in the indict-
ments pending in V. S. v, V. S. Manganese Oorporation et al. (S. D.
N. Y.); V. S. v, Stratoras) Oil, Inc. et al. (S. D. Tex.); and V. S. v.
Silas M. Newton et al. (D. Colo.) . In the V. S. Manganese case the in-
dictment charges that the corporation and defendants Commodore
Dewey Brock and Maurice A. Schuster conspired together and with
others to employ a scheme and artifice to defraud in the sale of the
corporation stock which resulted in substantial losses to investors.
The indictment alleges that the defendants caused to be printed and
issued a false and misleading offering circular which included mis-
representations that the corporation had acquired certain designated
mining properties and that one property contained 350,000 tons of
definite blocked out ore. It is further alleged that among the material
facts omitted from the offering circular were that the corporation
was obliged to pay approximately $700 a month on certain properties;
that the Defense Minerals Administration had refused to loan the
corporation $50,000 on the ground that its properties did not contain
sufficient ore to justify such loan; that substantially all the ore which
had been shipped by the corporation had been purchased from other
mines; that the total revenue received from the sales of the ore was
-greatly exceeded by the cost of such sales and the corporation was
operating at a loss.
In the Stratoray case the indictment, in addition to charging failure
to comply with the registration provisions of the Securities Act, alleges
that the defendants effected sales of investment contracts evidenced
by oil and gas leases by means of untrue and misleading statements of
material facts. Included among the misrepresentations, according to
the indictment, were statements that the drilling of a certain oil well
would most likely result in the discovery of one of the largest oil
fields in the United States and that persons purchasing leases in the
area from the defendants were being afforded an opportunity of ac-
quiring great wealth; that the defendants were convinced they had
a scientific oil hunting instrument, called a "scintillator," capable of
detecting virgin oil fields with near 100% dependability; that the
defendants, by means of their scintillator, had located what they be-
lieved to be a vast accumulation of oil, perhaps as large as the prolific
Yates field in Pecos County, Texas; and that one of the defendants
was a research scientist trained and experienced in the application of
electronic nuclear scientific principles.
The indictment in the Newton case alleges, among other things,
that the defendants, by means of false and misleading statements,
induced investors to purchase participating certificates in the Yellow
Cat Royalty Trust, the Tennessee Queen Royalty Trust, and frac-
tional undivided interests in mining claims held by the Tennessee
Queen Mining Co. The alleged statements include misrepresentations
concerning the value of the properties, the experience of the mining
operators, the shipping of ore, and the certainty of royalty returns
on the investments.
In U. S. v. Francis E. Getchell et al. (S. D. Fla.), the defendants

were sentenced to terms ranging from 1 to 5 years following their
convictions after a trial extending over 11 weeks. The indictment
charged that the defendants engaged in a scheme to sell stock of
Florida Palms, Inc., 'and other securities, by falsely representing that
defendants Francis E. and Harry S. Getchell had developed a secret
and commercially feasible process whereby pulp could be manufac-
tured from cabbage palms; that several large companies had offered
to buy this process for millions of dollars; that all money invested
would be used to build a plant and buy equipment and that all funds
received from the sale of the securities would be held in trust for this
purpose. It was further charged that false financial statements pre-
pared by defendant William F. Powers, a certified public accountant,
were used to deceive investors and to conceal the misappropriation of
their funds. The fourth defendant, Hollis Rinehart, an attorney, was
alleged to have been an officerof Florida Palms, Inc. and to have as-
sisted in these promotions.
In U. S. v. Olinton R. Bupp et al. (D. Idaho), the defendants
Clinton R. Rupp and Intermountain Development Company, Inc.
were found guilty of violating and conspiring to violate the anti-
fraud provisions of the Securities Act and the Mail Fraud Statute
in connection with the sale of Intermountain stock. The indictment
charged that the defendants misrepresented to investors that the
funds received from the sale of the Intermountain stock would be
deposited with the Idaho Insurance Commissioner and would be used
in compliance with the Idaho Insurance law; that 75% of the funds
so received would be deposited in escrow for use in purchasing con-
trolling interests in small life insurance companies; that, as a result
of the purchase of National Security Life Insurance Company, the
Intermountain stock would, and did, increase in value; that none of
the proceeds would be used in carrying on any mining and explora-
tion work; that the defendants had invested substantially in Inter-
mountain securities; and that the son of the Commissioner of Finance
of the State of Idaho had purchased $10,000worth of Intermountain
stock. The indictment further charged that the defendants con-
cealed from investors the fact that Intermountain had purchased Na-
tional Security Life Insurance Company for $270; that Intermoun-
tain had never obtained an insurance permit from the State of Idaho;
that Intermountain's assets had been frozen and receivership proceed-
ings were pending in the state courts and that the securities being
offered were the personally owned stock of certain individuals who
were receiving the benefits of the proceeds of the sale. Six of the de-
fendants received sentences ranging from a $1000 fine to a $1000fine
and a year's imprisonment following pleas of guilty or 'lWZO con-
tendere to various counts. Defendant Rupp, who after trial was
found guilty of securities fraud, mail fraud and conspiracy, was sen-
tenced to a 5-year prison term and a $10,000 fine. Intermountain was
fined $5,000. A remaining defendant, who had been a fugitive, was
recently apprehended.
Another indictment charging fraud in an insurance company
promotion, U. S. v. National Union Life Insurance Oompany et al.
(S. D. Fla.), alleges, among other things, that Basil P. Autrey and
the other defendants devised a scheme to defraud investors by means
of false and misleading statements; that the defendants bought the
capital stock of National Union at prices ranging from $2 to $40 per
share and thereafter by means of manipulative and other fraudulent
practices resold the stock to investors at prices ranging from $5 to
$63.50 per share; that the defendants caused the company to issue
10,000 shares of its stock allegedly in exchange for an officebuilding,
knowing that the stock was to be acquired by one of the defendants
rather than the vendor, the purpose of such transaction being to de-
feat the preemptive rights of the stockholders and also to enable the
defendants to acquire a large block of stock for resale; that the de-
fendants caused the company to issue 5,000 shares of its stock osten-
sibly for seasoned first mortgages, knowing that the mortgages never
would be received by the company; that the defendants artificially
caused the market price of the stock to rise by effecting a series of
transactions among themselves, with investors and with brokers and
dealers, by placing and giving scale-up orders for the stock, by caus-
ing the company to declare a 25% stock dividend and by circulating
fraudulent misrepresentations concerning the company and its af-
fairs. The indictment further charged that the defendants kept
false, inaccurate and incomplete books and records in order to conceal
the company's true financial condition. A motion by certain defend-
ants for transfer of the trial to the Northern District of Alabama was
granted. A motion by the Department of Justice for retransfer to
the Southern District of Florida is pending.
A 12-count indictment was returned charging Carl D. Schaeffer
(N. D. ill.) with devising a scheme and artifice to defraud investors
in the sale of investment contracts and evidences of indebtedness relat-
ing to the development of a machine for generating steam through
hydraulic forces. According to the indictment Schaeffer made
numerous fraudulent statements to investors, including statements
that Schaeffer had a written contract with a syndicate of compa-
nies comprised of Dow Chemical Company, the duPont Company,
Chrysler Corporation, General Motors and others, whereby these
companies had agreed to purchase the rights to Schaeffer's steam
machine and had put $10,000,000in escrow with the Chase National
Bank; that General Motors was interested in buying Schaeffer's
machine; that Fairbanks-Morse and Co. had offered to buy

Schaeffer's machine for a million dollars and that he could pick up
a million dollar check from that company any time he wished, al-
though he had turned down this offer; that Crane Company had
offered to buy the rights to Schaeffer's machine for a million dollars
and that Schaeffer had turned down this offer; that the United
States Navy and a big chemical company were bidding against each
other for the right to purchase Schaeffer's machine and that which-
ever purchased it would pay in the vicinity of $30,000,000; that the
United States Navy was interested in Schaeffer's machine for use
in submarines and was experimenting with the machine in extract-
ing ocean minerals; that monies invested with Schaeffer were placed
by him in the Northern Trust Co. in Chicago and that if an investor
ever wanted his money back he would get it because it was on de-
posit with that institution; and that all investors would realize $10
for every $1 invested.
Another scheme to defraud investors which involved an invention
was alleged in an indictment charging William L. Dorsey, Sr. (W. D.
Mo.) with fraud in the sale of the common stock of Southwestern
Industries, Inc., a corporation which he controlled. In connection
with the sale of this stock Dorsey made numerous false and mislead-
ing statements to investors, including representations that the com-
pany owned the patent to an irrigation pump known as the Cochran
Power Unit; that an investment in the company would yield divi-
dends as high as 100% a year; and that Dorsey would not receive
any salary, commissions or expenses from the company until such
time as the pumps were manufactured and sold. It was further
charged that Dorsey concealed from investors the fact that South-
western Industries owed royalties to the owner of the patent on the
irrigation pump; that the company had no orders for and had sold
no pumps; that the company had a continually increasing deficit
and that Dorsey was using the funds of the company for his personal
expenses. Dorsey pleaded guilty to 4 counts charging him with
violations of the anti-fraud provisions of the Securities Act and 4
counts charging him with violations of the registration require-
ments of that .Act. He was sentenced to a term of a year and a day
on each of the fraud counts. The sentences are to run concurrently
and he is to be placed on probation for five years upon release
from confinement.
In U. S. v, Hugh Van Valkenburgh et al. (D. Neb.), one of the
defendants, Abraham Schapiro, was placed on probation for 30
months and fined $2,000 following his plea of nolo contendere to 8
counts of an indictment charging him and his co-defendant with
having engaged in a scheme to defraud in connection with the sale
of stock of Instant Beverage, Inc., a corporation organized and
promoted by the defendants to manufacture an instant powder
product which, when mixed with water, was stated to produce a car-
bonated beverage. Misrepresentations were alleged to include as-
sertions that several large companies would be interested in buying
or handling the formula and that the United States Government
would take the entire output of the powder for the first six months
of its production. The indictment further charged that the defend-
ants failed to disclose the number of shares of Instant Beverage
stock issued to promoters and the prices paid for such shares;
that Instant Beverage did not own the formula for the powder,
but only held a franchise for its use; and that the United States
Army had previously rejected samples of the powder as being unfit
for use by the Army.'
Fraudulent promotions involving finance company ventures were
alleged in the indictments in U. S. v. A. B. Shoemake et al, (S. D.
Tex.); U. S. v, Oonsul Mayo Forsyth et al. (E. D. Tex.); and U. S.
- v, HUrling L. Jacobson (D. Neb.). In the F01'Syth case the indict-
ment charged, among other things, that the defendants, in the sale
of stock of Central Finance Service, Jnc., falsely represented to in-
vestors that the stock being offered was unissued stock of Central
and the money received from the sale of such stock would be used
by Central in its business operations; that Central was realizing
substantial profits from its business operations; that Central would
pay substantial dividends; and that investors would receive a return
of all the money they invested in Central stock upon request. The
indictment further charged that the Central stock offered and sold
to investors was personally owned stock and not the unissued stock
of Central; that Central had operated at a substantial loss throughout
its existence and that it had no surplus and, therefore was not in
a position to pay any dividends. Defendant Forsyth entered a plea
of guilty to 2 counts of the indictment and was sentenced to 2 years'
imprisonment and a suspended sentence of 5 years; the other defend-
ant, Roy W. Adams, has entered a plea of not guilty.>
In the Jacobson case the defendant was sentenced to a suspended
term of 2 years and 3 years' probation on each of 17 counts, the
sentences to run concurrently, upon his conviction of charges in an
information that he violated the anti-fraud provisions of the Secu-
rities Act and the Mail Fraud Statute and filed false statements with
the Securities and Exchange Commission."
1 Subsequent to the end of the fiscal year the remaining defendant, Hugh Van Valken-
burgh, entered a plea of nolo contendere to four counts of indictment and was fined $11,500
plus costs and was sentenced to three years' imprisonment on each count, tbe sentences to
run concurrently. Execution of the sentence was suspended and the defendant was placed
on probation for three years.
1. Subsequent to the end of the fiscal year Adams was convicted on one count of the
Indictment and sentenced to a term of 18 months.
• 18 U. S. C. i 1001.
In the Shoemake case the indictment charges that the defendants

misrepresented that funds deposited with the U. S. Trust and Guar-
anty Company were insured and guaranteed up to $10,000 by 100%
reserves and that financial statements supplied to customers and
prospective customers contained a true and correct statement of the
financial condition of the company. The indictment further charged
that the defendants made false statements concerning the use to be
made of funds deposited with the company, made false and mis-
leading entries in the books of the company, and obtained false
appraisals of real estate owned by the company.
Frauds by broker-dealers were charged in the indictments in V. S.
v. Oharles M. Graves (D. Alaska) and V. S. v. Branch J. Oarden,
Jr. (W. D. Va.). In the Graves case the defendants Graves and The
Locators, Inc. pleaded guilty to various counts of an indictment
charging violations of the broker-dealer registration requirements of
the Securities Exchange Act and violations of the anti-fraud provi-
sions of that Act. Both the Locators, Inc. and Graves were fined
$250 and, in addition, Graves received a 6-month suspended sentence.
In the Carden. case the defendant pleaded guilty to an indictment
that charged him, among other things, with accepting payment for
securities and, by written confirmation, representing to customers
that the securities had been purchased and would be delivered to
them in accordance with customs and practices of the business when,
in fact, the defendant converted the customers' funds to his own use.
The indictment also charged the defendant with accepting securities
from customers to be sold for the customers' accounts and with con-
verting such securities to his own use. The indictment charged fur-
ther that, for the purpose of deceiving the customers and concealing
from them the scheme to defraud, the defendant intentionally re-
frained from recording certain transactions in his books and records.
The defendant was sentenced to two years' imprisonment.
Sentences ranging from 2 years' probation to 12 months' imprison-
ment were imposed upon Sidney Barcley (E. D. Mich.) and six other
defendants following their pleas of guilty to one count of an in-
dictment charging violations of the broker-dealer registration pro-
visions of the Securities Exchange Act. According to the indict-
ment, investors in the United States were solicited by the defendants
through the mails and by long distance telephone from Montreal,
Canada, to purchase from T. M. Parker, Inc., shares of stock of
various Canadian corporations, at a time when T. M. Parker, Inc.
was not registered as a broker-dealer with the Commission in ac-
cordance with the requirements of the Securities Exchange Act.3
8The enforcement problems arising in connection with fraudulent promotions orig-

inating in Canada are discussed in detail in previous annual reports. See, for example,
In U. S. v. Jesse S. Gill, et at. (N. D. Georgia), convictions were
obtained against two of the defendants on all counts of an indict-
ment charging that the defendants induced Paleo Oil & Gas Corp. to
retain their firm as an underwriter for an offering of shares of the
corporation, and the defendants converted to their own use a sum
of money advanced for expenses and maintained fraudulent records
to conceal their actual disbursements in connection with the offer-
ing of the Paleo stock. Sentences of imprisonment for a term of
one year were imposed, but execution of the sentences was suspended
and the defendants were placed on probation for five years on con-
dition that restitution be made in the sum of $2,000 for each defendant.
The case was dismissed as to the one remaining defendant.
In V. S. v. David L. SMndler et al. (S. D. N. Y.), the indict-
ment charges that the defendants conspired to defraud purchasers
of stock of Jerry O'Mahoney, Inc. by manipulative practices which
artificially raised the market price of the stock and maintained the
artificial price. The practices alleged include the buying of large
amounts of stock through dummy accounts, inducing others to buy
on the American Stock Exchange by promises to sell additional
shares off the exchange at a price below the exchange price, and
by purchasing large amounts of stock off the exchange to prevent
such stocks being sold on the exchange and thereby depressing the
price. In addition, the indictment charges that the defendants en-
gaged in a scheme to defraud purchasers of the stock by omitting
to state that the exchange price had been artificially raised and
maintained by the manipulative practices of the defendants.
An indictment was returned charging Edward J. Vitale (E. D.
Mich.) with violating the anti-fraud provisions of the Securities Act
and the Mail Fraud Statute in connection with his activities as man-
ager of a branch office of a Boston broker-dealer firm registered
with the Commission. The indictment alleges that the defendant,
after gaining the trust and confidence of certain customers, induced
them to sell their holdings of investment company securities and turn
the proceeds over to him by falsely representing that such funds
would be invested in various profit-sharing ventures, such as the pur-
chase, renovation and resale of houses, and the development of resi-
dential building projects and other business enterprises in which
the defendant was engaged when, in fact, such projects were either
not in existence or the defendant was not a participant therein.
In V. S. v. Paul H. Oollins (S. D. Ill.), the indictment charged
that the defendant, while acting as a branch manager for a broker-
dealer, not only defrauded customers of the company, but also de-
frauded the company itself. The indictment alleged that Collins
pages 202-204 of the 22nd Annual Report whIch contain a discussIon of U. 8. v. Link and
Gre6fl (1955) S. C. R. 183, an action for extradItion brought In connectIon wIth the T. M.
Parker case. See also pages 178-182 of the 23rd Annual Report.
engaged in fraudulent and fictitious transactions in securities with

customers and made fraudulent representations and promises con-
cerning such transactions and the handling of customers' funds.
Shortly after the end of the fiscal year Collins pleaded guilty to ten
counts of the indictment. The imposition of sentence was suspended
and Collins was placed on probation for three years.
Fraud in connection with the delivery of forged and counterfeit
securities was charged in the indictment in U. S. v, Albert Hefferan
(W. D. Mich.). The indictment alleged that, as a part of a scheme
to defraud, the defendant placed a series of newspaper advertisements
soliciting investors to advance sums of money. It was alleged that
these advertisements represented that the defendant would furnish
collateral described as "listed, high-grade securities" and "grade-A
negotiable listed securities" having values substantially in excess of
the amounts of the investments solicited and that the defendant
did not intend to and did not pledge genuine securities as col-
lateral but, on the contrary, delivered forged securities which he
falsely represented to be genuine. Hefferan pleaded guilty to five
counts of the indictment and, shortly after the close of the fiscal
year, was sentenced to three years' imprisonment.
In United States v. Edgar Robert Errion. et al. (D. Oregon), sen-
tences were imposed on the defendants who had previously pleaded
guilty or had been convicted on an indictment charging violations
of the anti-fraud provisions of the Securities Act, as well as the
Mail Fraud and Conspiracy statutes. Errion, who pleaded guilty
to two counts of the indictment, received a sentence of three years'
imprisonment on each count. He also entered a guilty plea to two
counts of another indictment charging violations of the same statutes
in the sale of membership certificates of Beaver Plywood Cooperative
and Co-op Loggers, and was sentenced to a term of three years on each
of those counts. All the sentences are to run consecutively, making
Errion's sentence a total of 12 years. Five other defendants, who
had previously been convicted after a trial lasting three weeks, were
sentenced to terms ranging from one year to seven years. One of
these defendants, Helen A. Davenport, filed an appeal and subse-
quent to the end of the fiscal year her conviction was affirmed by the
Court of Appeals for the Ninth Circuit.
A fine of $1,000 was imposed upon Ohristopulos & Niohol« Broker-
age Oompany and fines of $500 each were imposed upon Plato G.
Christopulos and Louis P. Nichols upon their being adjudged in
criminal contempt for violation of an injunction prohibiting, among
other things, the defendant brokerage company, its officers, agents,
employees and assigns from further violating the provisions of Sec-
tions 7 (a) and 17 (a) of the Securities Exchange Act, Section 4
(c) of Regulation T adopted by the Federal Reserve Board, and
Rules 15Cl-4 and 17A-3 adopted by the Commission under the Secu-
rities Exchange Act. These provisions prohibit the extension of
4
credit, without an authorized extension, by a brokerage firm for more

than seven days from the date of a transaction; the use of the mails
in connection with an over-the-counter securities transaction unless,
in confirmation thereof, there has been a disclosure by the broker
of his role with respect to all the parties; and the over-the-counter
sale of securities while the broker is not in compliance with the Com-
mission's bookkeeping and record requirements.
An indictment for "bail jumping" 5 was returned against Donald
F. Thayer (D. Mass.), who has been a fugitive since his release in
July 1953 on $10,000 bail following an indictment charging him and
others with violating the anti-fraud provisions of the Securities Act,
as well as the Mail Fraud and Conspiracy Statutes. This is reported
to be the first indictment of this type returned in the District of
Massachusetts.
The United States Court of Appeals for the Second Circuit affirmed
a conviction for securities fraud, mail fraud and conspiracy of Walter
F. Tellier, head of Tellier and Company, formerly a New York
securities dealer (255 F. 2d 441 (1958)). Tellier and his co-defend-
ants Elton B. Jones and Albert Joseph Proctor had been found guilty
of all 36 counts of an indictment following a trial lasting seven weeks
in the United States District Court in Brooklyn, N ew York. The
charges related to fraud in connection with the sale of 4 series of
debentures of the Alaska Telephone Corporation, totalling approxi-
mately $900,000. The evidence had disclosed that under Tellier's
direction and supervision Tellier and Company engaged in a boiler-
room securities sales operation, employing a large number of high-
pressure telephone salesmen and deceptive printed material. Tellier
had been sentenced to four and one-half years' imprisonment and
fined a total of $18,000.6 Still pending against Tellier are two in-
dictments charging fraud in the sale of more than 19,000,000 shares
of stock of a number of uranium mining corporations.
Convictions for violations of the anti-fraud provisions of the
Securities Act were affirmed in Wilson H. Walters, et al, v. United
States, 256 F. 2d 840 (C. A. 9,1958), Arthur V. Donaldson v. United
States, 248 F. 2d 364 (C. A. 9, 1957),7 and Eiohard W. Bowler v.
United States, 249 F. 2d 806 (C. A. 9, 1957). In both the Donaldson
case and the Walters case the appellants had been convicted in con-
nection with insurance company promotions. In the Bowler case
• The broker-dealer registration of O",.istopulos &; Nichols Brokerage Oompany was sub-
sequently revoked by the Commission. Securities Exchange Act Release No. 5703 (May 27.
1958).
" 18 U. S. C. Sec. 3246 .
• After the close of the fiscal year the Supreme Court denied a petition for certiorari
filed by Tellier in this case.
7 Petitions for certiorari were denied in each of these cases.
the appellant had sold stock of a warehouse and storage company,"

The appeal of Homer W. Snowden from his conviction for fraud
(E. D. Ill.) in the sale of oil and gas interests was dismissed on the
motion of his counsel. Additional details concerning this case are
contained on pages 172-73 of the 23rd Annual Report.
DISCIPLINARY PROCEEDINGS AGAINST PERSONS PRACTICING BEFORE

THE COMMISSION
In a private investigation to determine whether Union Electric

Company and certain other persons directly or indirectly made
political contributions in violation of section 12 (h) of the Public
Utility Holding Company Act of 1935, William A. Dougherty, an
attorney, testified under oath with respect to the circumstances re-
lating to a check for $5,000 which was drawn by him to his order and
endorsed by him and was deposited dn a private bank account of
Orville E. Hodge, then Auditor of Public Accounts of the State of
illinois. Dougherty at first testified that the check represented a
loan to a "friend" who was not a public official and whom he refused
to identify, and indicated that he did not know how the check had
reached Hodge's account. Later he was recalled and he again re-
fused to identify the recipient of the check, claiming his privilege
against self-incrimination. He was directed to answer pursuant to
the immunity provision of section 18 (e) of the Act, whereupon he
identified the person for whom he issued the check as Hodge and
disclosed other information which directly contradicted his prior
sworn testimony.
Private proceedings were instituted pursuant to rule II (e) of the
Commission's Rules of Practice to determine whether Dougherty
. should be temporarily or permanently denied the privilege of prac-
ticing before the Commission. After a private hearing the Commis-
sion issued its opinion 11 in which it found that Dougherty's sworn
testimony contained false and misleading statements and that in giving
such testimony he had engaged in improper professional conduct. It
ordered that Dougherty be denied the privilege of practicing before
the Commission until he obtained the Commission's approval. Sub-
sequently, Dougherty filed an application for reinstatement, and the
Commission, giving consideration to his age, the fact that he had
engaged in active and substantial practice for 38 years without having
been involved tin any other case of improper professional conduct,
the serious financial loss resulting from his disqurulification, his
8 For additional details concerning the Walters case see page 173 of the 23rd Annual Re-
port; for additional details concerning the Donaldson and Bowler cases see page 198 of
the 22nd Annual Report.
• Holding Company .Act Release No. 13567 (October 18,1957).
expression of contrition and his representation that his future pro-
fessional conduct would be beyond question, readmitted him to practice
before it.10
On May 5, 1957, the Commission pursuant to rule II (e) of its
Rules of Practice instituted private proceedings against Morris Mac
Schwebel, a New York attorney, to determine whether he should be
temporriy or permanently denied the privilege of practicing before
the Commission because of unethical and improper professional con-
duct in connection with his representation of clients before the
Commission.
Schwebel filed a complaint ill the District Court for the District
of Columbia for a preliminary injunction and temporary restraining
order enjoining the members of the Commission from prosecuting
disciplinary proceedings against him. In granting the Commission's
motion to dismiss the complaint, the District Court held that, because
00: the particular delicacy of an attorney's good reputation, it had
jurisdiction to determine whether the Commission had authority to
maintain the rule II (e) proceeding without first requiring Schwebel
to exhaust his administrative remedies, but that under the Commis-
sion's general statutory powers to prescribe rules necessary for the
execution of its functions the Commission has implied authority to
establish qualifications for attorneys practicing before it and to take
disciplinary action against those found guilty of unethical profes-
sional conduct. The Court further held that the Commission had
not violated section 9 (b) of the Administrative Procedure Act in
instituting the proceeding without first giving Schwebel an oppor-
tunity to demonstrate or achieve compliance,"
An appeal was taken by Schwebel to the Court of Appeals for the
District of Columbia Oircuit which, in a per curiam decision, affirmed
the decision of the District Court, stating, "though we think the
District Court was right ill dismissing the complaint, we think the
plaintiff failed to exhaust his administrative remedy and the court
therefore erred in ruling on the Commission's authority to disbar
attorneys." 12 Schwebel filed a petition for writ of certiorari which
was denied on ApriJI 7, 1958.13
The Commission's administrative proceeding under rule II (e) was
pending at the close of the fiscal year.
COMPLAINTS AND INVESTIGATIONS
The statutes administered by the Commission specifically authorize

investigations to determine whether violations of their provisions
10 Holding Company Act Release No. 13716 (AprlI2, 1958).

u Schwebe~v. Omck et al., 153 F. Supp. 701 (1957).
12 Schwebel v. Omck et a~.,251 F. 2d 919 (C.A. D.C. 1958).
12 Schwebel v. Omok et al., 356 U.S. 927.
have occurred. The nine regional offices,with the assistance of their

branch offices,are chiefly responsible for the conduct of such investiga-
tions. The Division of Trading and Exchanges, which exercises gen-
eral supervision over, and coordination of, regional officeinvestigative
activities, examines and analyzes the results of investigations periodi-
cally and recommends appropriate action to the Commission, giving
serious consideration in each case to the recommendation of the
regional office.
Complaints or inquiries from the investing public are a major source
of information leading to investigations. If, after careful considera-
tion of the information received from these or other sources, it appears
that violations may have occurred, a preliminary investigation may
be made. In some cases the preliminary investigation will disclose
a violation due to ignorance of the law or some misunderstanding and,
where no serious harm to the public is involved, no further action is
ordinarily taken, except to inform the offender of the violation and
to insure that steps are taken for future compliance.
However, if the preliminary investigation indicates a more serious
violation or the need to acquire more facts, the case is docketed and
a full investigation is made, sometimes involving the issuance by the
Commission of a formal order of investigation appointing members
of its staff as officers to issue subpoenas and take testimony under oath.
During the year, seventy-six formal orders of investigation were
issued. Care is exercised by the Commission and its staff to keep
investigations private until some official action is taken by the Com-
mission. The non-public nature of the investigation serves to pro-
tect innocent parties who may be involved and contributes largely
to the effectiveness of such investigations.
After an investigation has been completed and reviewed by both
the regional office concerned and the Division of Trading and Ex-
changes, a report of the investigation prepared by the regional office
is submitted to the Commission for decision together with the recom-
mendations of the regional and principal office. The Commission
then has several courses of action available to it.
If it decides the public interest requires criminal action be taken,
the Commission may refer the evidence to the Department of Justice.
In such a case members of the staff most familiar with the situation
assist the Department of Justice and the United States Attorney
assigned to the matter in presentation of the case to the Grand Jury
and, where an indictment is returned, with the prosecution of the case.
At other times the Commission may, when such action is warranted,
authorize institution of a civil proceeding for injunctive relief or
institute administrative proceedings.
TVVENTY-FOURTH ANNUAL REPORT 177
The Commission may, if it considers it appropriate, close the in-
vestigation. A case may be closed when all possible legal steps have
been taken or when any action taken would be ineffective; for example,
when the subject has fled the country with little chance of his return
or when the damage is so slight that further action is not warranted.
Before a case is closed, however, it is carefully examined by both the
staff of the regional officeconcerned and the staff of the principal office
to determine if any other course of action is practical or warranted
before closing is recommended to the Commission.
The following table reflects in summarized form the investigative
activities of the Commission during the fiscal year:
Investigations of possible violations of the Acts administered by the Commission
Preliminary Docketed Total
Pending June 30,1957 _____________________________________________ 736 986

New cases ________________________________________________________ 250
157 290 447
Transferred from prelimmary _____________________________________ 35 35
------~------
TotaL __________________________________________• _______. __.
407 1,061 1,468
Closed. ___________________________________________________________
181 293 474
'I'ransferred to docketed __... __• _______ . ____ . ______ . _______________ 35 -----~----- 35
Pending at June 30, 1958 _________________• _. _________________• ____ 191 768 959
ENFORCEMENT PROBLEMS WITH RESPECT TO CANADIAN SECURITIES
The Commission continues to be confronted with serious enforce-

ment problems arising from the offer and sale of securities by Cana-
dian issuers and broker-dealers in violation of the registration pro-
visions of the Securities Act. Solution of these problems remains
difficult since the Commission is without authority to conduct inves-
tigations outside the United States and the evidence necessary to
establish proof of such violations in most of these cases, as well as the
violators, are usually located in a foreign country, beyond our sub-
pena power. However, action is taken by the Commission to pro-
hibit such violations in cases where personal service can be obtained
in the United States.
The problems arising under the Supplementary Extradition Con-
vention between the United States and Canada and the narrow con-
struction placed on this agreement by Canadian courts were discussed
in the 22nd Annual Report. Negotiations seeking to solve this prob-
lem are continuing through appropriate diplomatic channels.
In the meantime, effective enforcement work in this area is depen-
dent almost wholly upon cooperation between this Commission and
the Canadian provincial enforcement authorities. There is no Do-
486867-59-13
mimon securities legislation, but each Province has its own legis-
lation. In general excellent cooperation has been obtained during
the fiscal year from the Provinces in the enforcement work of the
Commission. Upon being supplied by this Commission with evi-
dence that Canadian residents were engaged in violating the laws of
the United States some of the Provinces have taken action under their
respective statutes. The Canadian registrations of six broker-dealers
were canceled or suspended by provincial authorities during the past
fiscal year following receipt of information supplied by this Com-
mission.
With the cooperation of Canadian authorities this Commission
brought three injunctive actions during the past .fiscal year based
upon the illegal sale of Canadian securities in the United States.
Additional details concerning these actions, in S. E. O. v, James O.
Graye, doing business as J. O. Graye 00. et al., S. E. o. v, Alan Russell
Securities, Inc.; and S. E. O. v, J. H. Lederer 00., Inc., are described
above in the section on Litigation under the Securities Act of 1933.14
Further proceedings were also had in the case of S. E. O. v, Kaieer
Development Corporation. Limited and E. David Novelle, referred to
in the 23rd Annual Report," Permanent injunctions were issued by
the court, restraining the defendants from further violations of the
registration and anti-fraud provisions of the Securities Act.
The Commission continues to maintain its "Canadian Restricted
List," which is a list of the names of Canadian issuers whose securi-
ties the Commission has reason to believe recently have been, or cur-
rently are being, offered and sold in the United States in violation of
the Securities Act of 1933. The list is designed to warn investors
of the possible risks involved in their purchase of unregistered Cana-
dian securities and to alert broker-dealers to possible illegal dis-
tributions of Canadian securities so they may avoid participation in
such distributions.
Names are added to and deleted from this list as circumstances
warrant. During the fiscal year 1958, fourteen supplements were
issued which added .fifty names to the list and deleted two others.
On May 5, 1958, the Canadian Restricted List was revised and con-
solidated, resulting in the deletion of the names of seventy-nine com-
panies concerning whose securities the Commission had no evidence
of a public offering and sale in the United States during the last five
years," In many instances, the companies were no longer in exist-
ence. This list as presently constituted, totals 201 names .
.. Pp. 51-53, supra.

uP. 56.
•1 Securities Act Release No. 3924.
The current list, reflecting additions and deletions to December 1,
1958, follows:
CANADIAN RESTRICTED UST
Aero Mining Corporation DeVille Copper Mines Limited

Alba Explorations Limited Diadem Mines Limited
Aldor Exploration and Development Dolmac Mines Limited
Company Limited Dolsan Mines Limited
Algro Uranium Mines Limited Dubar Exploration Limited
A. L. Johnson Grubstake Dupont Mining Company Limited
Alouette Mines Limited Eagle Plains Explorations Limited
Alscope Explorations, Inc. East Trinity Mining Corporation
Amican Petroleum and Natural Gas Eastern-Northern Explorations Limited
Corporation Limited Embassy Mines Limited
Anthony Gas and Oil Explorations Explorers Alliance Limited
Limited Export Nickel Corporation of Canada
Apollo Mineral Developers Inc. Limited
Atlas Gypsum Corporation Limited F'algar Mining Corporation Limited
Augdome Exploration Limited Famous Gus Uranium Mines Limited
Barite Gold Mines Ltd. Fleetwood Yellowknife Mines Limited
Basbary Gold Mines Limited Forbes Lake Mining Corporation
Basic Minerals Limited Limited
Beaucoeur Yellowknife Mines Limited Glacier Explorers Ltd.
Belleehasse Mining Corporation Limited Golden Hope Mines Limited
Black Crow Mines Limited Granwick Mines Limited
Bli-Riv Uranium and Copper Corpora- Great Valley Exploration and Mining
tion Limited Limited
Blumont Mines Limited Halstead Prospecting Syndicate
Britco Oils Limited Harvard Mines Limited
Oabanga Developments Limited Hercules Uranium Mines Limited
Calumet Uranium Mines Limited Hoover Mining and Exploration Limited
Cameron Copper Mines Limited Huddersfield Uranium and Minerals
Camoose Mines Limited Limited
Canada Radium Corporation Limited International Ceramic Mining Limited
Canadian Alumina Corporation Limited Irando Oil and Exploration Limited
Canadian Natural Resources Limited Jacobus Mining Corporation, Ltd.
Can American Copper Limited Jilbie Mining Company Limited
Canso Mining Corporation Limited Judella Uranium Mines Limited
Casa Loma Uranium Mines Limited Kaiser Development Cor p 0 rat ion
Cavalcade Petroleums Limited Limited
Cavalier Mining Corporation Limited Kamis Uranium Mines Limited
Centurion Mines Limited Key West Exploration Company Limited
Cessland Gas and Oil Corporation Kirk-Hudson Mines Limited
Limited Lake Kingston Mines Limited
Colonial Asbestos Corporation Limited Lake Otter Uranium Mines Limited
Comet Petroleums Limited Lake Superior Iron Limited
Coneor-Ohibougamau Mines Limited Lama Exploration and Mining Company
Consolidated Easter Island Mines Limited
Limited Lambton Copper Mines Limited
Consolidated Quebec Yellowknife Mines Landolac Mines Limited
Limited Langis Silver and Cobalt Mining Com-
Consolidated Thor Mines Limited pany Limited
Continental Consolidated Mines and Lavandin Mining Company
Oils Corporation Limited Lee Gordon Mines Limited
Continental Mining Exploration Ltd. Lindsay Explorations Limited
Continental Uranium Corporation Lithium Corporation of Canada Limited
Limited Loranda Uranium Mines Limited
Copper Island Mining Company Limited Lucky Creek Mining Company Limited
Copper Prince Mines Limited Lynwatin Nickel Copper Limited
Cordon Cobalt Mines Limited Madison Mining Corporation Limited
Courageous Gold Mines Limited Mallen Red Lake Gold Mines Limited
Cove Uranium Mines Limited Marian Lake Mines Limited
Cree Mining Corporation Limited Marpic Explorations Limited
David Copperfield Explorations Limited Marvel Uranium Mines Limited (for-
Demers Chibougamau Mines Limited merly Marvel Rouyn Mines Limited)
Dencroft Mines Limited Masters Oil and Gas Limited
Derogan Asbestos Corporation Limited Mercedes Exploration Company Limited
Desmont Mining Corporation Limited Mexicana Explorations Limited
Mexuscan Development Corporation Rockcroft Explorations Limited

Mid-West Mining Corporation Limited Rouandah Oils and Mines Limited
Min-Ore Mines Limited (formerly Ryan Saskalon Uranium & Oils Limited
Lake Mines Limited) Sastex Oil and Gas Limited
Monpre Mining Company Limited Sentry Petroleums Limited
Monpre Uranium Exploration Limited Sheba Mines Limited
Montclair Mining Corporation Limited Sheraton Uranium Mines Limited
l\fontco Copper Corporation Limited Shoreland Mines, Ltd.
Nationwide Minerals Limited Skyline Uranium and Minerals Corpo-
Nealon Mines Limited ration Limited
New Campbell Island Mines Limited St. Pierre & Miquelon Explorations Inc.
New Faulkenham Mines Limited St. Stephen Nickel Mines Limited
New Goldvue Mines Limited Stackpool Mining Company Limited
New Hamil Silver-Lead Mines Limited Sudbay Explorations and Mining
New J'ack Lake Uranium Mines Limited Limited
New Lafayette Asbestos Company Surety Oils and Minerals Limited
Limited Tamara Mining Limited
New Metalore Mining Company Limited Tamicon Iron Mines Limited
New Spring Coulee Oil and Minerals Ta urcanis Mines Limited
Limited Temanda Mines Limited
New Vinray Mines Limited Three Arrows Mining Explorations
Norcopper and Metals Corporation Limited
Normalloy Explorations Limited Titan Petroleum Corporation Limited
Normlngo Mines Limited Torbrook Iron Ore Mines Limited
Norseman Nickel Corporation Limited Trenton Mines Limited
North American Asbestos Co. Limited Trio Mining Exploration Limited
North Gaspe Mines Limited Trio Uranium Mines Limited
Northwind Explorations Limited Triton Mines and Metals Corporation
Nortoba Mines Limited Limited
Nortoba Nickel Explorations Limited Triton Uranium Mines Limited
Nu-Reality Oils Limited Trojan Consolidated Mines Limited
Nu-World Uranium Mines Limited United Copper and Mining Limited
Oakridge Mining Corporation Limited United Uranium Corporation Limited
Obabika Mines Limited Val Jon Exploration Limited
Ordala Mines Limited Valray Explorations Limited
Pantan Mines Limited Vanguard Exploration Ltd.
Paramount Petroleum and Mineral Venus Chibougamau Mines Limited
Corporation Limited Vico Explorations Limited
Plexterre Mining Corporation Limited Virginia Mining Corp.
Principle Strategic Minerals Limited Viscount Oil & Gas Limited
Purdex Minerals Limited Wakefield Uranium Mines Limited
Quebank Uranium Copper Corporation Wayne Petroleums Limited
Quebec D eve lop e r s and Smelters Webbwood Exploration Com pan y
Limited Limited
Quebec Graphite Corporation
Quinalta Petroleum Limited Westore Mines Limited
Regal Minerals Limited West Plains Oil Resources Limited
Resolute Oil and Gas Company Limited Westville Mines Limited
Ridgefield Uranium Mining Corporation Whitney Uranium Mines Limited
Limited Winston Mining Corporation Limited
Riobec Mines Limited Woodgreen Copper Mines Limited
SECTION OF SECURITIES VIOLATIONS

A Section of Securities Violations is maintained by the Commission
as a part of its enforcement program to provide a further means of
detecting and preventing fraud in securities transactions. The Sec-
tion maintains files providing a clearing house for other enforcement
agencies for information concerning persons who have been charged
with violations of various Federal and State securities statutes. Con-
siderable information is also available concerning violators resident
in the provinces of Canada. The specialized information in these files
is kept current through the cooperation of the United States Post
Office Department, the Federal Bureau of Investigation, parole and
probation officials, State securities authorities, Federal and State
prosecuting attorneys, police officers, better business bureaus, cham-
bers of commerce and other agencies. At the end of the fiscal year
these records contained information concerning 65,563 persons against
whom Federal or State action had been taken in connection with
securities violations. In keeping these records current, there were
added during the fiscal year items of information concerning 8,942
persons, including 2,959 persons not previously identified in these
records.
The Section issues and distributes quarterly a Securities Violations
Bulletin containing information received during the period concern-
ing violators and showing new charges and developments in pending
cases. The Bulletin includes a "Wanted" section listing the names
and references to bulletins containing descriptive information as to
persons wanted on securities violations charges. The Bulletin is dis-
tributed to a limited number of cooperating law enforcement officials
in the United States and Canada.
Extensive use is made of the information available in these records
by regulatory and law enforcing officials. During the past year the
Commission received 3,475 "securities violations" letters or reports
and dispatched 1,633 communications to cooperating agencies.
ACTIVITIES OF THE COMMISSION IN ACCOUNTING AND AUDITING
Successive reports of the Commission have called attention to the

fact that the detailed provisions of the several acts administered by
the Commission recognize the importance of dependable informative
financial statements which disclose the financial status and earnings
history of a corporation or other commercial entity. These state-
ments, whether filed in compliance with the statutes administered by
the Commission or included in other material available to stockholders
or prospective investors, are indispensable to investors as a basis for
investment decisions.
The Congress recognized the importance of these statements and
that they lend themselves readily to misleading inferences or even
deception, whether or not intended. It accordingly dealt extensively
in the several statutes administered by the Commission with financial
statement presentation and the disclosure requirements necessary to
set forth fairly the financial condition of the company. Thus, for
example, the Securities Act requires the inclusion in the prospectus
of balance sheets and profit and loss statements "in such form as the
Commission shall prescribe" 17 and authorizes the Commission to pre-
11 Section 10(a) (1). (SchedUle A, pars. 25, 26).

scribe the "items or details to be shown in the balance sheet and earn-
ings statement, and the methods to be followed in the preparation of
accounts * * *.":18 Similar authority is contained in the Securities
Exchange Act,:l9 and more comprehensive power is embodied in the
Investment Company Act 20 and the Holding Company ActP
The Securities Act provides that the financial statements required
to be made available to the public through filing with the Commis-
sion shall be certified by "an independent public or certified account-
ant." 22 The other three statutes permit the Commission to require
that such statements be accompanied by a certificate of an independ-
ent public accountant," and the Commission's rules require, with
minor exceptions, that they be so certified. The value of certification
by qualified accountants has been conceded for many years, but the
requirement as to independence, long recognized and adhered to by
some individual accountants, was for the first time authoritatively
and explicitly introduced into law in 1933. Out of this initial pro-
vision in the Securities Act and the rules promulgated by the Com-
mission," and the action taken by the Commission in certain cases,"
have grown concepts of accountant-client relationships that have
strengthened the protection given to investors.
The Commission's standards of independence are stated in rule
2-01, paragraphs (b) and (c), of Regulation S-X which provides
among other things that "an accountant will be considered not inde-
pendent with respect to any person or any of its parents or sub-
sidiaries in whom he has, or had during the period of report, any
direct financial interest or any material indirect financial interest;
or with whom he is, or was during such period, connected as a pro-
moter, underwriter, voting trustee, director, officer or employee." 26
In determining whether an accountant may in fact be not independent
with respect to a particular person, the Commission will give appro-
priate consideration to all relevant circumstances, including evi-
dence bearing on all relationships between the accountant and that
person or any affiliate thereof.
In the recent revision of this rule the Commission has recognized
the impact of mergers and the growth of corporations through wide-
spread affiliations. The emphasis in the rule has been changed to
11 Section 19(a).
:IllSection 13 (b).
,., Sections 30, 3l.
21 Sections 14, 15.
"" Section 10(a) (1) (Schedule A, paragraphs 25,26).
s> Securities Exchange Act, section 13(a) (2) ; Investment Company Act, Section 30(e) ;
Holding Company Act, section 14.
M See, for example, rule 2-01 of Regulation S-X .
.., See, for example, Securities Exchange Act Release No. 3073 (1941); 10 S. Eo C. 982
(1942) ; and Accounting Series Release No. 68 (1949) .
.. Rule 2-01 of Regulation S-X as amended April 8, 1958. See Accounting Serles Release
No. 79.
make it clear that where the relationships described in the rule exist
the Commission will find that an accountant is in fact not independ-
ent with respect to the company involved, but in those instances
where lack of independence is not established the Commission will
make no finding with respect to the accountant's independence.
Several situations, described in the 22nd and 23rd Annual Reports,
in which accountants were not eligible under our rules to certify
financial statements because they were lacking in independence con-
tinue to cause difficulty. In many of these instances the accountants
and their clients were coming in contact with the Commission's filing
requirements for the first time and the reason for the lack of inde-
pendence was ownership by a member of the accounting firm of
stock of the client company during some of the periods certified. In
other cases the accountant or his firm may have been interested in
serving the client's management, or in some cases large stockholders,
in several capacities and in doing so had not taken care to main-
tain a clear distinction between giving advice to management and
serving as personal representatives of management or owners in mak-
ing business decisions for them. Many of these problems could be
avoided if the accountants would look forward to the day when the
public interest in their clients would require certification of financial
statements by independent public accountants.
As shown above, the statutes administered by the Commission give
it broad rule-making power with respect to the preparation and
presentation of financial statements. Pursuant to authority con-
tained in the statutes the Commission has prescribed uniform systems
of accounts for companies subject to the Holding Company Act; 27
has adopted rules under the Securities Exchange Act governing ac-
counting and auditing of securities brokers and dealers; and has pro-
mulgated rules contained in a single, comprehensive regulation,
identified as Regulation S-X,2S which govern the form and content of
financial statements filed in compliance with the several acts. This
regulation is implemented by the Commission's Accounting Series
releases, of which 80 have so far been issued. These releases were
inaugurated in 1937, and were designed as a program for making
public, from time to time, opinions and accounting principles, for the
purpose of contributing to the development of uniform standards
and practice in major accounting questions. The rules and regula-
tions thus established, except for the uniform systems of accounts,
prescribe accounting to be followed only in certain basic respects.
1tr Uniform System of Accounts for Mutual Service Oompanies and Subsidiary Service
Oompanies (effective August 1, 1936); Uniform System of Accounts for Public Utility
Holding aompanies (e1I'ective January 1, 1937; amended effective January 1, 1943) •
• Adopted February 21, 1940 (Accounting Series Release No. 12) ; revised December 20,
1950 (Accounting Series Release No. 70).
In the large area not covered by such rules, the Commission's principal
reliance for the protection of investors is on the determination and
application of accounting principles and auditing standards which
are recognized as sound and which have attained general acceptance.
Since changes and new developments in financial and economic
conditions affect the operations and financial status of the several
thousand commercial and industrial companies required to file state-
ments with the Commission, accounting and auditing procedures can-
not remain static and continue to serve well a dynamic economy. It
is necessary for the Commission to be informed of the changes and
new developments in these fields and to make certain that the effects
thereof are properly reported to investors. The Commission's ac-
counting staff, therefore, engages in studies of the changes and new
developments for the purpose of establishing and maintaining ap-
propriate accounting and auditing policies, procedures and practices
for the protection of investors. The primary responsibility for this
program rests with the chief accountant of the Commission who has
general supervision with respect to accounting and auditing policies
and their application.
Progress in these activities requires constant contact and coopera-
tion between the staff and accountants both individually and through
such representative groups as, among others, the American Account-
ing Association, the American Institute of Certified Public Account-
ants, the American Petroleum Institute, the Controllers Institute of
America, the National Association of Railroad and Utilities Commis-
sioners, the National Federation of Financial Analysts Societies, as
well as other government agencies. Recognizing the importance of
cooperation in the formulation of accounting principles and practices,
adequate disclosure and auditing procedures which will best serve
the interests of investors, the American Institute of Certified Public
Accountants, the Controllers Institute of America, and the National
Federation of Financial Analysts Societies regularly appoint com-
mittees which maintain liaison with the Commission's staff.
The many daily decisions of the Commission require the almost
constant attention of some of the chief accountant's staff. These in-
clude questions raised by each of the operating divisions of the Com-
mission, the regional officesand the Commission. This day-to-day ac-
tivity of the Commission and the need to keep abreast of current
accounting problems cause the chief accountant's staff to spend much
time in the examination and re-examination of sound and generally
accepted accounting and auditing principles and practices. From
time to time members of this staff are called upon to assist in field
investigations, to participate in hearings and to review opinions,
insofar as they pertain to accounting matters.
Prefiling and other conferences, in person or by telephone, with of-
ficials of corporations, practicing accountants and others, occupy a
considerable amount of the available time of the staff. This proce-
dure, which has proven to be one of the most important functions of
the office of the chief accountant, and of the chief accountant of the
Division of Corporation Finance and his staff, saves registrants and
their representatives both time and expense.
Many specific accounting and auditing problems arise as a result of
the examination of financial statements required to be filed with the
Commission. 'Where examination reveals that the rules and regula-
tions of the Commission have not been complied with or that appli-
cable generally accepted accounting principles have not been ad-
hered to, the examining division usually notifies the registrant by an
informal letter of comment. These letters of comment and the cor-
respondence or conferences that follow continue to be a most con-
venient and satisfactory method of effecting corrections and im-
provements in financial statements, both to registrants and to the
Commission's staff. Where particularly difficult or novel questions
arise which cannot be settled by the accounting staff of the divisions
and by the chief accountant, they are referred to the Commission for
consideration and decision. By these administrative procedures the
Commission deals with many accounting questions.
Inquiries in ever-increasing volume as to the propriety of partic-
ular accounting practices come from accountants and from companies
not presently subject to any of the acts administered by the Com-
mission who wish to have the benefit of the Commission's views and
thus utilize and apply the Commission's experience to the facts of
their own case. Teachers of accounting and their students also use
the public files and confer with the staff in the study of accounting
problems.
Cooperation between the Commission and professional groups in-
terested in improving financial reporting has been mentioned. An
example is the publication in April, 1958, by the Committee on Ac-
counting Procedure of the American Institute of Certified Public
Accountants of its Accounting Research Bulletin No. 49 dealing with
a number of the problems arising in connection with the computation
of earnings per share and the presentation of such statistics in pro-
spectuses, proxy material and annual reports to shareholders and
in the compilation of business earnings statistics for the press,
statistical services and other publications.
Appropriate determination of earnings per share has been a fre-
quent subject for comment by the staff in connection with filings
with the Commission. A decrease in improper presentations since
publication of the bulletin may fairly be credited in part to the wide
distribution of the bulletin. Such literature contributes to greater

uniformity in financial reporting, improves investor understanding,
and decreases staff time spent in processing material filed with the
Commission.
A further example of the importance of cooperation between the
staff and professional accounting organizations is found in the Com-
mission's authorization for its chief accountant to serve as a member
of the American Institute of Certified Public Accountants' Special
Committee on Research Program. This committee, the other mem-
bers of which are leaders of the accounting profession in public and
private practice and in teaching, was appointed to consider a new
approach to accounting research. Since investors in securities de-
pend upon the results of the accounting process, it is appropriate
that the Commission be represented in this endeavor to find a better
means for the development of generally accepted accounting prin-
ciples which serve as a guide for independent accountants practicing
before the Commission.
Some significant characteristics of the past year in the accounting
field may be mentioned. As in the prior two years, accounting for
mergers has again required much staff time in conferences with reg-
istrants and their accountants. Usually the problem has been to
determine the propriety of applying the pooling of interests concept
which avoids the booking of goodwill by using the accounting basis
of the constituent companies and permits the carrying forward of
the earned surplus of the parties to the merger.
In contrast to this desire of established companies to avoid the
recognition of intangibles is the insistence by promoters of new ven-
tures to place excessive valuations on the books for both tangible and
intangible properties. Examples during the past year have been
reminiscent of the early days of the Commission when it was found
necessary to deal vigorously with promotional ventures in which
shares of the issuer's stock were exchanged for assets of doubtful
value but were recorded at the par value of the shares issued. For
an example of this kind see the discussion of the Commission's deci-
sion In the Matter of the Fall River Power Oompany29 at page 39
of this report.
Another characteristic of the past year has been the number of
cases coming to the attention of our accountants in which a change
in accounting policy has been adopted or desired. Where a change
has appeared to be motivated by a desire to improve current earnings
by deferring the expensing of incurred costs, we have objected unless
it could be shown that the new method was clearly in the interest
of improved financial reporting in the long run. Accounting for
.. Securities Act Release No. 3932 (;rune 4,1958).

research and development costs for new products or expansion into
new sales territories are examples of this problem which require
further study.
Of a somewhat different order but a problem requiring further
study is the matter of accounting for pensions and other forms of
deferred compensation. There are so many difficulties in the way
of determining the amounts involved and the proper allocation of
such costs to accounting periods that a considerable lack of uni-
formity in accounting treatment persists between companies and be-
tween periods in the same company. Improvement in reported
earnings resulting from omission of any charge for pensions is an
extreme example of the problem which seems to be vulnerable to
severe criticisms but which has been defended when pensions have
been overfunded in prior years. These and other problems in the
reporting of corporate income are receiving active consideration by
the accounting profession and by the Commission's accounting staff.
OPINIONS OF THE COMMISSION
Opinions are issued by the Commission in contested and other cases
arising under the statutes .administered by it and under the Com-
mission's Rules of Practice, where the nature of the matter to be
decided, whether substantive or procedural, is of sufficient importance
to warrant a formal expression of views. These opinions include
detailed findings of fact and conclusions of law based on evidentiary
records taken before a hearing examiner who serves independently of
the operating divisions, or, in an occasional case, before a single Com-
missioner or the entire Commission. In some cases, formal hearings
are waived by the parties and the findings and conclusions are based
on stipulated facts or .admissions.
The Commission is assisted in the preparation of findings and opin-
ions by its Officeof Opinion Writing, a staff officecompletely indepen-
dent of the operating divisions of the Commission and directly respon-
sible to the Commission itself. The independence of the staff members
of this office reflects the principle, embodied in the Administrative
Procedure Act, of a separation between staff members performing
investigatory or prosecutory functions and those performing quasi-
judicial functions. In some cases, with the consent of all parties, the
interested operating division participates in the drafting of opinions.
Opinions are publicly released and distributed to representatives of
the press and to persons on the Commission's mailing list. In addi-
tion, the opinions are printed and published by the Government Print-
ing Office in bound volumes entitled "Securities and Exchange Com-
mission Decisions and Reports."
During the fiscal year 1958, the Commission issued findings and
opinions and other rulings in 121 cases of an adversary nature.
APPUCATIONS FOR NON.DISCLOSURE OF CERTAIN INFORMATION
The Commission is authorized under the various Acts administered

by it to grant requests for non-disclosure of certain types of informa-
tion which would otherwise be disclosed to the public in applications,
reports or other documents filed pursuant to these statutes. Thus,
under paragraph (30) of Schedule A of the Securities Act of 1933, dis-
closure of any portion of a material contract is not required if the
Commission determines that such disclosure would impair the value
of the contract and is not necessary for the protection of the investors.
Under section 24 (a) of the Securities Exchange Act of 1934, trade
secrets or processes need not be disclosed in any material filed with the
Commission, and under section 24 (b) of that Act written objection
to public disclosure of information contained in any such material may
be made to the Commission which is then authorized to make public
disclosure of such information only if in its judgment such disclosure
is in the public interest. Similar provisions are contained in section
22 of the Public Utility Holding Company Act of 1935 and in section
45 of the Investment Company Act of 1940. These statutory provi-
sions have been implemented by rules outlining the procedure to be
followed by persons applying to the Commission for a determination
that public disclosure is not necessary in a particular case.
The number of applications granted, denied or otherwise acted upon
during the year are set forth in the following table:
Applications for non-disclosure during 1958 fiscal year
Number
Number Number Number Number pending
pendinz received granted denied or June 30,
July 1, 1957 withdrawn 1958
Securities Act of 1933 , _____________________ 2 20 16 4 2

Securities Exchange Act of 1934 •__________ 3 16 7 8 4
Investment Company Act of 1940 3 ________ 0 6 6 0 0
Totals _______________________________ 12 6
5 42 29
, Filed under rule 485.

, FJled under rule 24b-2.
3 FJled under rule 45a-1.
STATISTICS AND SPECIAL STUDIES

The Section of Economic Research provides the Commission with
statistical information needed in the administration of the Securities
Acts and furnishes financial data to the Congress and other govern-
ment agencies as part of the overall Government Statistical Program
under the direction of the Bureau of the Budget.
The regular statistical series which are prepared include data on
securities effectively registered under the Securities Act of 1933,
offerings of securities by all corporations in the United States (in-
cluding issues not registered with the Commission, such as privately
placed issues and railroad securities), retirements of corporate securi-
ties, net change in corporate securities outstanding, stock prices and
trading. The research and statistical activity carried out under the
direction of the Bureau of the Budget includes individuals' saving in
the United States, income flow and investments of private pension
funds of United States corporations, current liquid position of United
States corporations, sources and uses of corporate funds, anticipated
expenditures for plant and equipment by United States businesses,
and a quarterly financial report for all United States manufacturing
concerns.
During the past year special effort was devoted to improvement in
methodology and source data for several of these series. A special
project was undertaken to re-examine the industrial classification of
all listed companies to comply with the revised Standard Industrial
Code of the Government, the revised codes for each company to be
published during the 1959 fiscal year. Plans were also laid for a de-
tailed survey of the assets and liabilities of all registered brokers and
dealers in the United States. During the year data were prepared for
two papers, the first of which was entitled "Implications of Pension
Fund Accumulations" delivered in September, 1957,before the Ameri-
can Statistical Association, and the second of which was "The Struc-
ture and Realization of Business Investment Anticipations" presented
in November, 1957, at the Conference on the .Quality and Economic
Significance of Anticipation Data, National Bureau of Economic Re-
search. There was also participation during the year in plans of the
National Bureau of Economic Research for a major study of the
Nation's pension funds. Certain basic data derived from the Com-
mission's surveys of corporate pension funds are to be provided in this
study.
The statistical series described below are published in the Commis-
sion's Statistical Bulletin and in addition, except for data on registered
issues, current figures and analyses of the data are published in quar-
terly press releases. The Commission's stock price index is released
weekly, together with the data on round-lot and odd-lot trading on
the two New York stock exchanges.
The various statistical series are as follows:
Issues Registered Under the Securities Act of 1933
Monthly and quarterly statistics are compiled on the number and

volume of registered securities, classified by industry of issuer, type
of security, and use of proceeds. Data for the 1958 fiscal year appear
on page 30-32 and in appendix tables 1 and 2.
New Securities Offerings
This is a monthly and quarterly series covering all new corpo-

rate and non-corporate issues offered for cash sale in the United
States. The series includes not only issues publicly offered but also
issues privately placed, as well as other issues exempt from regis-
tration under the Securities Act such as intrastate offerings and rail-
road securities. The offerings series includes only securities actually
offered for cash sale, and only issues offered for account of issuers.
Annual statistics on new offerings since 1953, as well as monthly fig-
ures from .Tanuary 1957 through .Iune 1958, are given in appendix
tables 3 and 4. A summary of the data is shown annually from
1934through June 1958in appendix table 5.
Corporate Securities Outstanding
Estimates of the net cash flow through securities transactions are

prepared quarterly and are derived by deducting from the amount
of estimated gross proceeds received by corporations through the
sale of securities the amount of estimated gross payments by corpo-
rations to investors for securities retired. Data on gross issues, re-
tirements and net change in securities outstanding are presented for
all corporations and for the principal industry groups.
Stock Market Data
Statistics are regularly compiled on the market value and volume

of sales on registered and exempted securities exchanges, round-lot
stock transactions of the New York exchanges for accounts of mem-
bers and non-members, odd-lot stock transactions on the New York
exchanges, special offerings and secondary distributions. Indexes
of stock market prices are compiled, based upon the weekly closing
market prices of 265 common stocks listed on the New York Stock
Exchange. The indexes are composed of 7 major industry groups,
29 subordinated groups, and a composite group.
Saving Study
The Commission compiles quarterly estimates of the volume and

composition of individuals' saving in the United States. The series
represent net increases in individuals' financial assets less net increases
in debt. The study shows the aggregate amount of saving and the
form in which the saving occurred, such as investment in securities, ex-
pansion of bank deposits, increase in insurance and pension reserves,
etc. The Commission has been cooperating in a program on national
saving covering government, business and individuals' saving, and sev-
eral changes and improvements have been made in the saving series in
the course of the last fiscal year. A reconciliation of the Commission's
estimates with the personal saving estimates of the Department of
Commerce, derived in connection with its national income series, is
published annually by the Commerce Department as well as in the
Securities and Exchange Commission Statistical Bulletin.
Corporate Pension Funds
An annual survey is made of pension plans of all United States

corporations where funds are administered by corporations them-
selves, or through trustees. The survey shows the flow of money into
these funds, the types of assets in which the funds are invested and
the principal items of income and expenditures.
Financial Position of Corporations
The series on working capital position of all United States cor-

porations, excluding banks, insurance companies and savings and loan
associations, shows the principal components of current assets and
liabilities, and also contains an abbreviated analysis of the sources
and uses of corporate funds.
The Commission, jointly with the Federal Trade Commission,
compiles a quarterly financial report for all United States manufactur-
ing concerns. This report gives complete balance sheet data and an
abbreviated income account, data being classified by industry and
size of company.
Plant and Equipment Expenditures
The Commission, together with the Department of Commerce, con-

ducts quarterly and annual surveys of actual and anticipated plant
and equipment expenditures of all United States business, exclusive
of agriculture. Shortly after the close of each quarter, data are re-
leased on actual capital expenditures of that quarter and anticipated
expenditures for the next two quarters. In addition, a survey is made
at the beginning of each year of the plans for business expansion
during that year.
PUBLIC DISSEMINATION OF INFORMATION
As indicated, one of the basic objectives of the Federal securities

laws is the public disclosure of financial and other information with
respect to securities so that they may be realistically appraised by
the investing public. Not only is the Commission a repository for a
vast amount of such information concerning several thousand com-
panies which are subject to the Commission's registration and report-
ing <requirements, but the data receive widespread circulation among
members of the investing public through the medium of the prospec-
tus on new issues, through the financial press and through various
securities manuals and statistical services used extensively by securi-
ties firms, investment advisers, investment companies, trust depart-
ments, insurance companies and others. Thus, the analysis and
evaluation of their securities by a broad segment of investors is made
possible.
To facilitate public dissemination of :financial and other proposals

filed with and actions by the Commission, a daily News Digest is
issued to the press containing a resume of these filings and actions.
For example, the News Digest contained a synopsis of each financing
proposal reflected in the 779 registration statements filed during the
year, as well as the 134 filings by investment companies increasing
the amount of securities previously registered. Much of this in-
formation is published in the daily newspapers and in financial and
other periodicals. Furthermore, most of the Commission's official
pronouncements take the form of orders, decisions and rules, copies
of which are issued in "release" form to mailing lists comprising the
names of persons who have requested particular types of releases.
During the year, a total of 800 such releases were issued and dis-
tributed to these lists; and a resume of each was included in the
News Digest. Another 77 releases were issued announcing the results
of the Commission's regular statistical studies referred to at page 188
hereof. An additional 173 releases were issued announcing actions
with respect to court injunctions and criminal prosecutions, plus 33
miscellaneous releases.
In order that the investing public may better understand the Com-
mission's role of investor protection, the Chairman, other members of
the Commission and staff officials frequently deliver addresses before
local groups or participate in radio or television discussions of the
Commission's functions and activities. They also address profes-
sional and trade bodies to discuss particular aspects of the Commis-
sion's law enforcement activities or its general policies and practices.
In addition, they make themselves available for interview by repre-
sentatives of the press, individually or collectively, particularly when
visiting financial centers throughout the country.
To alert the public to the risks involved in buying securities from
unknown sources, such as the "boiler room" operators discussed in
Part I of this report, the Commission has distributed more than
60,000 copies of an "Investors Beware" poster setting forth a 10-point
guide for prospective purchasers of securities.' With the cooperation
1 The poster warns Investors to observe the following ten-point guide to safer
investments :
1. Before buying . • • Think!
2. Don't deal with strange securities flrms. (Consult your broker!)
3. Beware of securities offered over the telephone by strangers.
4. Don't listen to high-pressure sales talk.
5. Beware of promises of spectacular profits.
6. Be sure you understand the risks of loss.
7. Don't buy on tips and rumors ... Get all the facts I
8. Tell the salesman to: Put all the information and advice in writing and mail
it to you ..• Save it I
9. If you don't understand all the written information ... Consult a person
who does.
10. Give at least as much consideration to buying securities as you would the pur-
chase of any valuable property.
of the Post Office Department copies of the poster have been placed
on the bulletin boards of all post offices in the United States and the
Federal Deposit Insurance Corporation has assisted the Commission
in distributing copies of the poster to all insured banks. In addi-
tion, copies have also been distributed to state securities commissioners,
securities exchanges, brokers and dealers, better business bureaus,
chambers of commerce and other organizations interested in the pre-
vention of fraud in the offer and sale of securities.
Information Available lor Public Inspection
During every fiscal year thousands of requests for information are

received by mail and through telephone calls and personal visits.
Most of these requests are answered by employees in the Commission's
public reference rooms in 'lVashington, Chicago, and New York City.
The files of the Commission provide information of interest to a
large cross section of the public. Numerous people visit the public
reference rooms seeking information on which to base decisions to
buy or sell securities; they are furnished the files which contain finan-
cial and other information about the issuers of the securities. Many
visitors, on the other hand, consult Commission records. They may
be representatives of business or financial journals, or students doing
research for theses or other projects. Research of a slightly different
nature is carried on by representatives of legal and accounting firms,
corporations and labor unions; they are interested largely in gather-
ing information to be used as specimens, as precedent material, or
for other specialized purposes. The inquiries received through the
mails and over the telephone follow the same pattern .
. Copies of any public information filed with the Commission may be
examined at the principal officein Washington, D. C. Such informa-
tion includes registration statements, applications and declarations
filed under the various statutes administered by the Commission, to-
gether with the records of agency action. In Washington, as in the
regional offices,space considerations have necessitated the transfer of
some of this material to warehouse-type space in nearby federal
records centers. Files from these centers are usually available with-
in twenty-four hours.
The New York Regional Office has copies of recent filings made
by companies having securities listed on exchanges other than the
New York Stock Exchange and the American Stock Exchange," and
copies of current filings of many companies which have effective reg-
.. Reports of Hsted companies on the New York and American stock exchanges may be
seen at the exchange offices.
486867-59-14
istration statements under the Securities :Act of 1933. The Chicago

Regional Office has copies of recent reports of companies which have
securities listed on the New York and American stock exchanges.
All regional officeshave copies of prospectuses used in recent public
offerings of securities registered under the Securities Act, of active
broker-dealer and investment adviser registration applications origi-
nating in their respective regions and of Regulation A letters of noti-
fication filed in their respective regions.
The public reference room in Washington had about 3,400 visitors
during the fiscal year. Requests were filled for an additional 28,500
persons who were sent almost 660,000 copies of Commission publi-
cations. More than 112,000 photocopy pages of information were
sold pursuant to over 2,000 orders.
Additional thousands of persons made use of the facilities pro-
vided by the New York and Chicago public reference rooms.
PUBUCATIONS
Publications issued during the fiscal year included:

Monthly:
Statistical Bulletin.
Official Summary of Security Transactions and Holdings of
Officers, Directors, and Principal Stockholders.
Quarterly:
Financial Reports, U. S. Manufacturing Corporations
(Jointly with the Federal Trade Commission) .
Plant and Equipment Expenditures of U. S. Corporations
(Jointly with the Department of Commerce).
New Securities Offered for Cash.
Volume and Composition of Individual's Saving.
Working Capital of U. S. Corporations.
Annually:
Securities Traded on Exchanges under the Securities Ex-
change Act of 1934, as of December 31, 1957.
Companies Registered under the Investment Company Act
of 1940, as of December 31, 1957.
Twenty- Third Annual Report of the Commission.
Other publications:
Volume 37 of the Decisions and Reports of the Commission,
(to June 30, 1957).
The Work of the Securities and Exchange Commission (edi-
tion of August 20, 1957) .
Amendment, dated November 5,1957, to Statement of Policy
under the Investment Company Act of 1940.
ORGANIZATION
The staff of the Commission is composed of lawyers, accountants,

engineers, security analysts and examiners, and administrative and
clerical employees. It is divided into divisions and offices,including
nine regional offices and eight branch offices.
Under the Commission's program of continuing review of its or-
ganization and functions, a number of changes were made during
the fiscal year in the interest of increased efficiency.
On December 15, 1957, the New York Regional Officewas realigned
to provide for a more functional organization. Corporate reorgani-
zation work under Chapter X of the Bankruptcy Act was transferred
from the Branch of Operations to a new Branch of Reorganization.
The remaining functions of the former Branch of Operations, i. e.,
interpretative work and the administration of Regulation A, were
assigned to a new Branch of Interpretations and Small Issues.
In December 1957, a Branch of Examination and Training was
established in the Division of Corporation Finance for the purpose
of initiating, developing and executing a training program for pro-
fessional employees assigned to the Division. The training activities
of this Branch supplement those conducted in the various Branches
of Corporate Analysis and Examination as part of the day-to-day
employee development resulting from work assignments. All new
employees are assigned to the Branch of Examination and Training
for intensive job instruction, as are middle-level employees who
have demonstrated the growth potential for supervisory positions.
The Commission established a Branch Office of the Atlanta Re-
gional Office in Miami, Florida, on March 3, 1958, and a Branch
Office of the Fort Worth Regional Office in Houston, Texas, on
April 14, 1958.31 The establishment of these Branch Officeswill not
increase overall personnel requirements but will enable the Commis-
sion to increase the effectiveness of its investigative activities and its
broker-dealer inspection program in those areas in the public interest.
PERSONNEL, BUDGET AND FINANCE
The following comparative table shows the personnel strength of

the Commission as of June 30, 1957 and 1958:
June 30, 1958 June 30, 1957
Commissioners _________________
- ___-- -- --- -- - ---- -- -- -- -- --- --- --------- 5 ---------. 4
Staff:
Headquarters Office ________________ .-- -- -- - - - -- -- -- -- - - -- - 543
------874- 480 -------780
Regional Offices ________- ---- - - - - - - -- - - - - --- - - -- -- - -- - - -- - -- 331 300
--- -- --- ---784
TotaL _____________________
-___- --- -- -- ---- -- --- --- ------ -----_.--- 879 -----_ .... -
.. On October 21, 1958, the Commission announced the establishment of a Branch Office
of the Chicago Regional Office in St. Louis, Missouri. .
The table on the opposite page shows the budget estimates of the
Commission, the recommendations of the President, the appropriation
actions of the House of Representatives, the Senate and the House-
Senate conferees and the appropriations (including supplementary
appropriations for statutory pay increases) made for the Commissiot~
by the Congress for the fiscal years 1949-1959.
The Commission is requitwi by law to collect fees for registration of
securities issued, qualification of trust indentures, registration of
exchanges, and sale of copies of documents filed with the C o m m i s s i ~ n . ~ ~
The following table shows the Commission's al~propriations,total
fees collected, percentage of fees collected to total appropriation, and
the net cost to the taxpayers of Commission operations for the fiscal
years 1956,1957, and 1958 :
Percentage
ApPmPria-
I
1 lncludcs to mver statiltow pay illcmases.
$235 WO
1 1 Feessrodtmkited inthe generali~ndafthe Treasury and are not a!.8llabla for expenditure by the Com-
mission.
I n furtherance of the objectives of the Joint Accounting Improve-

ment Program, an Imprest Fund was established in Headquarters as
we]! as in the New York Regional Office for the purpose of simplifying
the procurement and payment procedures of the Commission.
Psrsonael Pmgram
During fiscal 1958 the Commission continued to give specicial
emphasis to its ~ecruitmentprogram designed to attract outstanding
college and law school graduates for starting professional level posi-
tions such as financial analyst, attorney, and investigator. Through
on-campus ~nterviewsand contacts with the placement offices of vari-
ous colleges and universities, the Commission was successful in ap-
pointing to its staff a substantial number of well qualified applicants
of college caliber.
On March 31,1958 the Commission approved a Promotion P r o g r m ~
Policy and Guidelines statement as required by the Civil Service
Commission's new government-wide Merit Promotion Program. The
p r o g r m statement was developed with the active assistance of Divi-
sion and Office Heads and the v ~ e n sand coniments of employees also
~ * P r i n e l p a rl ates are (1) 1/100 of 1 percent of the maximum aggregate price of s e w .
nties proposed to be offered but not less than $26: (21 1/600 of 1 percent of the aggregate
dollar amount of stock exchange transactions. Fees for other services are only nominal.
Action taken on budget estimates and appropriations from ;fi8eal1949 through ;fi8eal 1959
F1sca119ti1 FIsca119liO FIsca11951 FIsca11952 Flscal1953 Ftscal19M FIsca11955 FIsca11l156 Fiscal 1957 F1sca11958 Fiscal 1959
Action
Average Average Average Average Average Average Average Average Average Average Average
employ- Money employ- Money employ- Money employ. Money employ- Money employ- Money employ- Money employ. Money employ. Money employ- Money employ. Mone)'
ment ment ment ment ment ment ment ment ment ment ment
Commission's estimate to the B1lnl6I1of the

Budget ___"_. __'_. ___" __•___•___•__•____••• 1,400 $6,684,800 1,307 $6,789,400 1,175 $6,675,000 1,127 $6,005,000 1,092 $6,360,000 1,080 $6,810,000 780 $5,124,760 734 $4,997,000 794 $5,749,000 935 $7,178,000 974 $7,500,000
Excess over President's Budget ••_________ ••• _. -155 -684,800 -177 -819,400 -40 -250,000 -77 -681,000 -157 -410,000 -142 -810,000 -63 -299,760 --------- ------------- --------- ---------- .._- -- ........ --- ------- ... ----- -58 -400.000
Amount recommended in President's Budget; 1,245 6,000,000 1,130 5,970,000 1,135 6,425,000 1,050 5,924,000 935 5,950,000 938 6,000,000 717 4,825,000 734 4,997,000 794 5,749,000 935 7,178,000 916 7,100,000
Aetlon by the House of Representatives __•• ___ -89 -173,860 -70 -220,000 -95 -295,000 -50 -225,000 -125 -704,920 -152 -754,920 -26 -125,000 -9 -122,000 -8 -49,000 -80 -478,000 -46 -300,000
Subtotal __•____._. __•__________ •••• __•__• 5,699,000 5,245,080 786

---- 5,245,080 4,700,000
1,156 5,826,140 1,060 5,750,000 1,040 6,130,000 1,000 810 691 72.5 4,875,000 786 5,700,000 855 6,700,000 870 6,800,000
Aetlon by the senate_ •• __._. __._. ____________ • ............ __ .. _---_ -_ .._-.- ..- --_ ............... - ... -
----_ .. ..- +44 +200,000 -93 -lW,520 --_ .. _ ..... - .. ------_ ..... --- -42 -245,080 +14 +75,000 +9 +122,000 +8 +49,000 --------- ------------- +46 +300,000
SubtotaL __ •__•___•_________________ • ___ 1,156

-----
5,826,140 1,060 5,750,000 1,084 6,330,000 907 .5,378,480 810 5,245,080 744 5,000,000 705 4,775,000 734 4,997,000 794 5,749,000 855 6,700,000 916 7,100,000
Action by contereeB._._. ___._. __•_______
•• ___• -----_ .. _- -_ .... _-.- .. ---- - ....--.--- _---
- ..... - .......... -22 -100,000 ---- ..- ....... ----------- ..- ------ ..- .. --_ .._----_ .... - -------- .. .... -_ ......... _ ..- ..... -6 -2.5,000 -4 -42,000 _ ..... - ... _--- ------------- --------- ------------- ----- .. - .. - ------ ..... - ......
Annual appropriation. __•_________

• ___•••• _•• _
----- ----
1,156 5,826,140 1,060 5,750,000 1,062 6,230,000 907 5,378,480 810 5,245,080 744 5,000,000 699 4,750,000 i30 4,955,000 794 5,749,000 855 6,700,000 916 17,100,000
Supplemental appropriaUon tor statutory pay
increases. _. _. ______________
~. ._ •• __-_____._.
----- ..-_ .. 295,000 -----_ .. _- 128,250 --_ ......... _ .. _ ... _ ...... _-- ...._ .. _ ..... _ ............. 435,000 .. .. __ ......... - .... _-_ .............. - -- ........... - .. ..... - ....... _--_ .... - -- .. _ .._-- ... 93,180 ..... __ .._--- 323,000 --------- - ... - .. _--_ ..- .._- _ .. _-- .... _- 235,000 -- ......... --- ---_ ... __ .. ----
Total appropriation.. _._. _____._._. __•__ 1,156 6,121,140 1,060 5,878,250 1,062 6,230,000 907
----
5,813,480 810 5,245,080 744 5,000,000 699 4,843,180 i30 5,278,000 794 5,749,000 855 6,935,000 916 17,100,000
Mandatory reserve required in 1961 ___________• ....... _ .... _-- ----_ .._ ....---- ..- ..... -- ..- ........ _--------- -32 -150,000 _ ..- .. -..__ .. ... _-- ..--_ .. __ ...... _ .._-- ..... -- -_ ..-----_ ... _ ...... .. _------ ... .... _ ... _-_ .. _ ..... _- --- ..... _--- ------- ..... _--- ..... _------ ------ ... _ ...... _-- ------ .. -- .... _ .._--_ .._--- ............. --- .. _-_ .... _-- ...... _- .. _-_ .. _--- --_ .. _-- ..... .. _-
-----_ ...... - ------------- -_ .._--_ ..- ----_ .._--_ ......... 1,030 6,080,000 -------_ .. -----_ .. _-_ ... - .. ------ ..-- ------------- -----_ .. -- --_ ......... __ .. _-- ----_ ...... - ... _----- ..... _--- .. - .. - .. _ ..... .. -._--_ ..... _ .. _- .. _--- .... - .. .... _- .. __ ........ _ .... .._------- .... _-- ...... - .... _- -_ .......... -..- - .. _---- ..-----
I Does not fncfnde funds for statutor,y pay increases. 486867-li8 (Face p. 196)
S. E. C. PERSONNEL 1.1
NUMBER
1000
800 .: :.
. . -' :: : . .;.....
. .
. ..
:.'
. .
. :... DEPARTMENTAL .
:~.: : .:
.:
: . ~:'
',.
. .. :. ...
.. . . .:' .::,' .i ",
600
400
200
o
1951 52 53 54 55 56 57 58
(FISCAL YEAR)
lj Av e-r age g"pZoygent
OS. 3950
were solicited. Merit Promotion Plans which implement these policies

and guidelines systematically in specific groups of positions are being
developed and will be adopted by January 1, 1959.
The proper allocation of top level positions continues to be of
utmost importance to the Commission for the effective execution of
its programs. In the interest of attracting and retaining highly
qualified persons for these positions, recommendations for the alloca-
tion of additional positions to grades GS-16, G8-17 and GS-18 were
presented to the Civil Service Commission.
The passage of the Government Employees Training Act on July
7, 1958 for the first time provides the Commission with general train-
ing authority. As required under this Act, a complete review of
the needs and requirements of the Commission for the training of
its employees win be made and a suitable program providing far
in-service, mter-agency or out-service training to meet identified
needs and requirements will be established.
During fiscal 1958, special health programs for the benefit of the
staff were undertaken in the Commission. On November 6, 1957, 140
members of the staff in Washington were inoculated against Asian
influenza. Sixty-four employees in the regional offices also received
this inoculation under programs arranged by Regional Administra-
tors.
The first and second of a series of three inoculations of anti-polio
vaccine were administered under the direction of a private physician
on March 3 and March 25, 1958, respectively. A total of 121 em-
ployees participated in this program which was sponsored by the
Commission's Employee Recreation and Welfare Association.
Recognition of career service with the Commission, meritorious
work performance awards and public recognition in the form of
awards made by outside organizations for outstanding achievements
by staff members continued to be stressed under the Commission's
incentive awards program. In September 1957, ten- and twenty-year
service pins and certificates were presented to a total of 51 employees
for service with the Commission. Six employees were awarded $195
for adopted suggestions. Cash awards totalling $5,805 and cer-
tificates of merit were presented to 66 employees.
Mr. Robert S. Wood of the Budget and Finance office was one of
120 successful candidates out of a total of 236 nominations submitted
by government agencies for participation dn the Civil Service Com-
mission's 1958 Management Intern Program. In May 1958, a Cer-
tificate of Merit was awarded to Jule B. Greene, Attorney~in-Charge
of the Commission's Miami Branch Office, by the William A. Jump
Memorial Foundation. In June 1958, the National Civil Service
League awarded certificates of merit to four Commission employees-
John T. Callahan, Special Counsel in the Division of Trading and
Exchanges, Amerst E. Huson, Chief of the Office of Research and
Service Company Regulation rin the Division of Corporate Regula-
tion, Franklin E. Kennamer, Jr., Chief Enforcement Attorney in
the San Francisco Regional Office,and Edward H. Rakow, Assistant
Regional Administrator in charge of the Detroit and Cleveland
branch offices.
Canons of Ethics for Members of the Commission
The Commission for many years has had a Regulation regarding
conduct of Members and Employees and Former Members and Em-
ployees of the Commission, which was codified in substantially its
present form in 1953. This regulation prohibits any member or em-
ployee of the Commission from, among other things, acting in any
official matter with respect to which there exists a personal interest
incompatible with an unbiased exercise of official judgment; accept-
ing, directly or indirectly, any valuable gift, favor, or service from
any person with whom he transacts official business; and becoming
unduly involved, through frequent or expensive social engagements
or otherwise, with any person outside the Government with whom
he transacts official business.
Supplementary to the overall Conduct Regulation, on July 22,
1958 the Commission adopted Canons of Ethics for Members of
the Commission. These canons, which are presented in appendix
table 30, set forth standards which the Commission has always be-
lieved are applicable to its executive, legislative and judicial respon-
sibilities. They include statements of principle with respect to,
among other things, Commission members' personal conduct, main-
tenance of independence, relationships with persons subject to agency
regulation and avoidance of appearances of improper influence.
PART XII
APPENDIX
STATISTICAL TABLES
TABLE I.-A 24 year record of registrations fully effective under the Securities Act
of 1988
1935-1958
[Amounts in millions of dollars]
For cash sale for account of lssners

Number of A.ll regis-
Flscal year ended June 30 tratlons Bonds, de-
statements Preferred
Total bentures Common
and notes stock stock
19351 _________________________ 284 $913 $686 $490 $28

1936___________________________ $168
1937___________________________ 689 4,835 3,936 3,153 252 531
1938___________________________ 840 4,851 3.635 2,426 406 S02
1939___________________________ 412 2,101 1,349 666 209 474
1940___________________________ 344 2,579 2,020 1,593 109 318
1941. _______________________• __ 306 1,787 1,433 1,112 110 210
1942___________________________ 313 2,611 2,081 1,721 164 196
1943 ___~_______________________ 193 2,003 1,465 I, (141 162 263
1944__________________________ 123 659 486 316 32 137
1945___________________________
221 1,760 1,347 732 343 272
340 3,225 2,715 1,851 407 456
1946___________________________ 661 7,073 5,424 3,102 991 1,331
1947_________________________
1948_________________________ 493 6, 732 4,874 2,937 787 1,150
1949_________________________ 435 6,405 5,032 2, 817 537 1,678
1950___________________________ 429 5,333 4,204 2, 795 326 1,083
1951___________________________ 487 5,307 4,381 2,127 468 1,786
1952___________________________ 487 6,459 5,169 2,838 427 1,904
635 9,500 7,529 3,346 851 3,332
1953___________________________ 593 7,507 6,326 3,093 424 2,808
1954___________________________ 631 9,174 7,381 4,240 531 2, 610
1955___________________________
1956___________________________ 779 10,960 8,277 3,951 462 3,864
1957_____________________ • 833 13,096 9,206 4,123 639 4, 544
• 8AO 14,624 12.019 5.689 472 5,858
1958___________________________ 16,490 13,281 6,857 427
'S09 5,998
I
1 For 10 months ended June 30, 1935•
• Statements registering American Depositary Receipts against outstanding foreign securities as provIded
by Form 8-12 are not Included,
TABLE 2.-Registrations fuUll effective under the Securities Act of 1933

PART I.-DISTRIBUTION BY MONTHS, FISCAL YEAR ENDED JUNE 30,1958
(Amounts In thousands of dollars I]
All registrations Proposed for sale for account of Issuers

Year and month
Numberofl Number of Amount Number of Number of Amount
statements Issues statements Issues
1961
July __________________________
August. ______________________ 62 78 $1,095,287 55 66 $991,735
65 97 1,321,511 56 77 990,778
63 79 927,028 55 61 750,623
~~~r~~:: :::::::::::
November ____ :::::::
•_______________ 56 88 989,575 51 75 810,643
December ________________ • ___ 78 104 1,048,208 68 81 905,759
42 76 465,365 35 59 353,786
1968
January ______________________
60 75 3,087,442 56 65 1,830,169
64 77 988,875 55 63 891,898
r:t~r.:::: ::::::::::::::::::
Aprll _____________________
•___ 63
99
86
119
1,088,745
2,805,833
58
92
71
108
873,260
2,666,619
May __________________________
June __________________________ 71 111 1,370,459 58 92 983,664
86 104 1,401,407 79 89 1,231,885
Total, fiscal year 1958___ '809 1,094 16,489,736 718 907 13,260,840
PART2.-PURPOSE OF REGISTRATION AND TYPE OF SECURITY, FISOAL YEAR ENDED

JUNE 30, 1958
[Amounts In thousands of dollars 1]
Type of security
Purpose of registration Bonds, de-

All types bentures, Preferred Common
and notes I stock stock 4
All registrations (estimated value) _____________________

$16,489,736 $6,914,479 $455,015 $9,120,241
For account of Issuers for cash sale________________ 13,280,840 6,856,553 426,635 5,997,651
Corporate ______________________________________
• 12,868,369 6,444,083 426,635 5,997,651
Offered to:
~=; Ihl~S~.:;;~:::::::::::::::::::::::
Other Special
9,058,605
213,984
2,
groups ___________________1,595,781
5,449,718
991,154
3,211
404,072
21,719
844
3,204,815
1,201,111
1,591,725
Foreign governments ___________________________412,471 412,471 --~---------------------
For account of Issuers for other than cash sale______ 3,007,993 54,540 11,234 2,942,219
For account of others than Issuers __________________ 200,903 3,386 17,146 180,371
See footnotes at end of table.

:s ~ 5 S S
~ ~ ~
,,
,
~ ~ SSg g : g "'''''.,.,
o.,.,<=>
«>o<=>
cir..:--
~' ~ g g ~ «>-
'"
~~eici,-"
-"
~ ~ a ~ ~; ~
tefifJfi,~"
...
o
""
oS
oS
::;;
o .
, ,
.
, o
o 0' o
..
00
o o
o
.
o
o
o ,o
,
o
o
..
o
o
o
o
o
• 0 , :i
,
.
o
'0
S
'"8
03
:g 1
Ji
g
f3
0
•
~
.e
~e-
08
",'
i
li!
~ _~ a 8~ ~
oS ~ ~ ~
.8 ~ i
..
~ ~ <
~fE~~~~
fJSC'flt5'o"f/il.'Q
:g(C~~~:g
c:i,..;C'iatS' ..... ~ ..
gj~~~8~
i~"f6"'g-g:=;"
88~r;ag
....;.o~.. uiQ:J-O)
~~gig~~
....
s~~~~~~~~~~S1 ~&3~H2~&5 ('.10C'lC:OO...-l
~!..~~~g..~;l~t~~g~~g~"~
.... .... ....
IOIQOc.:;lt---O
t!~~~~;Z
I,Q'"~ ~- ... cO eq'"
~!OfJ~~8
........
~i~g~~~~~~~~
~~~..~..~~-~~~~~
..ii
C'icicf)~ .._ ..C'i_ ........cooci"cQ~ ..
.. ., .,,
, I
I
I I
t I
I
I
, ,
I I • I 'I'
. .
I I I 'I
I I I , • I I I I I I I
I I I I I I
,
I
I
I
I
I I I
•
I
I
I
I
I
I , , I 1 I I
,
.
t
,,
I I I I I I I I
, I I I I
,
I
"
I I I
,, I I I I I I I
,
,,,
I I 111 I I I
, ,
,,,
I I I I I f
I I I I I I I I t
, I
I I
I I
I
I
I
I
I
,
I
I l ,
, ,, I I I I I I
,,
,
.. .
I I I ,
,, ,, ,,,
,
I I I I I I I I I I
I I I I I I I I
,
,
: ; ~i : ~_'OI::::I:I::
11
I I
I
I
I
1
I
I
I
I
I
I
I'
I I
I
I
I
I
I
I
I
I ~~
I
,,
, ,,,
.
,
I: I::: I I::'
.. , ,,
;~I;) ;; < ;; ;
t : : : : I
,,
...,., . .
I I I I I
, ,, ,,
, ,,,
iii Iii
,,
: : : : : : : : 1: : : ,, ,
: : : : : : : :J :J
'I'P,8 :
:::
~ , I It:
'~I t I
I.e '.e
I I I I q)
f>a
• I
I
I
I
,
I
I
I
I
I I ... ~~: I: I
••
• I
I I
••
I
a~.cI : : : :~8.888 .. e'5d : :
-
g.E ~'2 ~~ ~e,!.s~~
, I •• I I
m~!88;~
..... ~.............. ~~)1~~~~r210ZA
~.g:a~~
...r..::!l<Ii!i...
~:gsfa~g~ ~~~~H~~
~..;Jggfli~
~~~~~i~
.... .....r-4...tc:ic:i~ ..
~~~8~~
O>t-..t--co.t---C\l
;gti~"'g"~~'"
C:OCOCf:a",,"I:tl 0
e-:...._ ...
cq...I0... ,.....;cq...
>r.!0)L-e-:l0) '0
~=~~&1~~ ~~~8~!~f!H2~~~ fO~~~~~

l""'l-o"'~"'.o.oCQ"'I..--r~-~"'Ct'J"'_"'o :i ~~r;:f
c:::" CC"g
~g~~~~~
-~
_lQ"'::tllQOO_t--Ct'JO<o::tll'ooCO
l--C'<tl_a.ooo
--
Cl)r--OtOt.=lot--OO~Q)c,....
.o...:...:r-:r-:a5oi' -"'
gS~~~~~~~~~8
~n~g~~
...
~~~!-~
...
~...
~
~"'_-lN"'ci_-_- _- _..~C'iC'l-C'-l-
~~~ia~gg~~i~~~~~~~~~ ;;t;c:<~s::!:;s OH .... r---COt--C'l
~g~~~~~ ~..
g ~
~~-~
.. t~~~~
...
~
.. ~..~-gg~-f2 ..
"';~,...i"'; ei"";ei...i
COCOet::lt'-~o
ci...4cilQ...4N
~~~~~::!~
~~~~~~
u5";-cQ-fcQC'i
-- -- --
_t'-cqC':l_CO
00 00 (0 C'U'" CD
......
CDlCcq(O_IC
g;1:;~a!;~
cir-:C!)"'C"iotQ
t'-CX)lt)co(O_
~.C!)C!)_O
CI:J"'cq"'C/i(O"'cq""Cf:J""
: 1
:!: i
:: I I
I
,
.,
I I
I I I
, .
I I I
,
,
, I
.
I I I I I I I I I I I
I' I I I I
: I t :
! I,: ,: :
::
I I
, ,,
r I I
,
. ,, ,, ::
I
: ::
: ::
: : I ,: I
I I 1.1 • I
: ::
••
'. " "

: : : ,:" ~ ;: ;! : :
I
I ::
: :
,
I I I
., . ::
I I
::
: :
!:!. !
I
:
I
:
I
t I
I
!~
I
,
:
::
:
, , ,
, , ~! :: i : ~ i ;
. ....
, ,,, ,,
, , , , , ,
, ,
,,
, ,, ,
,, , ,
.
I
I
It'
I
..
I'
.
11
I
I
I
I
,
I
I
,
If
I'
I I
I
,
1
,
I
;!
""
!
,,
, , , ,,
""
. ..
I I I I I I I I
, , ,
.
I I 'I I I
::, !
I I I I l'
, , I I I I
,
, ,,,
I I I I I I
• I I I •
., .
, , , :::
~~,
:!I I l.c~.o.a
fa: t t t
:~
:
I
::
••
," ,, ....-a.d :~e~aa hi:a; :;

~ e-e'E~,p s:.~~~:8
I : :
, I It'
r;j~fii:a:s~ ~e-e'i'!~J
~o2~ ~!3'3 =' ~o Q '" =02" q,S!3...
~",,}l..:oiili
~::=~~5ia2~ ... "" ... ..:oiili...... ..:"'OZA
s~~~!~~O~8~g~~~~g88 ~~~~S8
I ~:!gf~c;~li...iCJAC>i-r-:;ilti_-
~C'f..qr~~ cQ"';oiC"l-~C'f
I ,..,.t-t--cq~ocq
f::c;;~~S5~~
!~:g~~~~~
eti~uSttSl6'&Of:J~
2~!O~~~i6
CSC::"l~~.r.e~LQ
gOOgOgOO~08°
ooS".ooO.ooi-t'
_aoOl,Qoo:f!c,ot-
fi gfg&:£g
..... e< .....
1 _~_~t-_L':l
~~~:;~~~i2~~:;;~
LQlOLOl.QcqCQOOO'<:tl000 l.O ~~8:2~~
Il'5L-5e5ar"";C'i6cici~~-~
~OOC'lOOO)tOO'J~tOo::.t-~ s~s~~$f
~~C':IC')CQC"')C'I':l"C>iOOCQe"
...; ci ...;
..~...,y.OOC'lC'?~
--..;; --
LQCO_.-4QO:let:lC'let.lC'lC':lO
~~gsf2g~~cqag~~:g ;1;~~8~~
Clt-t-COt-C"l
....:....: ....."'-.:t<_ ...CQ......,y.-r-..- .....-C'ioo"": t£C'iaOo~('I"J-
C':IOtOOOOLQIt::lO:l!Oo::.r...co LQ_C":lC":l""'L':)
____ c.f"';cq-_-
CQOOO...,y.o::.OOC"C)Q:lLQ_lO tCtOCQt-..,.O
ei "";-C",fLQ- ....iC"l-
~~~f::;~5
LOOO"",*,OO..,."<t'
~g~?2-;;:;!
~~~~;£~~~~~g!
~~~rg~-ggf;iggr~~r~-
O_CQO:lt-"'l:tlQO:lO_OO_
...;_-~ __ ..1_- _-
, , , ,,
, ,
, , , ,
_-,;~I:
~ ::: I I I
»... ,
~2'5d : :
='.0 ........~~
~~~~~~
486867--59----15
~rgs~s~~~~~:gg
1812'18~~'g~ggg-IiIi~'
TABLE 4.-Prop08ed 1l8U of net proceeds from the sale of new corporate securities
offered [or cash in the United States
PAR'l'l.-ALL OORPORATE
[Amounts In thoU88Dds of dollan I)
Proceeds New money

Retire-
oaiendar hear or mentor Other
mont' purposes
Total gross Total net Total new Plant and WorkIng securities
proceeds' proceeds' money equipment capital
1951- _____________________
7,741,09V 7,606,5ID 6,531,403~ 5,110,105 1,421,298 486,U3 588,703
1952______________________ 9,534,162 9,380,302 8, 179, M8 6,311,802
1953 _________________•____ 1,867,746 664,056 536,698
1954 ____________• _________ 8,897,996 8,754,721 7,959,966 5,646,840 2,313,126 260,023 534,733
1955______________________ 9,516,168 9,365,000 6, 780,196 5,110,389 1,669,806 1,875,398 709,496
1956 _______________ • 10,240,155 10,048,855 7,957,394 5,333.328 2, 624,066 1,227,494 863, 967
1957_________• _______•____ 10,938.718 10,748,836 9,662,952 6,709,126 2,953.826 364,459 721,424
12,883,533 12, 661,300 11,783,879 9,039,778 2, 744, 101 214, 294 663,127
1951
January _____________•____ 1,088,225 1,068,333
February ________________ 1,023,270 797,840 225,431 8,818 36, 245
March ___________________ 1,108, 365 1,084,892 912,947 705,110 207,836 19,433 152,513
1,360,939 1,340,096 1,244,148 1,088,274 155,874 20,274 75,674
966,462 946,815 871,321 663,192 208,129 16, 068
tfi;:~::::::::::::::::::: 795,814
J nne _____________________ 1,495,270
780,318
1,467,280
703,134
1,373,311
545,954
1,028,925
157,180
344, 386
15, 235
14, 572
59,425
61,949
79,397
July ______________________
1,027,527 1,011,020 941,467 534,023 407,444 8,353 61,200
August ___________________ 946,556 932, 346 915,639 621,152 294, 487 8,514 8, 194
September ______________•
October __________________ 1,023,218 1,006,855 951,638 800,274 151,363 34.105 21,112
November _______________ 1,112, 656 1,098,504 1,060,000 882,391 177,609 8, 885 29,619
844,303 828,051 763,915 559,074 204,841 39,229 24,007
December __• _____________ 1,114, 198 1,096,789 1,023,089 813,570 209,519 20,809 52,892
1958
January ____• _____________ 815,745 711,218 592,582 118, 636 82,414
February ________• __• _____ 804, 996 11,364
874, 625 856,333 832,306 577,440 254, 867 5,229 18, 798
March ___________________
ApriL ____________________ 1,623,330 1,607,646 1,525,228 1,300,176 135, 052 47,044 35,374
May ________________• ____ 1,231,956 1,213,303 1,037,122 885,181 151,940 71,939 104, 242
J unD ____________ • ________ 713, 757 698,830 532,089 438,649 93,440 99,081 67,661
962, 640 947,994 709,020 572, 156 136,864 67,166 171,808
PAR'l'2.-MANUFAOTURINO
195!- _____________________
1952______________________ 3,121,853 3,066,352 2,617,233 1,832, 777 784,456 220,828 228,291
1953______________________ 4,038, 794 3,973,363 3,421,892 2,179,563 1,242,329 260,8liO 200,621
1954______________________ 2, 253, 531 2, 217, 721 1,914,863 1,324,675 500,178 00,115 212,753
1955 _____________•• _______ 2, 268,040 2, 234, 016 1,838,007 1,009,495 829,413 189,537 205,671
1956______________________ 2, 993, 658 2, 929, 734 2, 020, 952 1,265, 272 765, 680 1532,571 376,210
1957 _______• ______ ow. _____
3,647,243 3,578.502 2,944,378 1,928,034 1,016,344 242,684 391,440
4,233,708 4, 153,534 3,764,423 2,644,460 1,119,963 49,131 339,980
January __•1961
___•• __________
February ____ • ___________ 300,413 383, 519 377,121 306,176 70,945 4,653 1,746
574,412 561,384 440,475 361,369 79,106 3,787 117,122
March __________ ._ •• _____
368,228 361,794 329,299 264,446 64,853 1,014 31,480
tf:~__
~:::::
::::::::::::::
June •• __•• ___• ___• ____• __
337,779
139,758
640,516
330,915
136,215
627,974
278,554
101,484
573,145
173,848
32,916
398,949
104,706
68,568
174,196
8,522
6,269
43,840
28,463
July. _ • ______• ___• _______ 4,768 50,061
August_. _____• ___________ 257,546 253,053 238, 389 129,052 109,336 5,382 9,283
September ______________• 246,928 243,122 240,636 180,880 59,756 354 2,132
October _. _________• ______ 328,383 323,812 316,706 212,303 104,403 3,782 3,325
November _______________ 133, 414 130,795 121,619 58,847 52,772 2,174 7,002
December ________________ 224,111 220,296 206,988 119,849 87,138 253 13,056
592,221 680,655 540,009 395,824 144,186 8,174 32,472
January __• 1958

_______________
155,342 153,586 139,550 120,171 19,379 6,753 7,283
179,786 173,471 164,789 116, 395 48,394 2,803 5,879
r::~~::::::::::::::: 240,490 236,844 192,807 121,829 70,978 41,186 2,861
June __ ._. :________________

tfa~:~:: :::::::::::::::: 639,971 631,616 542, 448 434,843 107,605 11,577 77,591
192.933 189,825 123,439 92,460 30,978 26,418 39,968
318,560 315,543 231,328 165,580 65,748 49,015 35,200

TABLE 4.-PropoBed uses of net proceeds from the sale of new corporate securitie8
offeredfor cash in the United States-Continued
PA.RT 3.-MINING
[Amounts In thousands of dollars I]
Proceeds New money

Retire- Other
Calendar year or mentol
month I purposes
Total gross Total net Total new Plant and Workln!! securities
proceeds I proceeds I money equipment capital
~:k::::::::::::::::::::: } 235.368
1953 ________•_____________
(.) (.)
222,051
(.)
199,151
(')
113,104
(')
86,048
(')
1,912
(')
20,988
1954. ________• ____________
538,591 513,596 334,704 215,758 118,946 45,624 133,268
1955 _____________• ________ 415,289 390,758 325,490 197,394 128,006
1956____________• _________ 3,921 61,347
455,523 435,691 304,909 211,029 93,880 37,849 92. 934
1957_______________. ___. __ 288,574 276,809 242,826 159,783 83,042 6,838 27,145
1951
January _._ •.. ________. ___ 23,259 22,007 18,024 11,165 6,859 1,416 2,567
February .• ___. ______. ___ 47,426 45,300 42,751 28,771 13,973 0 2,639
March .. __• ____. ____. ___. 18,959 17,421 10,208 4,753 5,455 0 7,212
AprIL _______._. ___. ___. __ 10,32-3 10,145 9,944 9,343 602 0 201
May __ . ___• ___.. _________ 10,955 10,421 6.234 3,212 3,022 32 4,155
June __ ._._._._ .. _______._ 19,538 18,001 13,863 7,048 6,815 274 3,864
July ... ____• __. ___________ 42,781 41,742 40,443 25,122 15,321 0 1,299
August ____._._. ___. ___. __ 16,401 15,904 11,087 7,605 3,482 4,570 248
September ___ . ___.. ______ 25,246 24,116 22,472 14,321 8,151 0 1,644
October __________________ 36,826 36,167 35,523 33,862 1,661 444
200
November. ___ ._ .. _______ 22,473 21,701 20,523 10,787 9,737 0 1,178
December _. ____. ____ .• ___ 14,387 13,796 11,753 3,790 7,964 347 1,695
1958
January ___. __._. _________ 14,225 13,520 13,194 8,017 5,177 0 326
February ________ .. ______ 18,Ob9 17,694 13,455 9,874 3,582 0 4,239
Marcb. ___._ .. ________. __ 22,406 22,094 21,603 20,464 1.139 67 424
Aprtl, ____.. _____• ________ 34,759 33,569 25,677 12,756 12,921 50 7,842
May _. ___. ______•.• __. __. 6,836 6,539 4,119 1,180 2,938 1,996 424
June. ___. _______________. 15,015 14,253
14,453 8,774 5,479 0 200
PA.RT 4.-ELECTRIC, GAS AND WATER
1951 __• __________• ________

1952_____________• ________ 2,454,853 2,411,714 2,186,248 2,158,823 27,425 85,439 140,027
1953______________________ 2,674,694 2,626,377 2,457,823 2,441,862 15,961 87,726 80,827
1954 _________•___• ________ 3.029,122 2,971,911 2,755.852 2,737,082 18,770 67,034 149,025
1955___________. __________ 3,713,311 3,664,922 2,597,651 2, 582, 366 15,285 989,799 77,473
1056______________________ 2,463,729 2,428,158 2,218,094 2,205,655 12, 439 174,015 36,049
2,529,175 2,487,493 2,409,885 2,394,928 14.957 13,794 63,814
1057 _______ ._. __••• _______ 161,430
3,938,087 3,871,899 3,659,189 3,645,019 13,271 51,280
1951
January ___________. ______ 249,777 245,662 226,550 226,440 110 0 19,111
February. ____ . _______._. 262,938 258,460 230,669 222,001 7,768 12,892 14,898
l'vfarch ____ . _. _______._. __ 513,147 505,431 457,882 457,882 0 15,685 31,864
AprIL __________________. 366,719 359,553 349,724 349,158 566 5,595 4,234
May ____ . ________________ 364,164 357,908 331,858 331,473 385 7,499 18,551
June ____ . _____. _______• __ 439,106 430,739 418,801 418,741 59 0 11,938
July _________. ____________ 33,418
247,675 244,014 210,231 210,099 132 365
August __•______. _________ 254,367 251,145 249,751 249,458 294 0 1,394
Septem ber, ______________ 424,314 416,875 414,243 413,763 481 2 2,629
October ___._ . ____• _______ 338,729 333,353 312,848 311,971 877 330 20,175
November __ ._. ______. ___ 302,353 295,692 284,598 282,038 2,560 8,750 2,344
Deeember., ________
. . ____ 174,799 173,067 172,033 171,995 38 161 873
1958
326,299 322,039 320,340 320,269 71 649 1,049

~~~!rY-.-.-~~::::-::~::::
March .. ____ . ___. ____.. __
373,064 365,528 365,528 357,981 7,547 0 0
415,220 409,343 386,124 386,124 0 0 23,219
AprIL. ______. ___. _____. __ 319,700 315,489 293,108 286,111 6,997 22,264 117
May _________________ . __ 36,649 95
345,306 339,781 303,037 299,529 3,508
June. __' ._. __... ______. __ 411,832 405,748 325,467 325,467 0 16,219 64,062

TABLE 4.-Proposed USe8 of net proceeds from the sale of new corporate securities
offered for cash in the United States-Continued
PART 5.-RAILROAD
[Amounts In thousands of dollars I]
Proceeds New money

Retire-
Calendar year or mentof Other
month. purposes
Total gross Total net Total new Plant and Working securities
proceeds' proceeds • money equipment capital
195L __________• ___• _. ____ 335,087 331,864 296,917 291,886 5,030 34,214
1952 ________• ______•• ___._ 733
1953 _________________• ____ 525,205 520,817 286,526 286,476 50 223,532 10,758
1954 _________• __• ____•____ 302.397 298,904 267,024 244,254 22,770 31,879 0
1955______________________ 479,322 474,180 209,585 202,441 7,144 261,345 3,250
1956 _________• ____________ 547,777 540,345 215,702 214,411 1.291 318,965 5,679
382,012 378,159 365,447 365,447 0 12, 713 0
1957 ________• _____________ 343,647 340,244 326,409 326,409 0 13,835 0
1957
1 anuary ____________••• _._
Fehruary _____• ___________ 51,298 50,731 50,731 50,731 0 0 0
22, 112 21,902 21,902 21,902 0 0 0
March. _. ___• _____• __• __• 39,433 39,115 39,115 39,115 0 0 0
ApriL •• _____• _____• _____• 28,415 28,129 28,129 28,129 0 0 0
May __• _____• _____._. ____ 53,774 53,774 53,774 0 0 0
rune __•_____•_____._. ___. 54.284
24.598 24,291 16,361 16,361 0 7.930 0
July ___•_____•_____•_____ . 23,269 23,029 23,029 23,029 0 0 0
August. _____• _____• _____. 15,465 15,337 15,337 15,337 0 0 0
September __• _____• _____• 23,949 2J,741 23,741 23,741 0 0 0
October _____•_____. _____• 17,688 17,491 11,586 11,586 0 5,905 0
November __ ._. ___._. ___• 16,347 16.196 16,196 16,196 0 0 0
December ___• _____• _____• 26,789 26,508 26,508 26,508 0 0 0
1958
January ________
•______
•__ 68,562 67,810 43,559 43,559 0 24,251 0
February _________ . ______ 17,252 17,074 17,074 17,074 0 0 0
March __• _______. ________ 40,036 39,410 34,500 18,858 15.641 4,910 0
April ___________. _________ 19,549 19,393 19,393 19,393 0 0 0
May ________________ . ____ 12,000 11,845 11,845 9,889 1,956 0 0
June ________•____________ 500 487 487 487 0 0 0
PART 6.-0THER TRANSPORTATION
195L ___•• ____._. _____•__ . 159,227 158,240 131,009 123,217 7,792 18,478 8,753
1952 _________• ____________
467,094 462,006 410,778 377,064 33,713 1,119 50,109
1953 ____•• ____• ____•• _____ 293,036 289,859 264,880 260,568 4,312 3,949 21,031
1954 ____• _____• __• __• __• __ 299,432 296,907 270,342 267,042 3,300 9,073 17.493
19511.__•• ____••• ____• ____• 345,280 341,717 237,366 220,971 16,395 18.769 85.582
1956__._. ____•• _. ___• _____ 342,000 335,772 322,855 298,537 24.318 7.147 5,770
1957 ____• _____• _____• ____. 479,921 475,421 465,095 456,665 8,430 204 10,122
1957
January, _____•• _. __•_____ 51,192 50,568 50,044 49,781 262 0 525
February __________ • _____ 8,3R9 8,346 8,157 8,062 95 0 189
March _____________ .• ____ 30,892 30,778 30,679 30,585 94 0 99
April _____ • ______________ 45,501 45,246 44, 597 43,430 1,167 0 649
May ______. ______________ 27,456 26,213 26,138 21,399 4,739 0 75
June _____. _______._______ 33,624 33,481 32,559 32,185 374 0 921
lulY ____ •. ______. ________ 22,687 22,353 22,185 21,604 580 0 168
August. _________________ 15,717 15,597 15,366 15,307 59 204 28
September __ . ___.. _______ 56,649 56,414 66,080 55,746 334 0 3M
October _____• ___________. 37,429 37,262 37,175 37,043 132 0 87
November _____________ ._ 38,916 38,035 34,068 33,476 592 0 3,967
December ________________ 111,469 111,127 108,047 108,047 0 0 3,080
1958
January, _________________38,816 38,705 38,591 38,478 114 0 114
February _______________ • 31,167 31,092 29,962 28,786 1,171; 0 1,130
March __• __• ___. _________ 29,081 28,960 27,922 27,384 538 0 1,038
ApriL ___• _____. _. ________ 67,549 66,569 66,525 66,132 393 0 44
May ____._. ___• _____• ____ 11,896 11,591 11,591 7,549 4,043 0 0
lune ____• ___._. _____• ____ 106,572 105,534 42, 864 36.674 6,190 0 62,670

TABLB 4.-PropoBed me, of net proceed' from the sale of new corporate s«Urities
offeredfor cash in the United States-Continued
PART 7.-COMMUNIOATION
(Amounts In thousands of dollars I]
Proceeds New money

Oalendar year or Retire- Other
month I mentof purposes
Total gross Total net Total new Plant and Working securities
proceeds' proceeds' money equipment capital
195L _____________________
1952______________________ 612,080 605,095 594,324 574,417 19,907 6,231 6,li4O
1963______________________ 760,239 763,169 738,924 736,996 1,928 6,095 8, 151
1954 _______• ______________ 881,853 873,726 860,967 841,600 19,367 3,164 9,696
1965______________________ 720,102 710,819 641,487 639,376 2,m 60,089 9,243
1956_____________________. 1,132,271 1,121,408 1,039.611 1,038,092 1,620 76,667 6,230
1957______________________ 1.419,457 1,405.006 1,371.471 I, 36lI, 832 1.639 20.674 12,861
1,461,748 1,444, 446 1,427, 'i1I7 1,425,696 2, 281 3,904 12, 566
1957
January __________________ 103,822 0 917
February ________________ 106, 991 105, 420 103.822 680
March ___________________ 47,012 46,261 46,261 46, 177 84 0 0
279,477 276,823 274,719 272,950 1,769 0 2,104
50,873 50,225 47,195 47,142 52 0 3,030
83,126 81,705 78, 925 78,890 35 0 2, 781
tfa~:=======:=== =:======
June _____________________
July ______________________ 138, 064 136, 161 136, 161 136, 128 33 0 0
August ___________________ 64,385 63,866 53,270 63,225 45 0 697
September _______________ 128, 795 126,975 123,364 123,248 106 2,612 1,009
October __________________ 66,296 65.241 64,088 64,061 27 198 966
November _______________ 372,271 369,238 368,146 368,081 65 176 915
December ________________ 93,006 91,707 91,491 91.446 45 0 216
41,453 40,825 40,646 40,527 20 0 278
January 1958
__________________
85,564 84,469 34,469 34,384 85 60,000 0
35, 834 35.481 35, 481 35,436 46 0 0
ri~~a.::..~
~====== :=====:=
AprIL ____________________
May _____________________
800,418
7B, 807
796,773
77,207
796,773
39,'i1Il
796,773
39,IlOll
0
62 37,236
0 0
0
June _____________________ 41,417 40,966 10,989 10,989 0 29,966 0
12,490 12,333 12,333 12,257 76 0 0
PART B.-FINANOIAL AND REAL ESTATE
195L _____________________
1952______________________ 624, 616 615,267 368, 485 15, 686 352, 800 66,030 80, 751
1963 _______________• ______ 616,178 508,184 409,630 14, 248 395,387 60,498 38, 0li6
1964 _____•• _. ______• ______ 1,676,048 1,660,672 1, 462, 279 32, 116 1,420,162 24,225 84, 168
1955_______________• ______ 1,075,818 1,061,015 619,165 29,647 689,608 273,043 168,817
1956_________ • ____._ 1,898.677 1,867,887 1,606,145 33,472 1,572,672 66,010 205,731
1957. ____.. ______________• 1,856,953 1,831,650 1,703,487 39,038 1,684,449 16, 947 111,116
1,795, 413 1,768,853 1,635,740 241,464 1,394, 276 67,314 65,298
1957
January __________________ 192, 677 188.930 178, 311 39,775 138, 535 348 10,272
February ________________
114. 624 112,440 99,485 10,566 88,919 2,400 10,655
March ___• _____________.. 93,720 92, 359 87,425 9,298 78, 127 3,575 1,359
April, ____•_______________
93,628 91,438 89,562 7,032 82, 530 23 1,853
May _____• ________• ______ 76,278 71,162 2, 628 68,534 4,218
J une __ . __• ________• ______ 75.380 0
180,574 177,933 170,673 13,192 157,481 0 7,260
July __ ._ •• _. ______• _____• 347,565 342,818 334,481 64,236 270,245 0 8,337
August. __• _____. _________
September _______________ 227,809 225,017 222,926 1,984 220,942 775 1,315
October __• ________• ______ 84,220 83,125 43,960 10,464 33,506 30,033 9,131
161,217 159,361 158,861 43,815 115,046 0 500
November _______________ 129,932 127,793 95,916 95,330 30,161 1,715
December ._. _____________ 686
93, 168 91,760 82,978 37,897 45,080 0 8,782
1958
January __________________
February ________________ 111,324 109,'i1I9 107,068 16,506 90,562 723 2, 188
March ___________________ 210,790 207.678 197,948 5, 777 192, 172 2,389 7,340
60,032 49,287 42,864 6,846 36.019 478 5,944
42, 189 40,374 24,266 6,002 18,264 160 15,949
Jtfart_=====:===::========
UDC_. ___ • _______________ 79,388 74,992 51,469 7,360 44,108 615 22,908
82,903 79,426 68,486 14,322 54, 144 1,752 9,208

TABLE 4.-Proposed uses of net proceeds from the sale oj new corporate securities
offeredfor cash ,n the United States-Continued
PAR! 9.-COMMERCIAL AND OTHER
(Amounts In thousands of doJJara I)
Proceeds Newmonel
Oalendar year or Retire- Other
month I mentof purposes
Total grOSS Total net Total new Plant and Working secur1U8s
proceeds I proceeds I money equipment capital
1951- _____________________
1952______________________ 533,383 511,988 331,181 113,299 223,888 56, 194 124,601
1953 ______________•• _____• 552, 958 536,386 453,975 275,698 118, 371 24, 235 58, 116
1954______________________ 326, 640 319,871 244, 960 93,441 151,619 37,745 37,112
1955 _________________• ___• 421, 541 409,635 268,354 164, 365 104, 000 46,889 94,382
1956______________________ 443.473 428.848 294, 03li 158.061 135,974 46.676 88,138
1957______________________ 307,355 296,663 240,521 102.281 138.239 12, 652 43,491
342,435 330,693 262,220 139,382 122,838 21,188 46,585
1961
January __________________
22,617 21,497 18,667 9,949 8,719 1,484 1,345
February _____________ • __
March ___________________ 31,453 30,710 23,246 5,356 17,891 353 1,110
11,084 16,376 14,820 9,245 5,575 0 1,555
33,223 31,165 23,611 5,111 18,501 1,929 6,619
39,193 38, 701 33,560 21,663 11,898 1,435 3,107
19,251 18, 702 11,149 6, 321 6,428 1,600 5,353
~!=-::==================
July ______________________
August ___________._. _____ 31,620 30,145 19,440 1,656 11,184 2,606 8,099
41,014 39,250 37,182 21,334 9,848 0 2,068
September __________ • ____ 10,341 5,886 4, 461 00 3,093
October __________________ 14, 162 13,530
November _______________ 15,081 14, 837 14,243 7,187 7,056 100 495
December ________________ 11,165 16,630 14, 134 4, 695 9,439 65 2, 431
59,912 59,051 41,215 28, 982 12,233 12,126 6,111
1968
January _____________• ____
February ________________ 16,614 14,889 14, 447 11,200 3,247 37 406
March ___________________ 8,672 8,316 8,069 6,111 1,952 37 210
25, 647 24,934 22,635 11,897 10,738 402 1,897
29,431 29, oss 25,133 20,035 5,698 652 2,699
tf:::====================
J une _____________________ 23,982
14, 168
23,302
14, 469
15,600
13,822
I 9,692
8,596
5,009
5,226
3,436
180
4, 266
468
I Slight discrepancies between the sum of figures In the tables and the totals shown are due to rounding.
J For earlier data 88e 18th Aunual Report.
I Total estimated gross proceeds represent the amount paid for the secur1ties by Investors, while total
estimated net proceeds represent the amount received by the issuer after payment of compensation to
distributors and other costs of flotation.
'Included with "Commercial and other."
~~~~~~oo=~~~~~~~~o~~~~~~~~
~~~~~~~~~~~~~~gg~~~~~:~~g
~~N~~~~~~~~OOOQ~~_~O~~O~~~
~~oo~~~~g~~~~~~~~~~~~~~~g~
o~.~_.~~~~~~~~~~~~~g~~g~~ _ .-1 __
S~!~$~~~S~~8~~8~~~8~;~E~~
...;-...reieti"Nc.fcQ~t;i'~rtS'cQeticQ"";
~~~~~~~~~~~g~~~g~~g~!~~~~
...(,..jC'iricir:i"cQ~('I')C"iri~~~_-
~~~~=~~~~~~~8~gE~8~~i~~~~
...("";.4'''';-'';...i',..i''';,..j...rc-reici
~~~~~~s~~~~~~~~~i~~~!~~~~
...;-~....;....;....;....;...(
~~~~ri~ri~~~~~~oo~
~~~~a~~~~~~~s~S~~~~~g~a~~
-"ci,..j"':~,..(e-i"";"';cfC't"C'i'ei
~~gS~S~~~g~~~ssi~gg~!68~~
C'i~"';-N~~~ ~~.~~~~~~~~~OOO~
~~~~~~~~~~~s8~s~~E~~~~~i~
N~c.fC'i'~ei~"";"";~C~~~~~~o~~gs~~
TABLE 6.-Suspension orders issued pursuant to regulation A under the
Securities Act of 1988 during the fiscal year 1958
Temporary Suspension Orders-

Regulation A :
Albuquerque Exploration, Ine., Albuquerque, N. l\Iex.; Securities Act
Release No. 3880 (December 20, 1957).
AI-Kern Mines, Inc., Austin, Nev.; Securities Act Release No. 3811 (July
15,1957).
Alunite Corp. of Utah, Salt Lake City, Utah; Securities Act Release
No. 3921 (April 22, 1958).
American Development Corp., Dover, Del.; Securities Act Release No.
3876 (December 13, 19;)7).
American Reserve Oil & Mining Oorp., Reno, Nev.; Securities Act Release
No. 3881 (December 23,1957).
Michael Laurence and Stephen Richards as the "Amish Company", New
York, N. Y.; Securities Act Release No. 3936 (June 10, 1958). Order
vacated, Securities Act Release No. 3944 (July 8,1958).
Appell Oil & Gas Corp., Alice, Tex.; Securities Act Release No. 3820
(August 1, 1957). Order vacated, Securities Act Release No. 3920
(April 16, 1958).
Australus Corp. of America, Jersey City, N. J.; Securities Act Release
No. 3874 (December 11,1957).
Beckjord Manufacturing Corp., Toms River, N. J.; Securities Act Release
No. 3936 (June 10,1958).
Ben Franklin Oil & Gas Oorp., Franklin, N. J.; Securities Act Release
No. 3823 (August 6,1957).
Big Ute Uranium Oorp., Reno, Nev.; Securities Act Release No. 3862
(November 15,1957).
Blue Bird Mines, Inc., Pinal County, Ariz.; Securities Act Release No.
3933 (June 4,1958).
Brevilana, Inc., Hollywood, Calif.; Securities Act Release No. 3933 (June
4, 1958).
James Preston and Charles Olsen as the "Career Co.", New York, N. Y.;
Securities Act Release No. 3940 (June 20, 1958).
Carver House, Inc., Las Vegas, Nev.; Securities Act Release No. 3899
(February 19, 1958).
Central Oils, Inc., Seattle, Wash.; Securities Act Release No. 3902
(March 3, 1958).
Col-Ny Uranium, Inc., Cortez, Colo.; Securities Act Release No. 3878
(December 18,1957).
Confidential Finance Oorp., Omaha, Nebr.; Securities Act Release No.
3878 (December 18,1957).
Cottonwood Uranium Oorp., Reno, Nev.; Securities Act Release No. 3911
(March 20, 1958).
Dlgit-Ometer Co., Denver, Oolo.; Securities Act Release No. 3913 (March
27, 1958). Order vacated, Securities Act Release No. 3930 (May 22,
1958).
Douglass Mnfiler Manufacturing Corp., Alhambra, Calif.; Securities Act
Release No. 3865 (November 26, 1957).
Eagle Oil & Supply Oo., Inc., Brockton, Mass.; Securities Act Release
No. 3878 (December 18, 1957).

Securities Act of 1933 during the fiscal year 1958-Continued
Temporary Suspension Orders--Continued

Regulation A-Continued
Escalante Garlic Corp., Caliente, Nev.; Securities Act Release No. 3847
(October 10,1957).
Fidelity Trust of America, Dallas, Tex.; Securities Act Release No. 3812
(July 17, 1957).
Fireball Uranium Mines, Inc., Moab, Utah; Securities Act Release No. 3895
(January 31, 1958).
Florida Real Estate Investors Syndicate, Dania, Fla.; Securities Act Re-
lease No. 3905 (March 6,1958).
Franklin Atlas Oorp., New York, N. Y.; Securities Act Release No. 3857
(October 30, 1957). Proceedings pending at end of fiscal year.
Russell Janney as "Frontier Co.", New York, N. Y.; Securities Act Re-
lease No. 3874 (December 11, 1957).
Garner Aluminum Corp., Washington, D. C.; Securities Act Release No.
3913 (March 27, 1958).
Gem States Securities Corp., Boise, Idaho; Securities Act Release No. 3923
(May 5,1958).
George L. Headley Associates, Inc., New York, N. Y.; Securities Act
Release No. 3874 (December 11,1957).
Giant Petroleum Corp., New York, N. Y.; Securities Act Release No. 3850
(October 22, 1957). Proceedings pending at end of fiscal year.
Gob Shops of America, Inc., Providence, R. 1.; Securities Act Release No.
3818 (July 31, 1957). Proceedings pending at end of fiscal year.
Gold Crown Mining Corp., Allegheny, Calif.; Securities Act Release No.
3940 (June 20, 1958). Proceedings pending at end of fiscal year.
Great Bear Lake Uranium Mines, Ltd., Regina, Saskatchewan, Canada;
Securities Act Release No. 3940 (June 20,1958).
Gunn and McCrary, Jne., Shreveport, La.; Securities Act Release No. 3819
(August 1,1957).
Half Moon Uranium Corp., Ogden, Utah; Securities Act Release No. 3899
(February 19,1958).
Hardrock Mining Syndicate, Las Vegas, Nev.; Securities Act Release No.
3895 (January 31, 1958).
Hart Oil Corp., Seattle, Wash.; Securities Act Release No. 3926 (May 15,
1958). Proceedings pending at end of fiscal year.
H. F. Rieser's Sons, Inc., West Leesport, Pa.; Securities Act Release No.
3874 (December 11, 1957).
Holiday Lake, Inc., Camden, N. J.; Securities Act Release No. 3936 (June
10,1958).
ffiowata on Oorp., Denver, Colo.; Securities Act Release No. 3866
(November 26, 1957). Proceedings pending at end of fiscal year.
Index Corp., Glenns Ferry, Idaho; Securities Act Release No. 3848 (Octo-
ber n, 1957).
InspIration Lead Oo., Inc., Spokane, Wash.; Securities Act Release No.
3929 (May 26, 1958). Proceedings pending at end of fiscal year.
International Telo-Servlce Corp., New York, N. Y.; Securities Act Release
No. 3874 (December 11, 1957).
Interstate Holding Corp., Memphis, Tenn.; Securities Act Release No.
3809 (July 9, 1957).
TABLE 6.-Suspension orders issued pursuant to regulation .A. under the
Securities Aot ot 1933 during the fisoal year 1958-Continued
Temporary Suspension Orders-Continued

John Paul Enterprises, Ine., New York, N. Y.; Securities Act Release No.
3874 (December 11, 1957).
Jontex, Ine., Reno, Nev.; Securities Act Release No. 3860 (November 13,
1957).
Jurassic Minerals, Inc., Cortez, Colo.; Securities Act Release No. 3891
(January 23, 1958).
Lake Champlain Associates, Inc., Wellsboro, N. Y.; Securities Act Release
No. 3874 (December 11,1957).
McCullough Motors Oorp., Philadelphia, Pa.; Securities Act Release No.
3835 (September 3, 1957).
Mia Nina Mining Corp., Salt Lake City, Utah j Securities Act Release No.
3847 (October 10,1957).
Microveer, Ine., Santurce, Puerto Rico; Securities Act Release No. 3928
(May 19, 1958).
Monarch Laundry Machine Corp., Fort Lauderdale, Fla.; Securities Act
Release No. 3869 (December 2,1957).
Mutual Investors Corp. of New York, New York, N. Y.; Securities Act
Release No. 3936 (June 10, 1958).
Oliver Products, Inc., New York, N. Y.; Securities Act Release No. 3936
(June 10, 1958).
Pawnee Oil Oo., Los Angeles, Calif.; Securities Act Release No. 3891
(January 23, 1958). _
Pixie Beverage Oorp., Reno, Nev.; Securities Act Release No. 3871 (De-
cember 5, 1957).
James Spicer as "Porcelain Clay 00.", New York, N. Y.; Securities Act
Release No. 3936 (June 10,1958).
Profile Mines, Inc., Boise, Idaho; Securities Act Release No. 3814 (July
22,1957).
Pyramid Mining and Metal Oorp., Lubbock, TeL; Securities Act Release
No. 3870 (December 5, 1957).
Rainbow Uranium Corp., Tonopah, Nev. j Securities Act Release No. 3848
(October 11, 1957).
Rancho Club Cabazon Corp., Las Vegas, Nev.; Securities Act Release No.
3858 (November 4, 1957).
Real Estate Clearing House, Inc., New York, N. Y.; Securities Act Release
No. 3874 (December 11, 1957).
Red Rock Oil & Gas 00., Las Vegas, Nev.; Securities Act Release No. 3883
(December 30,1957).
Reliance Uranium Oorp., Reno, Nev.; Securities Act Release No. 3910
(March 18, 1958).
8alesology, Inc., Phoenix, Ariz.; Securities Act Release No. 3889 (January
20,1958). Proceedings pending at end of fiscal year.
Seaboard Drug Oo., Inc., New York, N. Y.; Securities Act Release No. 3931
(May 28, 1958).
Peter Lawrence as "Shinbone Alley 00.", New York, N. Y.; Securities Act
Release No. 3940 (June 20,1958).
Simplex Precast Industries, Inc., Norristown, Pa.; Securities Act Release
No. 3824 (August 7, 1957).

Securities Act of 1983 during the fiscal year 1958-Continued
Temporary Suspension Orders-Continued

S & M Mining & Exploration, Worland, Wyo.; Securities Act Release No.
3915 (April 7, 1958).
Southwestern Chemical & Mineral Corp., New York, N. Y.; Securities Act
Release No. 3849 (October 21, 1957).
Howard Hoyt as "Strip for Action Co.", New Y'ork, N. Y.; Securities Act
Release No. 3877 (December 13, 1957).
Tejanos Mining Corp., EI Reno, Okla.; Securities Act Release No. 3930
(May 27,1958).
Texas-Augello Petroleum Exploration Co., Anchorage, Alaska; Securities
Act Release No. 3904 (March 5, 1958). Proceedings pending at end
of fiscal year.
Truly Nolen Products, Inc., J\1iami, Fla.; Securities Act Release No. 3841
(September 24, 1957). Proceedings pending at end of fiscal year.
Turbo Corp. of America, Philadelphia, Pa.; Securities Act Release No.
3874 (December 11,1957).
United Production Co., Jnc., New York, N. Y.; Securities Act Release No.
3921 (ApliI22, 1958).
Universal Life and Accident Insurance Oo., Duncan, Okla.; Securities
Act Release No. 3921 (April 22, 1958).
Universal Metals Corp. of Nevada, Reno, Nev.; Securities Act Release
No. 3880 (December 20, 1957).
Universal Mining and Milling Oo., Albuquerque, N. Mex.; Securities Act
Release No. 3915 (April 7, 1958).
Universal Oil Recovery Corp., Chicago, Ill.; Securities Act Release No.
3862 (November 15, 1957). Proceedings pending at end of fiscal year.
Urania, Ine., Las Vegas, Nev.; Securities Act Release No. 3895 (Janu-
ary 31, 1958).
Uranium Exploration and Copper Co. of Nevada, Las Vegas, Nev.; Secu-
rities Act Release No. 3887 (January 13, 1958).
Uranium Queen Exploration Co., Greeley, Colo.; Securities Act Release
No. 3913 (March 27,1958).
Voltar Electronics, Ine., Brooklyn, N. Y.; Securities Act Release No. 3936
(June 10, 1958).
Washington Planning Corp. of Maryland, Washington, D. C.; Securities
Act Release No. 3925 (May 8, 1958).
Findings, opinions and orders permanently suspending the exemp-
tion after hearing were issued in the :following three cases under
Regulation A:
Apache Uranium Company; Securities Act Release No. 3830 (August 15,
1957).
Interstate Holding Corporation; Securities Act Release No. 3831 (August
19, 1957).
Idea, Ine. ; Securities Act Release No. 3837 (September 5, 1957).
TABLE 7.-Brokers and dealers registered under the Securities Exchange Act oj
193,p-effectille registrattons as oj June SO, 1958, classified by type oj organization
and by location oj principal office
Number of proprietors, partners,

Number of registrants officers, etc •• 3
Location of principal office

Sole Part. Sole Part.
proprl- Corpo- proprl- nero Oorpo-
Total nero Total
etor- shlps rations • etor- ships rations'
sbJps ships
--- --- --- --- --- --- ---
Alabama ___•• __._. __________________
Arizona _____________ • _______________ 36 13 7 16 107 13 22 72
Arkansas ___• __• _____________________ 30 5 9 16 129 5 21 103
Callfornla_. ___._ • ___________________ 22 9 3 10 52 9 6 37
332 133 85 ]]4 1,161 133 445 583
Colorado _____• _______• ______________
Connecticut _________________________ 99 36 5 58 346 36 30 280
Delaware ______• _____________________ 42 18 ]] 13 175 18 59 98
9 I 2 6 51 I 15 35
District of Columbla ________________ 92 22 356 32 94 230
Florida ________• ______• _____• _______' 32 38
89 37 14 38 246 37 34 175
43 12 6 25 184 12 24 148
~~rg:a:::::::::::
:::::::::::::::::::
Illinols, _____________________•_______ 16
182
9
41
2
62 79
5 33
879
9
41
5
296
19
542
Indtana, • ____•• __•___•___•_____•____ 54 23 6 25 162 23 ]] 128
Iowa __ • ___________•__• ______• _______ 4 75
Kansas ________• ______• ______' ___' ___ 34 14 16 97 14 8
31 10 6 15 126 10 18 98
Keutucky. _. __••• ___________________
Louislana _______ ' ___' _______________ 18 7 5 6 64 7 19 38
Malne _________• _____•• _________• ___• 53 32 13 8 100 32 40 28
31 ]] 2 18 88 ]] 8 69
Maryland ____•• _____•• __• ___• _' ____• 45 21 14 10 145 21 85 39
Massachusetts_ ••• ___• ____• _______•• _ 196 83 31 82 882 83 217 582
MicbJgan_. ___•• __•• _______' _________ ss 13 19 26 262 13 95 154
Mluuesota ___• ________._ •• _____• ___._ 9 32 215
iii 7 35 254 7
24 ]] 7 6 50 ]] 17 22
~l:::r~i: .: ::::::: ::::::: :::::::: Il3 25 20 48 473 25 134 314
Montana. ___••• __•• _• ____•• _________ 10 7 1 2 16 7 2 7
N ebraska ____•• ____' ___, _____• ____•• _ 2 16 ]]9 10 5 104
28 10
Nevada; , _____________
•__._. _____
••• 7 5 0 2 9 5 0 4
New Hampshfra., _________ ••• __•• ___ 11 9 0 2 18 9 0 9
New Jersey ___•• __• __._. ___• __• ______ 207 ]]9 34 54 444 119 92 233
New Mexico ___•___• _____•• __• _______ 3 29 7 8 14
13 7 3
New York State (excluding New
York City) _______•• ___• _____•• ____ 344 231 37 76 652 231 ]]8 303
North Carollna ___• __•• ____•• ___••• __ 36 14 5 17 147 14 13 120
North Dakota _____••• ___• ___________ 4 3 0 1 8 3 0 5
Obio __ • ____• ______•• ___• _________._. 13! 26 41 550 26 188 336
64
OkIaboma _______• _________"_' __•• __ 45 29 6 10 79 29 12 38
Oregon __•• ___• ___________•• ____• __._ 26 6 7 13 82 6 18 58
199 55 81 63 845 55 392 398
~=};::t:::::::::::::::::::::::
Soutb Oerollna, •• _. __••••• _._. ______
18
28
4
12
10
4
4
12
43
84
4
12
29
9
10
63
South Dakota _________• _____•• ____ ._ 11 7 0 4 21 7 0 14
Tennessee_. __________________• _•••• _ 38 10 10 18 149 10 27 112
Texas __ • _____• ____ ._ ••• ___, __, ____._ 257 126 30 101 696 126 85 485
Utab __• _____• ________•• __• ___• ______ 6 146 25 110
45 ]] 28 ]]
Vermont. ______ ._. ____•_______" ____ 3 2 0 1 11 2 0 9
Virginla ________••• _________• ________ 19 14 13 150 19 60 71
46
Wasblngton ___• _____• ___• _, __, ______ 89 48 7 34 248 48 16 184
West Vlrglnla_. ___•• __••• ____•• __•• _ 12 7 3 2 26 7 9 10
Wlsconsln __••• ___• _. _______• ______ ._ 45 10 5 30 204 10 26 168
Wyoming _. _'_'_' _•• ______'" _____._ 6 5 0 1 12 5 0 7
Total (excluding New York

--- --- --- --------- --- ---
City) __• ____•••• _____• _____._ 3,339 1,385 670 I, 284/11' 210 /1, 385 2,869 6,956
New York City ____ ._. _________• __._ 1,325 364 596 365 5, 945 364 3,680 1,001
--- --- ------------ ---
4,664 1,749 1,266 1,649 17,155 749
I
8,857
I 1, 1 6,549/
I Domestic registrants only, excludes 88 outside continental limits of tbe United States.
t Includes directors, officers, trustees, and all otber persons occupying similar status or performing slmllar
functions.
t Allocations made among States on the basis of location of principal offices of registrants, not aetual loea-
tlon of persons. Information taken from latest reports filed prior to June 30, 1958.
• Includes all forms of organizations otber than sole propnetorshrps aud partnerships.
TABLE S.-Number of issuers and security issues on exchanges

PART 1.-UNDUPLICATED NUMBER OF STOCK AND BOND ISSUES ADMITTED TO
TRADING ON ALL EXCHANGES AND NUMBER OF ISSUERS INVOLVED, AS OF JUNE
30, 1958.
Total Issuers
Status under the Securities Exchange Act of 1934 Stocks Bonds stocks and Involved
bonds
Registered pursuant to Sections 12 (b), (c) and (d) _____ 2,663 1,132 3,795 2,236
Temporarily exempted from registration by Commis-
sion Rule ____________________________________________
7 2 9 7
Admitted to unlisted trsdlng privileges on registered
exchanges pursuant to Section 12 (0------------------ 240 32 272 218
Listed on exempted exchanges under exemption orders
of the Oommtssion ___________________________________ 72 8 80 59
Admitted to unlisted trading privileges on exempted
exchanges under exemption orders of the Oommlsslon, 15 0 15 15
TotaL ___________________________________________
2,997 1,174 4,171 2, 535
PART 2.-NUMBER OF STOCK AND BOND ISSUES ON EACH EXCHANGE AND NUMBER
OF ISSUERS INVOLVED AS OF JUNE 30, 1958.
Stocks Bonds
Exchanges Issuers
R X U XL XU Total R X U XL Total
Amerlcan ______________
-- -- -- ---- -- -- -- -- -- --
Boston _________________
802 615 1 243 ------ ------ 859 23 ------ 34 ----- 57
423 74 -----. 363 ------ ------ 437 16 ---_.- ------ -----. 16
Chicago Boardot'I'rada, 12 7 ------ 5 ------ ------ 12 ------ ------ ------ -.---- -----
CmclnnatL ___________
Colorado Sprlngs _______
133 47 ------ 95 ------ 142 7 1 ------ ------ 8
12 ------
Detroit ________________ 217 ._---- --.--- 13 ------ 13 ------ ------ ------ ------ -----
Honolulu ______________
107 1 117 225 ---.-- ------ ------ ------ ------
Mldwest _______________ 59 -._--- ------ ------ 53 16 69 ------ .----- ----- 8 8
455 398 3 114 ------ ------ 515 14 ------ ------ ------ 14
New Orleans ___________ 1 -----
14
New York Stock _______ 1,282 1,526
4 ------ 14 ------ ------ 18 1 ------ 2
Pacific Coast ___________ ------ -----. ------ ------ 1,526 1,087 2 ------ ----- 1,089
479 300 1 249 ------ ------ 550 20 ------ ------ ----- 20
Phflsdelphia-
Baltimore ____________ 519
Plttsburgh _____________ 161 7 427 ------ ------ 595 52 ------ ------ ----- 52
Richmond __• _______•• _
115 48
18 ------
------ 74 ------ 122 1 ------ ------ ------ 1
Salt Lake ______________ ------ ------ 27 ------ 27 ------ ------ ------ ------ -----
San Francisco Mlnlng __
93 92 ------ 4 ------ ------ 96 ------ ------ ------ ------ ------
48 49 ------ ---'6' ------ ------ 49 ------ ------ ------ ------ ------
~kane--.------------
heeling ______________ 28 25 ------ 31 ------ ------ ------ ------ ------
13 ------ ------ ------ 12 3 15 ------ ------ ------ ----- ------
Symbols: R-reglstered; X-temporarIly exempted; U-sdmltted to unlisted trading privileges; XL-
listed on an exempted exchange; XU-sdmItted to unlisted trading prlvileges on an exempted exchange
NOTE.-Issues exempted under Section 3 (a) (12) of the Act, such as oblIgations of the United States
Government, the States and cities, are not Included In this table.
TABLE 9.-Unlisted stocks on Ifecuritiu ezhangfJlf1
PART I.-NUMBER OF STOCKS ON THE EXCHANGES IN THE VARIOUS UNLISTED
CATEGORIES I AS OF JUNE 30, 1958
Listed and registered on another

Unlisted only'
exchange
Exchanges
Clause 1 Clause 3 Clause 1 Clause 2 Clause 3.
Amerlcan ____•__ ._ ••••••••••• _._. __•• __••••

Boston _••••• _. _____•••••• _•••••••••• ____••
~ 2 38 2 1
1 0 154 208 0
Chicago Board of Trade ••• _._ •••••• _._ •• _. 3 0 2 0 0
ClnclnnatL •••••••••••• ___._ •••••••••••• _•• 0 0 0 95 0
Detrolt __•••••••• _. _. _•••••• _._ •••• _••••••• 0 0 14 103 0
H onolulu __•••• _. __• __•••••••••••••••• _•••• 16 0 0 0 0
Mid west.; _••• __._ •• _._ ••••• _. __• _. _. _•••• 0 0 0 114 0
New Orlesns.; __••• _•••••••• _. ____•• _••••• 8 0 4 2 0
Pacific Coast __•___•••••• _._ •••••• _•••••••• 26 0 61 162 0
Philadelphia. Baltimore __•___•••••••• _•• _•• 4 0 246 177 0
Plttsburgh; , _._•• _._••••••••• _•••• _•••••• _ 0 0 16 58 0
Salt Lake.;., _____•___•• __•• _. _____._ •••• _•• 3 0 0 0 1
Spokane __• _•••• __••• _. _••• _••••••••••• _._. 4 0 1 1 0
Wheeling •••••••••• _._ •••••••••••••••••••• _ 0 0 0 3 0
Total'_ ••••• _•••• ___•••••••••••• __•• 265 2 536 925 2
PART 2.-UNLISTED SHARE VOLUME ON THE EXCHANGES-OALENDAR YEAR 1957
UnIlstedonly Listed and registered on another

exchange
Exchanges
Clause 1 Olause 3 Clause 1 Clause 2 Clanse 3
Amerlcan_ •••••••• _•• ____•• ___• ____ ._ ••••••• __ 26,41R,870 18,1~ 3,277,360 369,~ 15,O:MI
Boston_. ___________________•• __._ •••••••• _. __• 8,046 0 2, :MIl,382 1,948,501 0
Ohlcago Board of Trade. _____._._. __._._. ____• 0 0 0 0 0
Omctnuatf..L, ••• __•___•__••_•••• __••••••• _••__ 0 0 0 299,891 0
Detrott , •• _•• __•• _____• ___._ •__•••• _•• _••••• ___ 0 0 185,745 1,591,034 0
Honolulu __••• _____. ___••. ___••• ____•••• _______ 37,341 0 0 0 0
Midwest .• __••• __••••••• _____________•• _•••••• 0 0 0 6,515,680 0
New Orleans •••••• _______• _____._. ____•• _••••• 69,509 0 0 548 0
Pacific Coast-. _______• __•••• _••••••••••••••• __ 2, :MIl,174 0 2,818,199 4,279,028 0
Philadelphia-Baltimore ••••••••••••••••• __•••• _ 2,263 0 2, 972, 816 2, 214, 279 0
Pittsburgh, •••••••••••••••• __•••• _._•• _._____ • 0 0 266,069 232,549 0
Salt Lake, •••_. __•••••• __•• ______ •••• ___._._ ••• 248 0 0 0 573
Spokane __•• _•••••• _____• __• __• __• ____._. _••••• 87.888 0 0 0 0
Wheellng ____• __._._ ••••• _._ •• _•••••••••••••••• 0 0 0 1,252 0
Total ________._._ •• _•• _._ •••• _•••• __•••• _ 28,825,339 18, 1:M1 11,721,571 17,451,962 15,593
t Refer to text nuder heading "Unlisted Trading PrIvileges on Exchanges." Volumes are as reported by
the stock exchanges or other reporting agencies and are exclusive of those In short-term rights.
I The categories are according to clauses 1, 2, and 3 of sec. 12 (0 of the Securities Exchange Act.
I None of these issues bas any llsted status on any domestic exchange, except that 9 of the 26 Pacitlc Coast
Stock Exchange Issues are also listed on an exempted exchange •
• These Issues became listed and registered on other exchanges subsequent to their admission to nnllsted
trading on the exchanges !IS shown.
'Duplication of Issues among exchanges brings the figures to more than the actual number of Issues
Involved.
224 ~IJES AND J<iXCHANqE COM}<ITSSION
,
~.J.(ft'W oJ
A, ~ ;;..l~vij'rtv</
TABLE 10.- e and volu'ffte !;f:ales effected on securities exchanges in the
12-month period ended December 31, 1957, and the 6-month period ended June 30,
1958
[Amounts In thousands]
PART 1.-12 MONTHS ENDED DECEMBER 31,1957
Stocks I Bonds I Rights and

warrants
Total mar-
ket value
(dollars) Market Number Market Principal Market Num-
value of shares value amount value ber of
(dollars) (dollars) (dollars) (dollars) units
---
Registered exchanges. 33,360,273 32,059,020 1,070,093 1,154,256 1,252,794 146,997 222,332
Amerlcan ______________ 2,376,051 2,315,383 224, 738 14,111 16,688 46,557
---
9,756
Boston _________________ 246,169 246,065 5 130
5,100 5 99
Chicago Board of
Trade ________________
CmclnnatL ------------ ------------ ------------ ------------ ------------
•• __________
---------- -------
24,694 24,061 544 237 451 396 230
Detroit. _______________ 134,677 134,597 4,588 .----------- ----------- 81 461
MIdwest ------------.- 866,143 864,754 25,901 10 13 1,379 4,263
New Orleans ___________
Xew York __• __________
1,448 1,448 74 ------------ -----------. --------- ----.-.-
28,686,335 27,450,748 714,451 1,139,573 1,235,240 96,014 199,711
Pacific Coast ____ ----- 651,284 650,011 32,362 34 26 1,239 2,901
Phf lad e I phla- B al tt-
more ------------- 323,257 321,741 7,868 285 370 1,231 4,820
Ptttsburgh _____________ 39,829
Salt Lake ______________
3Q,828 1,613 ------------ ------------ 1 2
3,983 3,981 27,348 ------------ ----------- 1 7
San FrancISCO Mming __
Spokane _______________
5,831 .'i,831 24,404 .-------._-- ------------ ---------- ----.-.-
574 574 1,101 .----------- ------------ --------- ------.-
---
Exempted exchanges. 8,842 8,747 573 13 15 24 82
Colorado Sprlngs _______
---
Honolulu ______________
21 21 43 ---------.-- ------------ ---~------ -------
7,747 7,651 499 13 15 82 24
Rlchmond __• __________
Wheeling ______________
637 637 19 ------------ -----~------ ---------- ~------
438 438 12 ------------ ------------ ---------- ~------
P_mT 2.-6 MONTHS ENDED JUNE 30, 1958
Stocks 1 Bonds I Rights and
Total mar.
ket value
I warrants
(dollars) Market Number Market Prlncrpal Market Num-

value of shares value amount value ber of
(dollars) (dollars) (dollars) (dollars) units
---
Registered exchanges, 15,704,710 14,932,617 526,438 704,827 741,376 67,266 43,451
American; _____________ 1,046,831
---
1,015,271 00,998 9,688 11,085 21,871 3,303
Boston _________________ 120,193 702
U8,170 2,561 107 80 1,916
Chicago Board of
Trade ________________
C1uclnnatL ____________ ---~--------
12,953
------------ ------------ ------------ -----------
12,840 294 85 165 27
------.-
34
Detroit. _•• ____________ 55,833 55,736 2,029 --------._-- ----------- 97 41
Mldwest _______________ 414,374 412,883 12,181 _.---------- ------------ 1,491 801
New Orlesns ___________
New York _____________ 13,543,808
403 402
12,810,250
21
694,508
1
729,659
1 -------
371,355 39,049 37,095
Pacrflc Coast. _________ 329,148 326,832 14, 516 362 278 1,953 1,035
Phlladelphla-Baltl-
more _________________ 164.092 163,156 4,172 75 109 861 434
Pittsburgh _____________
Salt Lake ______________
14,350 14,350 1,030 ------------ ~-----~----- ---------- -------
1,216 1,216 10,425 -~--------- _._---~----- (.) 6
San Francisco MlnIng __
Bpokane, • _____________
878 878 6,679 ------------ - --- -- - - -- ~- --.------- -------
633 633 1,178 -~---------- ------------ ---------- -------
Exempted exchanges. 4,801 4,655 359 39 43 107
---60
Colorado Sprlngs __• ____
---
Honolulu ______________ 4,348
6 6
4, 201 289
64 ---------39- ._----.-----
43
--~------ ------00
107
Rlchmond ________• ____
Wheelmg ______________
327 327 10 ------------ ------------ ---------- -------
121 121 6 -~---------- ------------ --------- .-._----
-
1" Stocks" Include voting trust certificates, American depositary receipts, and certificates of deposit.
I United States Government bonds are not Included In tbese data.
I Less than $500.
NOTE.-Value and volume of sales effected on registered securIties exchanges are reported In connection
WIth fees paid under Section 31 of the Securities Exchange Act of 1934. For most exchanges the figures
represent transactions cleared during the calendar month. Figures may differ from comparable data in
the Statistical Bulletin due to revisions of data by exchanges. Figures have been rounded and will not
necessarily add to totals shown.
TABLE n.-Block distributiOn8
[Valueln thousands of dollars]
Bpeeial offerings Exchange dlatrlbutlons Secondary distributions
Calendar year
Num- Shares Value Num- Shares Value Num- Shares Value
ber sold ber sold ber sold
----.---_ .. - - _. - ~-
1942 , ___________
1943. ____________ 79 812,390 22,694 - -~----. 116 2,397,454 82,840
1944________• ____ 80 1,097.338 31,054 -.-----. -------._-- ----_.-- 81 4,270,580 127,462
1945. __. _________
87 1,053,667 32,454 -------. ------------ -------- 94 4,097,298 135,760
29,878 -.--.--- ------------ 9,457,358 191,961
_____ M __
79 947.231 115
1946. ____________
1947.. ______• ____
2-3
24
308.134
314.270
I 11,002
9,133
-------.
-------.
---------- - --------
------------ .-------
100
73
6,481,291
3,961,572
232,398
124,6il
1948_____________
1949. ____________
21 238,879 5,466 -------- ------------ -------- 95 7.302,420 175,991
1950 ___. _________
32 500,211 10,956 -------. ------------ ------- 86 3,737,249 104, 062
1951_____________ 20 150,308 4,940 ----._-- ------------ -------- 77 4,280.681 88,743
1952. ____________
1953. ____________
27
22
323 013
357.897
10,751
9,931
-------- ------------ ----_.--
----._-- ----------.- --------
88
76
5,193.756
4,223.258
146,459
149,11 7
17 380.680 10,486 .------ ------------ ----- -- 68 6.906,017 108, 229
1954_____________ 57 705.781 24,664 84 5,738,359 218,490
19.55____. ________ 14 189.772 6,670
9 161. 850 7.223 19 218 348 10.211 116 6.756,767 344,871
19.56_____________ 8 111, 7~1l 17 1'\6481 4 645 146 11 6Q6.174 520,966
4. "7
1957. ___. _______. 5 63,408 1.845 33 390,832
I 15,855 99 9,324,599 339,062
I The first Special Offering Plan" as made effectn e Feb. 14, 1942 the PIau of Exchange DIstribution
was made effective Aug 21, 1953: Seccnrlary Distrtbu tions arc not mnde pursuant to any plan but generally
exchanges require rnembe .. to obtain approval of the exchange to parncipate In a secondary and a report on
such distrfbutlon Is filed WIth this Commission.
4811867
-511--16
TABLE 12.-Comparative share sales and dollar volumes on exchanges

[Annual sales, Including stocks, warrants and rights, lIS reported by all United States exchanges to the
Commission. Figures (or merged exchanges are Included In those o( the exchanges Into which they
were merged]
Year Share sales NYS AMS MSE PCS PBS BSE DSE PIT CIN Other
% % % % % % % % % %
1935_________
-- -- -- -- -- --
681. 970, 500 73.13 12.42 1.91 2.69 0.76 0.96 0.85 0.34 0.03 6.91
1936_________ 962. 135. 940 73.02 1643 2.18 2.96 .69 .72 .74 .32 .04 2.90
1937_________ 838. 469, 889 73.19 14.75 1. 79 3 2-3 .70 .83 .59 .38 .03 4.51
1938_________ 543. 331, 878 7808 10.55 2.27 2.67 .79 103 .75 .25 .04 3.57
1939_________ 78.23 11 39 2.26 2 35 .93 1.18 .76 .25 .05 2.60
1940_________ 468. 330, 340
377,896. 572 75 44 13.20 211 . 2.78 1.02 1.19 .82 .31 .08 305
1941. ________ 73 96 1273 2.72 2.69 1 24 1.50 .87 .36 .14 379
1942_________ 311, 150. 395
221,159,616 7649 11. 64 270 2.62 1.08 1.39 .90 .29 .12 2.77
1943_________ 486290026 74.68 1672 2.20 1.92 .85 .76 .64 .20 .07 206
1944_________ 461\ 523.183 73.40 16.87 207 2.40 .79 .81 .86 .26 .06 2.48
1945_________ 769.018.138 61\ 87 21. 31 I 77 298 .66 .66 .79 .40 .05 551
1946_________ 66.07 1937 1. 74 351 .68 .84 .63 .28 .05 683
803.076. '\32
1947_________ 513.274. 867 6982 1698 1. 67 4.22 .90 1.05 .66 .19 .08 443
1948_________ 571. 107,842 72.42 1507 1 6-3 3.95 .87 .76 .68 .18 .08 4.36
1949_________ 1.21 .93 .73 .18 3.47
516. 408, 706 73. 51 14.49 1 67 3.72 .09
1950_________ 1354 2.16 .79 .65 .55 .18 .09 2.61
8"3.32 I. 458 7632 3.11
1951_________ 863,918.401 74.40 1460 210 3.54 .76 .70 .58 .16 .08 3.08
1952.. ____• __ 732, 400, 451 71 21 1608 2.43 3 85 .85 .73 .55 .16 .09 4.05
1953. ________ 716. 732. 406 72 64 1585 2.28 3.90 .8-3 .81 .55 .15 .11 288
1954_________ 1,053,841,443 71.04 16.87 200 324 .88 .50 .53 .13 .07 4.74
1955______• __ 1,321,400,711 6885 1919 2.09 308 .75 .48 .39 .10 .05 5.02
1956. ________ I, 182,487,081\ 66 31 21 01 2 32 325 .72 .47 .49 .11 .05 5.27
1957_________ I, 293, 021, 856 70.70 18.14 2.33 273 .98 .40 .39 .13 .06 4.14
1958
Six months }
to June 30, 570, 308, 000 71.61 18.12 2.28 273 .81 .57 .36 .18 .06 3.28
1958.
Dollar volume
(000 omitted)
1935. ________ $11\,396 139 8664 7.83 1.32 1.39 .68 1.34 .40 .20 .04 .16
1936_________ 23,640.431 8~ 24 8 69 1.39 133 .62 1.05 .31 .20 03 .14
1937. ________ 21,021,865 87 85 7.56 1 06 1. 25 .60 1.10 .24 .20 .03 .11
11138_________ 12, ~45. 419 8924 557 1. 03 127 .72 1 51 .37 .18 .04 .07
1939_________ 11.434.528 8720 6.56 1 70 1. 37 .82 170 .34 .18 .06 .07
11140
_________ 8,419.772 8U7 7.68 2.07 1. 52 .92 1 91 .36 .19 .09 .09
1941. ________ 6.248055 8414 745 259 1. 67 1.10 2.27 .33 .21 .12 .12
1942__• ______ 4, ~14, 294 85.16 660 2.43 1.71 .96 2.33 .34 .23 .13 .11
1943_________ 84 93 8.90 2.02 1 43 .80 1.30 .30 .16 .07 .09
9,033.907
1944_______._ 9,810.149 8414 9.30 2.11 1. 70 .79 1.29 .34 .15 .07 .11
1945__• ______ 16,284,552 8275 1081 2.00 1.78 .82 1.16 .35 .14 .06 .13
1946_________ 18 828,477 82 65 10.73 200 1. 87 .79 1.23 .33 .16 .07 .17
1947_______._ 11,596.806 84.01 877 1.82 2.26 .91 1.51 .36 .14 .11 .11
1948. ________ 84 67 807 1.85 2.53 .88 1.33 .34 .14 .10 .09
1949_________ 12,911.665
10,746.935 83 85 844 1.95 2.49 1.11 1.43 .39 .13 .12 .09
1950_________ .92 1.12 .39 .11 .11 .05
1951. ________ 21,808.284 8591 6.85 2 35 2.19
21.306.087 85 48 7.56 2.30 2.06 .89 1.06 .36 .11 .11 .07
1952_________ 17,394,395 84.86 7.39 2.67 2.20 .99 1.11 .43 .15 .12 .08
1953_________ 16,715,533 85.25 679 2.84 220 1.06 1.04 .46 .16 .13 .07
19M _________ .94 .89 .39 .14 .10 .08
1955_________
28,140,117 8623 679 2.42 202
38, 039, 107 86.31 6.98 2.44 1.90 .90 .78 .39 .13 .09 .08
1956. ________ 35.143,115 84. 95 7.77 2.75 2.08 .96 .80 .42 .12 .08 .07
1957_________ 32, 214, 846 8551 7.33 269 202 1.00 .76 .42 .12 .08 .07
1958:
Six months
to June 30, 15,004,655 8563 6112 276 2 19 1.09 ,80 .37 .10 .09 .05
1958.
Symbols. NYS, New York Stock Exchange: AMS, American Stock Exchange: MSE Midwest Stock
Exchange: PCS, Pacific Coast St'lck Exchange: PBS, Philadelphia-Baltimore Stock Exchange: BSE,
Boston Stock Exchange: DSE, Detroit Stock Exchange: PIT, Pittsburgh Stock Exchange: CIN, Clncln.
natI Stock Exchange.
TABLE I3.-Reorganization proceedings in which the Commission participated
during the fiscal year 1958
Securities
and Ex-
Petition change Com-
Debtor District court Petition 1I1ed approved mission
notice of
appearance
1I1ed
Alaska Telephone Corporation ___________ W. D. Wash ____ Nov. 2,1955 Nov. 21,1955 Nov. 7,1955
American Fuel & Power Co .. ____________ E. D. Ky _______ Dec. 6.1935 Dec. 20,1935 May 1,1940
Buckeye Fuel Co ___ . ________________ _____do. __________ Nov. 28, 1939 Nov. 28,1939 Do.
Buckeye Gas Service Co __• __________ . ___.do _______________.do _____ •__ _____do ________ Do.
Carhrcath Gas Co .. _________________ . ___.do ___________ . ___.do, _______ . ____ do. __. ____ Do.
Inland Gas Distributmg Co __________ . ___.do .. _________ _____do .. ______ ____.do .... ____
Do.
Automsuc Wasber Company ____________ S. D. Iowa ______ Oct. 17,1956 Nov. 2.1956 Nov. 2,1956
N. O. Nelson Company ' .... _____________ E. D. Mo. ______ Oct. 22.1956 Nov. 8,1956 Nov. 1,1956
Central States Electric Oorp.; ___________ E. D. Va .. ______ Feb. 26 1942 Feb. 27.1942 Mar. 11,1942
Coastal Finance Corporation _____________ D. Md . ________ Feb. 15,1956 Feb. 18,1956 Apr. 16,1956
Columbus Venetian Stevens Buildings, N. D. IlL _______ Aug. 30.1955 Aug. 31,1955 Oct. 3,1955
Inc.
Empire Warehouses, 1nc. ________________ _____do __________ June 15.1956 June 15 1956 July 19,1956
Equitable Plan Company 1______________ S. D. CaliL ____ Mar 18,1958 May 29.1958 Mar. 27,1958
Frank Fehr Brew iug Co.' ________________ W. D. Ky._. ____ Aug. 13,191i7 Aug. 14,191i7 Nov. 8,1957
General Stores Corp ___• __________________ S D. N. Y ______ Apr. 30,1956 May 1, 1956 May 23,1956
Adolf Gobel, Inc _____• __________________ D. N. 1.. _______ July 23. 1953 Dec. 28, 1953 Scpt. 8,1953
Eastern Edible Refinery Corp _______ _____do ___________ June 23, 1954 June 23, 1954 Oct. 14,1954
Gobel's Q. F. Distributors. __________ ____ do ________________ do ________ . ___.do, ______ Do .
Gohel Pharmaceuticals, 1nc __________ _____do ____. ______ __. __do .. ____._ ____.do. _______ Do.
MetropolItan Shortening Corp _______ ____do.. _________ . ____do. _____._ _____do ___.. ___ Do
Green RIver Steel Corporation .. _________ W. D. Ky .. _____ Sept 13, 1956 Sept. 18,19511 Oct. 5,1956
Horsting 011 Company ___________________ D. N. Dak, _____Mar 17.1952 Mar. 17.1952 Sept. 30, 1955
Hudson & Manhattan Railroad Com- S. D. N. Y ______ Aug. 11,1954 Dec. 14,1954 Jan. 7,1955
IJE any
and • Gas Corporation __________________ E. D. Ky _______ Oct. 14.1935 Nov. 1,1935 Mar 28,1939
International Power Securities Corp .. ____ D. N. J ... ______ Feb. 24. 1941 Feb 24.1941 Mar. 3,1941
International Railway Company .. _______ W. D. N. Y ... __ July 28,1947 July 28,1947 Aug. 4,1947
Keesbin Freight Lines, Inc. .. ____________ N. D. IlL ______ Jan. 31,1946 Jan. 31,1946 Apr. 25,1949
Keeshm Motor Express Co., Inc _____ _____do ________________do ________ _____do. ... ____ Do.
Seaboard Freight Lines, Inc _________ _____ do _______________ .do ________ _____ do.. .. ____ Do.
National Freight Lines, Inc __________ _____do. __________ _____do ________ ... __do. _______ Do.
Kentucky Fuel Gas Corporation. ________ E.D Ky _______
Oct. 25,1935 Nov. 1,1935 Mar. 28, 1939
Liberty Baking Corporation. ____________ S. D. N. Y .. ____ Apr. 22,1957 Apr. May 2, 1957
Magnolia Park, Inc.i ____________________ • E. D. La ________ Oct. 16.1%7 Feb. 22.1957 26,1958 Oct. 24,1957
Muntz 'l'V, Inc. _________________________ N. D. I1L. ______ Mar. 2,1954 Mar. 3,1954 Mar. 4,1954
Tel-A- Vogue ________________________ _____do .. _________ _____do ________ _____do ________ Do.
Muntz Industries, Ine _______________ _____do ___________ _____do _____________do .. ______ Do.
Nortbeastern Steel Corporation __________ Conn .. _________ Feb. 1, 1957 Feb. 5.1957 Feb. 19,1957
Parker Petroleum Co('/nc.' .. ____________ W. D. Okla _____ May 6.1958 May 6.1958 June 9,1958
PIttsburgh Railways 0 •. _______________W. D. Pa _______ May 10,1938 May 10,1938 Jan. 4,1939
Plttshurgh Motor Coacb Co _________ ____ do ________________do ... _____ _____do . ______ Do.
Seaboard Drug Co ___________.. __.. ___. __ S. D. N. Y ______ May 7,1957 May 10,1957 June 25,1957
Selected Investments
Selected Investments
Trust Fund
Corporation
I} .----
N. D. Olda _____ Mar. 3,1958 Mar. 3,1958 Mar. 17,1958
SIerra Nevada Oil Co ____________________ D. Nev. ________ June 22,1951 June 22,1951 July 25,1951
Bileslan American Corp __________________ S. D. N. Y .. ____ July 29,1941 July 29,1941 Aug. 1,1941
South Texas Oil & Gas Co.' ______________ S. D. Tex. ______ Feb. 2 1958 Feb. 2,1958 Feb. 15,1958
Stardust, Inc .. __________________• _______• Nev _____________ July 19,1956 Sept. 10, 1956 Sept. 7,1956
Swan-Fmch 011 Corporation 1____________ S. D. N. Y ______ Jan. 2.1958 Jan. 2,1958 Jan. 27,1958
Texas CIty Chemicals, Inc.' .. ____________ S. D. 'I'ex _______ June 22,1956 Sept. 26. 1956 Oct. 11,1956
Third Avenue 'Pransit Corp .. ____________ S. D. N. Y ______ Oct. 25. 1948 June 21, 1949 Jan. 3,1949
Surface Transportation Corp _________ _____do. __________ June 21,1949 _____do. _______ July 7,1949
_____do ________________do ________ _____do ________
Westchester St. TransportatIon Co. Do.
Inc.
Westchester Electrio R. R. Oo.; _____ _____do ________________do ________ ~_-- do .. ______
Warontas Press, Inc .. ________________ _____do ___________ Sept. 8, 1949 Sept. 8, 1949 S:if,t. 8,1949
Do.
Yonkers Railroad Co __________ • _____ ____.do ___________June 21,1949 June 21,1949 J Y 7,1949
TMT Trailer Ferry, Inr.' .. _______• ______ S. D. Fla ________ June 27,1957 Nov. 15.1957 Nov. 25.1957
Trinlty Buildlncs Corp. oCN. Y. ________ S. D. N. Y .. ____ Jan. 18,1945 Jan. 18.1945 Feb. 19.1945
Uintah Dome all & Gas Corporation 1,'__ C. D. Utah _____ Apr. 1.1957 Apr. 2,1957 July 29.1957
U. S. Realty & Improvement Co.' _______ S. D. N. Y ______ Feb. 2,1944 Feb. 1,1944 Feb. 8,1944
I Commission filed notice oCappearance m fiscal year 1958.

J Reofl'anlzstlon proceeding closed during fiscal year 1958•
• Commlsslon no Ionger partjelpatlng in proceeding,
228 SECURITIES AND EXCHANGE COM:MISSION
TA.BLE 14.-Summary of cases imtituted in the courts by the Commission under the
Securities Act of 1933, the Securities &change Act of 193J,.,the Public Utility
Holding Company Act of 1935, the Investment Company Act of 19J,.0,and the
Investment Advisers Act of 19J,.0
Total Total Cases In. Total Cases

Cases Cases
cases In. cases pending pending stltuted cases closed
sntuted closed at end at end during pending during
Types at cases up to end up to end
of1958 of 1957 1958 during 1958
of 1958 of 1958 1958
1Iscal 1Iscal fiscal fiscal
fiscal fiscal year year tlscal year
year year year year
---- --- --- --- ---- ---
Actions to enjoin violations of
the above acts •••• ___._._ ..••. 842 789 68 43 62 105 52
Actions to enforce subpenas
under the Securities Act and
the Secunties Bxehange Act.. 69 68 1 3 3 2
Actions to carry out voluntary
plans to comply with sec.
°
11 (b) ot the Holding Com.
pany Act •••• _ •... _.. _. ____•.• 125 120 5 2 5 7 2
Miscellaneous actions. _•• _••• _. 24 23 1 1 1
Total •• _ ._. ___••• _._ •••• _
---
1,060
---
1,000
---60 ----° ---71
45
---- ----°
116 56
TA.BLE I5.-Summary of cases instituted against the Commission, cases in which the
Commission participated as intervenor or amicus curiae, and reorganization cases
on appeal under ch, X in which the Commission participated
Total Total Cases Cases Cases in. Total Cases

cases In. cases cases
pending pending stitnted pending closed
stltuted closed
up to end up to end at end at end during during during
Types of cases 00958 or 1957 1958 1958
ot 1958 of 1958
1Iscal fiscal fiscal
1958
fiscal
fiscal fiscal year fiscal year
year year year year year
---- --- --- --- ---- ---
Actions to enjoin enforcement
of Securities Act, Securities
Exchange Act and Public
Utlllty Holding Company
Act with the exce~tlon ot
subpenas Issued by t e Com-
mission ••• ___._. ___••••.••• __ 64 64 0 0
ACtiOIlll to enjoin enforcement
ot or compliance with sub. ° ° °
penes issued by the Oommis-
sion .• _. __••• ___.•• __•• __•• __ . 8 8 0 0 0 0 0
Petitions tor review of Com-
mission's orders by courts ot
appeals under the various
acts admmistered by the
Commission. __ .•• ____• __•••. 209 195 14 6 11 17 3
MIscellaneous acttons against
the Commission or otllcers of
the Commission and cases in
which the Commission par.
tlelpated as Intervenor or
amicus curlee .•• __••• _..••• _. 196 192 4 7 6 13 9
Appeal cases under ch. X In
which the Commission par-
ticipated __• _. ___•••• _.••• ___• 154 150 4 1 6 7 3
---22 ---14-'---23-
TotaL ..•• __._ ••• _._ •• __•
~1---009 ---37-1---1-5
.
,
,
,
-,o
-<"
~
~ ~
g- 0'"
.,"
]~ A
o
.,
o
,
o
o
- - ..
o 0
o
,
0
,
., -
o
• 0
., .,
o
o 2J o
o ~ ~ s
,
o
a
~ ~
o
.g
~
~ ..
Z~
~ <:
a o ~
•
•
,,
o
.0
0
0
.
o
o
.., o
. .
o
,, o
,
o
,o
• d-
.0
.
o
o
o
~ ,
o
o
o S
e- ~ d .5"
s
..
0
..
o
A
o
o o o
8 ~ o
~ .e -e
t~
o ~
~
'0
:Il
~ .E
~
<:
'"-:;
.t:l
la, o
.!3 ~
~ ~ !3
r.:
-< -< I'Q
, ,
,
, ,
,
,
,
, ~
.
,,
- ... ...

J ...
'"
.,
,
..: .. . . ,
,,,
o
, ,
.
,
,,,
,
. ,,
,,
,
,,
,,
,,
o ,, ,,
~
o ==
o
.9 .
.! '"g ~
{
I
'"s
~
f 2Po< J
~ ,.;
1
c ~
i J
A
~ ~ ~ ~ ~ ~ ~
ti' cQ ~ a5' .Q 8f ",,"
~~~~~ ~~
, '5
,,
,
,
,
,,
.,,
,
---- -
o 0 0 0 o
-
o
I
p ~
,
""~ ....~
~ ~
....
.
.,
, "
,
,. , ,,. ...
,
I
,
:
I
:
,
I
I
: ,,
.,,
,
...
, ,,
.,
"
: J :
~
o :.9 : I
I
,, ,,
J! O
eo l.a ,
j
0 ~ ,
i O
'" o(l
p
:s 0
0
Q o
III
~
~
1~~i I I
~ i ]~
III ~
~ ~
! o -< c
0 0 c
gs~~ ~g
~~~~
.~~~e~~~
~~~~~og~$~
~~~~s~t
~~&~S~ gg~5~~g
~~~~~~~g.8 bS~~
~~~~
lJ'5'e~.Q .~ -:al:'i'~ 'd ...;at:) .s~o 8 ...E. 8!!3~.E~abll .s~.so
-~ed~a~~~~ .=~~s ~~~B~ .s~e =8oo~~~~ ~~~
~~o~~~.~>~d~~~< .=~~~d e~~ ~S$e~=- ;~d~
~~~~5~~~~~~ooO~~~~:~~~
12~e'Ur-:C"I ...ss g$~a~~ .Q)~.,g8
~~~g~~;~~~~~~~~~
~l-ootO"~8~:a~.cc~~
~~~g~og~~~~~~~~~~~~~g
'g»~-:'C~s;:::'"""O ..gC'l .~$~~.s::
~a~~~:~~s8~a~~~6
J-."d~
d --:~B o~ce~
s::: k~;'"
;; ~~~ ~<~:~~~~8~E~~
~Z~~~~~ga~~£~a~~~i~$~
es
'"'
~a~g26~Q~£~~~~<~~~~ba
....,."2 ~
0 r..., _~ t:.e"C ~Q3S~~~;>'Q~-"d<l:l ~s:::o -- c,.."CQot-- t--~C"i
'"
3 ~ ~~~~B~8;~~i~~~OO~;~~ ~8- ~g~~"C~~~~~~~~
"
t: ~~o~~~8~~~aS~~J-. _~C~~~ zo~ .S"C~o~<.c<~~ ..~~
~~~"d$~~Q3gs a6~~~a~Ooo~ "d~s~~a~._.'d~~o~S~
gB 8 a~~~g].g~~ goo Sd~ .~~ ~~:a.9~:!: ~~~~ ~ g w 0 ~CQ ~~
g8~sag~~Se!g~$~8~E~8g ~~sog~$5~S~o~~~g
~~~dIDg~~S~~gz~~!ao8e~~<-~S~~~o~~~~~~~~
.o~,; g~ ~3~~ o~~~.s'agi
~~~ ;.;
.~~~~~ ;:~.s'E~~~ Ef;.Q
bt
~~~ga~~~s~Og8~a~~~d~6
:=_>cd -~:t"C~,.Q •
~8~~8'Ei;~gO~S~~=~
::;::s ~o Sl::1"""'i C)cdcnoSQ) ......
l..?~ "C4:l~QS
g8~~~S cn~Q)~~a~H~~~~~~~Mg~~~~~8Qa~5a~~~~
~~~~8~~~E~~z~~EaE8Sg~~~~~~S£Og~~~~~~~8~
~ ~ ~ ~ 0 ~ 0
-'"
'2,.-(~ - ....
~
"';N'''-:':
<>~'" ~
'3' , 8 i
'0 ....
~~
<to:;
...~'l'-
"'-""C:J"'-" •
,,~~ of
r-..~tO~
..... ~.g~
....
t;
00-<: <>
~ I ~
<J ~~ ~ -< .... ~
~
'8;:Qd~ ~" ~"""d
~'" ee
0
'" ,
'0
a ~~
d-~~
g-3~ z
~~if<1l'"
",~
.$
0
....... :;;1 ~ e '000
~ '0 ~-<~ '0

'g-d<o
tI3~~"'1l
a:g
~~ ~ '"....
'3 00 ~1i3~
'0
@
-,a-- a e7
'"
<D
'"
=:l
<
--s.<-;i'g-
; ~~ci
..........
.eg€"E3 $
~.-.~~
-.._ ...0
C'O
'();
'0
$
a 'd~
<,'"
"';;::
'2"";
~<>
'()cs
~~
~",
",< '"
~"'.
~~ ~ ."0< "' ...<>
t- ",0
tOtQ_d
""
~'Z
'"e5
ee
~~~g &i< g~;~ .'"
g~ g~ ~~ ~~~
'"
0
00 sn 00 00 00 00 rfJ 00
~ .... ~
<DOO
<,'"
<0
'"
~ ~ '"
~
'"
'"
~
t-
'"
~ '"
L~
~
l;;
~ ~
oc<:l
.$~
,: ,: ~- ::f ~- ~. ~ <tS
:a~
.... ""
~
:?1 Z
~
~
> i0
00
..:
:?1'"
00
~"
Ii
~
.g
~
:s!3 ~ -0 ~
... '0 ~ "0 ~
£ :s!3
I £.0.
!!l <>
A ~ ~ ;: ~
~... SIl" ~.bi
... t3 A~ tI,; ~~0 tI..!i A..!i A~ A!S
"'0
!i.lo
'0
6;;; 6S
<>~
e>< ,," ,,6
B.8 ....0
0_ E~ e><
..8~ ...
"'-'" 1l~ ,c:::l ",,,,
'"
f!
"
t>
.d
S'"
gz
00
~o ~z
00
"':::l
...
z!So '" "1:"
00
z
...
~
g)~ ~z
r;il
",~
.... '" C', ee

'" .... ~
.8c!>~ '" '" '"
~:::1l
zo~ I : , ,, ,
;:; , , ,
If,
,
'"
00
: : , 8- ,,
,,
, 0
"
oS
<> <>
,
.; ~
o
0
0
, 8 ..
00
;;
.So
<>
..J
00
...."
.,;
0
o<l
:>;
0
.,;
-<l
I'" oS
$
~.,
ft ...
.s.... ~ 0
a '"
0
-""'" 6
-<l
.... 0
111 ~ ~
~
'" i'" . i
20'"
rfJ
,:
0
...;
...'"
111
;;
:> '"
<>
~'S a
...
s'" Eo<
Z
~
0
sl!: ...;
&4
..:-
1l
0
111
~
s
l'll
~
.s
~
.s'"
jg
",;J
1:4
g
.. ,
,,
l!
: ~... ~
o ~ ~ ~
d 0
~ a ~ Q
s ::: ~ ~
;g = oS ;Ij
~~l ~
=g~~
_O~ ~ ~~_~
~~~~ ~ Q~b~
~ig~ ~~~ ~
~a~
~~~s ~~~b~
Z~.t d~fi~ ~ ~ ~
~ 0 ~~
8 00~
~ ~~-~~ 1
'tlg~ ,g .gag ........ 1'I~~~''':::l . ..:'tl,g •
~~g~~ ~~$ ,g~I'I~ga~~ ~ ~g ~ 8
A
0-$
1iS:2~ g",,:o.g ~
.-~~
,; ~ a:,'"~ S.EI'tl
~.~
-< ]:g ~ ~
Ii. ~ ".s,O ~ ~ I>.
j,;~""S~oS~A ~~~ o~s~~~~~~ ~ ~~ < g

.. lll~~~ S~. n'$ ... :S..
_ ......
a .. ~~ • Os[-og
'1"'4+:1>
:i 'Os ":i G)_ bO =
0
~~g80.s~~B~~ ~~~ ~~g~~~~~a~ ~ j~.a~ !

., HS~.~~~8.~
~""o.aoo =~~ e~-d~Q~O~~
. _::10" .sl~8. o ... ...~ ~., .aPo.,jl'l
.a.......al'l ~e~ ~~
B ~~~!~f~~~~~
--~~ ~g .2 ~
~~~ a~~~~~~~~~
~ .... ~ .... ~. -~ ....<
~~~~~.
f ~~~
'0
., e~~~~~~;~~
~~~ ~~~a~~~~~ .~ oo~~~~~
~
W ~~~~~~~a~~m
Pobg~~~n",,~~.a
Sjl'l ~g~~""o~eO~
~~S ~~~~a~~~~~~
i~~ ~a~as~~g~~= ~~~i~~~
~~~~~~~ns~~
S ~~~S~~
~~~~~g~
~~ogga~~~~~s ~~i "~~a~~a~s~ ~ ~g~l'I~og£
~".as~o",,~g"i~
0
,:~.s:~.E-
......Po
8~o.a"~~aPo"o!
~ . ~m &; S as
"'Qi,r:.
° 'tl~~ '8"'-
-e ~ .!1..S!b:t
oS 0
wi~~~~m~~8=
4)~
1'1 ...... _ .. "sal

~~f~~~g
~.,"
gg=~-e
aa""
O",.,ol':s...,'O.="".1'1 ""p,;;:j-<.,,,,,l:,dl'l
- ""s'
~ ~~~~~~~
~o
..1'1 .S"'I'II'I ~
...._
0 ~'i~ 0 •
~~~ ~d= ....~ ....~~~....f ~~s ~~~-~ga~~~g~~B~~

~~~~~~~~~~8~~~=~~~~=~~~g~~~c~a~~g~~~
~Poa l!l.<" a 8 "'~o~6.gO g,a '" ;.i5~ a g-g.Sl~!5 a_:::l~ 8~
~8~'" ~ ...
~~ .....
~...~ ~ 8°"~ ~ s~
. .. ..
.... -. ... ..
,, ,, ,, ,
, ,, ,
,
,, ,,
,
'"
~~
';;j''tl
~~
~
~
-. .~
,
,,
a
,
"
-<
....
,, ,,
,
,
. '0<
;l;:l; ~~
~
'tl .< .. :2
....... -~-<-....
....=' ' ,
e~ e~ :; ....
.... , ~
~
,g
~
~
-< ...::~
o
,
~,
. 'g~ ..... ~tf~" s =...
'tl ~
~ 'tl
<.... ~
..
.,
'tl ~
i~
.,e....
",,!ll
~... ~
.... ..
~ ...::
~ i
ee
~
e
.......
=....
::.~
c..:,
:s~
......g<
~-"'lft
'S~~
s
... s
-s~.~""........
~
~ ~" "0'';
~ - ...
""'2- s ~-<
~ ...,;
., ~-
~~
.,.,dd
~
CD
,;
.,
~
.,,;
~Cj'
...
tl
g~
:2",,1
~~.'!
., .....
IO<S
.~IQ
"'''' . .,
g-g ,; .!ll
:il'"
'"... CD'" CD CD CD
'"~ '" '" CD
..""
.a~
_CI'l
~
..:
e--eo
~~
g~-
~
..,'" :::
<0
•
<0
=...
'"
~.
...
~
<0
:::
:?!
<0
~
..:
....
.., ~ ~ ~
= ~
...
....
00
~ ~
.... ~. ..: ;!
00
S~
~8.
~s.
~
°
d":
.,Po
A< A"
,;
.,
d 1:1
., ~ i .. ~..
.: .: .,
,;
.., :~.. -~
0 ~ ~ A
-s
l1.l 0 to
~ , ,,
0 '0 0 '0 "0-
~ -
0 '0
,
,,
..
,,
.,, .... s
:0
ii , ,~ ~ ~
.:!l
,,
~ ~ b"!!~" E ,,
A il A~s.
''I::
:~ .21 .l!i '"
!~
So
",0 . jE~e~
, lA~A ~
e.,;
.,~ e><
0
~~
~
~~iS.i iS~8
~ee e~1l
'0
~1'1
~..
1P
~:5z~~o~
Q)~CDO .,~ ~.,
gz
!~
.,
...
gz
.,~~
~~~~ ::I ., ~z~
p z ~dl z
0"
~~ to
:p,~o ~ z
.... ~ ~
'"~ .... ... ... ...
tl~ .... ::!: co>
-a~~
z'Oj I . . .. .,,. . .,. .. . ..
...
,, , , ,
~ : . .. ,, , , ,
. , ,,
!i .... . ..
~ , ,,, , fr ,, ,:
,, : fr
! ~ .
, d ,,
.
0
j""., , ,, ,: ,,
0 0
0
'tl
dl
..: .
,, ,,,
,,
,
,,
,
i
: ,
,,,
'"
i., 11
~ ..
0
0 i
=~.,
d
0
~
~
R !li ~J~~ ;'tll ..:i
'tl 0
0
~
:::l "E'" '"'tl l., ~
~ co
Ii!
1l
'0
., ~0
"".e
ro-l~
,::l~ .:
0
0
~ ~
0
~
III
A
~ A
s 1j
~ ",Po
fp, ~i S' aJ
i
III
.,
'tl i ~ S
.g 1-
III
j !
III III
Gl
III
Gl
to: III III
0
-< !
..
'i
-<
~
e- co
! ~
t:l" <t!
~ ~
-
o
.. .., .... .
.. ..
,
... .. . ...
,
,
..
.. .e ~ .
.. "0
:s
.
..;
)f
f f
w w
~
~
;:;;
1 II
.g,
8
.E!
w w ~
.,;
5J
o
6
~ 0
o 0
I~'"
o
0
,
,
o
:a ""
'" ~o~
~ 0
, ,
. ,,
.
I
'""
~J
,
1"1
,
,,
,
, o
o
o(l
Ii
...;
JJ
-
o
,
,
,
~
o
e
.£
r:i ~
s .5
~ ~
8- ii:
~
'0
~ 0
;:= ;:=
-
o
J
CD
~
co'
-
o"
-
o .,
,
~
o
"0
co ... .., co co
I
,, ,,
..,
,, ..
,,
,,
,
,, .
.
,, ..
..
,
CD
..f
ci
i I
! !
~ !
:!i ~.
~ ~
!ig
..
o
o
~ ~ ~ ~ ~~
o.
.
o
o'
o
o
o
o
,
1-
o
.
o
o
o
i
~
~
.. 11
.,, .
. ... .,
o o o
o
Ii
0 o
o • o o
. .
o •
o , , ,
..,,
• 0
o , 0
.., . .
• 0
o • o
o • o o
. .:
o o
o o
: o
,
,
: ,
o
,o
,
,
0
,,,
: ,
Pi ~ ~ : ,oo
.:i
J
o
,o .l:l
Iii
~ < ~ ..
o
00
AA i
liJ
e II ~
,
,
o
~ ,g
-
o"
,
o
'C
-
o
o
o
.
-
.E
~~
0
0
I
.
o
p~i
e;E : .g
~~.g
~~ : o
r:G : o
, o ,
o ,
o
o
, o
. .: . o
.
o
o
~
o
: o
.
o
~'"
o
~::J :
,
.
o
o
o
o., c"" ~
!; '"
=:S I
'" "-"
E":; ~
~!?- ~i! o
o
o
"£1 '
~ "' .... Cl
~~ ~~ : o
J ..
;lA
~ ~
)1
.rcjO
)1'0 A
.Cl
1"1
A
, , ,
co "<tf I I I
~ ~ :::
i;~~~
co
, ,
,,,
, ,,
,,
, ,, ,
,
, ,
,,
, ,
00
AAA g
~
486867-59-17
'g~
<Z"
c~
~:;:
--
r-'"
'dol
~~
E~
:e;:so
fl)~CD
~eD
tLJ
-
o
I~
~
'" "'"
00
-?
~~
:;::;<=
e'" ~ ::;
.!is e-l ~ ~
~~ .ci '"
.s~ ..,dco ~'" ..,S
-
'0
E;
0
0",
.s
.0
S
,
"'''
"''''
-'"
1l'"
-e 0
"
'0
000<
-e
E
'8
5 -j a
'0
e
"2
p s.... A -
5
'"
2-
o
o
s '".:::
.g
..,
a'"
o .;
0 .:::
c
~ 5
8 G'"
244 SECURITIES AND EXCHANGE CO:MMISSION
,,
,
,,
::
5
5
£
,, ,
'"
,
, ,,,
, ,
.,,;
~ ,,
,
.0
s
S
~
'"
<5
g
oc
'<:>
~
.....
0
~.,
~
B
-e
'".:e
"t:l
.,
....
.,
C3 '£
C
~'"
Z
.., Ci~
'I:; ~
OJ
C)
'"
:S 0
P::
.... 1- ....
""....s i>;
E- if]
0<>
~ ~
cc
"'
~
.; c, :;:;'"
::f g ~
~ SE
~'" ~c,
~
...""e
"t:l
E-
Z
0
-Po
Ol"
.....
Po
oi
"
0 m'"
<1
...,ee
.:e
co 0
R. ~ ~.... -'"
OJ
-< i5
..."""" :g
"1::l
sc
z
....
0
0
"t
><
~
e,
..,'" ~ ~ Z
'0
c 0
.... s
R.
R.
li:
£
s
r£
i
P.
~., <:
'".:; '"
-3 g ~
I 0
a:
Co ~ oc
.; .86=
..:l
III
g::=:.a
Zo~
<
E-< ;;
"c-
-'"
tr 2
I"l
.::'"
" .
-g'"
''""'
c,
'"
c
{;
(5
-;;
Z - r.;
::E o=
.;j
~-"'-
<1>0
$0
ot'
.. .g ....o"i:l<>
.s~~"O 0=
.... t:e£ ~
t:lc .... ~8. -<>
~:::-3"E= .sf ]s =""
Q)
",-
gs..e- 1:;t:e
~f::oo.s .@-E . ~~

~~ .godgg..s~~
gj .5~~~~~r:rg~~
-B.,
<>
0
;8"O::;g
,.g"""oQ,)~o
s g,g.1:0 .5;1~~
........0
'3tt.:1cdg
..... .:2dJ:as:;
....s:l
0
c:;I
..c.c t:l
ro ~~~.E8.;a~ 8.~g-d
r... Oll) .."0
Z ~ ~.oti'3-g- ~~
0-1
G()-~.aB
-0
~~,g ~r-:~o
::=..c .. l'J.l~-
.~,~J::o~eq:r...- ...
a..c:g$~I3~~.g~~
;:;J .. o""~"8~"'E
"""~""
o ....~._.a::~E,..8.o
<:) IV..c c,'l"o CD
rg € ~~c.'E ~ 8'2 ~'5

0 0 0
""'0"..
., -
""..;
5l
.,,
..
.E ~ "0
-< -
~., -< '"
ee
-<"
'0
'"
~ ~~ '";:;'"
...::-<
=
iJ e: .0 ...
~'" e-
""-
O>
"

C7J """" ""d~ """"
g e
C7J "
C7J w
..
:B~
] ~
~
~.
~
~
00'
~
~
",'
~~ "".,~
.:l:s.
=., ~ .0
..... "" ;:;J ;:;J '"
fz<
-S
..
'"
0
0-
Z
. ~
...
~
~
'0
E
--
8
0
'" ~ , ~
~ A
io
-o ='" . E
0
z'"
",-",
B _0
;g ""'"
g>< ~
"
0
w
-
in
'" '" ....

.8b=
S"" es
""
Z
~'O-g
oS I
!l
a ,
"".B=
"
'0 d ~
0 ...
'"
.9
o
'"
...:l
r:r
.;
'g
:a'"
E
Il< ~ ::i 0"
'"
"";;0
-e
=0 -E
0
;:Il ...:l w
.,
"'-'0
r-,
"'
~
<0
"'e
..
"'
;:;
;;;
~ "'~
00 00
"'
~
00
"'
~
""",
.sa .,; ",'
O'l
otS
ec ~
0 .,;
~
"
-",
..: ~ >.
E8. ...
i >. .ci
s '"
00 0 ~" ...
"3 e
I'< ~ ~'"
",,-
... 0 •
o~~
;-'0'" ~
~E~ '5
o~o ee '"
H
S .=i
-'" ... I
II
ZCi."
oE~
~-5 a
:0
s -~
'0
.5;
'"
6
s:
s
°
0
° "'''''
0°'"
000
S ,,;-.
",-:<
0
'"
"0
'0
s
s'"
- '"
'0
OJ
0
0
"0
0
'0
c
.c
.... cec;.
;ooZ ~ eli ~
00 ~ "
0
00 ~ s
't:l
c>
~ ~
s s.
:J
c,
!E oS°
'"
is .s" Ci ~ o
o
c ~ ~
.;;
;;
0
s
3
s; " '"
:;;; E
'"
'0
I:
I'-,
"
"0
'"
~
c
;:
Eo<
c, ~
~ :J
",'
I
.s
""gJ
0
-
00
Z
""8°
~"'"
£
.5
""
'"~'"
0
Ci
" °
""'
Z
TWENTY-FOURTH ANJ\TUAL REPORT 249
,
,..;
.
:'"
"''''
p: .
.58
ci-c
0"'<3
"'.8
-ar<l
0'"
-<l;;
gjgj
00
",,,, .
='"'"
,",.gP:
~~~
~'"
~i~g~~~~~~~~g~~~
~~~--a~~~oB~~-B ~
~ M~.!S ~~~O ~~S ~~ ss ~
~S8~~~!~ .~~~~~~~~
~~O~o~E~~Q~~~ .~~~
~E .....
o.t::b(l~~SEo
~ 0_ c.=.E
....... ...rn --0)~6f8e aJ
~~~~~~S~~~~~~~~Q,
~ a-
.~~~~SdQS~~~~£~~
a~ <P .... 'O Gl 0 0 Q;I ="0::3 .....
~~~a~~~~7~~ ~Q~j
f~~~.s a~;a<~~ ~~'d Q3 ~..-
s ....
~~~~~~Oo8~ef~o .
~8a~~~E~~~~~~~~3
~s=a.E ~8 f~~~
........ s::
g.s ~ ~S"g0
s:I"'c, ~.clltJ
=~~~~~<
o~-cf~
...
~....
"'0 :g CD ~ 00-'0 «S tl2 Q,~ Q,

gj ~~~oss .9
"
'0 s~]~~~~~~~~~~~3~~~
s ..-a
I
~ bC41 ~~ l>.~"';CD~O ~~ ~:;
~E~~o~~~~a"O~~:~<p:~
III ~~ag~~~8a~~~o~~~~~
.~~a~o~_Q~~gQ ~ ~~
~so~os~~~~s~~~~~~w
~O)~~s~~~~~~~o~
8.o~~'5l~~~
O)g~
'-;'-"'::;~Cl! ....
~~ooo-Q,~O~~0Sd~~~f~
. .£ °
.. co -Ss:ld.Et'
~~e~~-~~~<P aJ!~~~~O .05 0
o~~~~~~~~A~z AS~~Z
al..;~""::=l!~aa~r..E~'OQ
_I~OO~_ .. e 0"0
".!l
....s"O~~
~<-~'dO~~ 8~~O<p~~~C1S
QO~o.!lZ.~~-~O~a~~8
s_~ ~ gE ~~~o Q~~
~~~~~~~f~~S--~~£ .~
~s:lB=~J~~3~~S~30~~~
~e~~Sf~f8o~~~8~!~=
-<
,,
'0
aIe ..
,
!.
.,
,
~
""If ;i
::::
i -
:l
II
0
.,,
~
:J
A
..,
s~
~o .
°
iii
~ ~,
:a~
:5
'8 ee
p CD
A
,, .
,
.,,
,,
,,
,,
I ,,
'0 ,
~ c.~
~
z 0
0
""i3:5
p
~
.<::
8
ai.o.~iJ
0<:>80S;j"
8.s
OClJ~gEl 2
.... ~.EJcdO~O'
E'E.!o~~~
80 ...8 °ali
;.,.8<=&<=",
S£;~ ;::;~- ...
o::q;S~~"':
0u?~do.S~
"t:l_ 3"t:lC.-~
0;"8<=~-SO"JtllI
"':l
.-1
.
.s~~~~_~~c:I
Cf.I"O...-OQ;l° ....
~~oliEl~O~
~ ~":&~8.;
"0 8~~~Q,Q~cn
~~.E_::scel::~
...;., :arn~:5wgB.~
i
oCl
"0='-- ._)<8.
.s~.a2~ go:: ~
"t:l
<= ""s--li,°'"
$- ;.,. =;l
'"
<:>
1O£J:,Q~
e f"C~i'O
~ ~ en
~B
l:l
~ i~~::;tl5al ~ f;l
Z 1'«", ".o~
lJ£~~£EE!.9
o~o ~Q.,-Cii
.=.:=~~ ~f'el
,c'Cl_ ....'t:'g
"O-~- ...=
'O ...
t,8<,ScQS
f:;g.!3&~~&,g
........~~o_~=:
cod
~~~i~ciBS.
~~fi~~gB. .. cn
11;.,'" l!i 8."" S.s

afa:-~.s...~~ e
PtPoc_ ..... CD 0+11
-<
0
0
-e
a:l &:i
::::
~
~ ;.,
'" ~
f
-e
~
~
<:>
~
0
0
~ ,
0
~
A 0
0
!~ £1.,
"0
000 l3
"t:l .g
i '"
~
~
~
~
00
.5l
., II
gj .!l
<>
r>;1
"0
., e
-e
;.,
~ r::
z al
<=
~
E!
.s
s
TABLE 25.-Reorgantzation cases under ch. X of the Bankruptcy Act pending during
the fiscal year ended June 30, 1958, in which the Commission participated when
dist» ict court orders were challenged in appellate courts
Name of case and United States Nature and status of case

Court of Appeals
General Stores Corp., debtor; LCWIS Appcals from orders of May 2, 1957, staymg LeWIS J. Ruskin,
J. Ruskin, Ford Hopkins oo., secured creditor, from foreclosing on stocks of debtor's subsidtar-
Stineway Drug Co , Sargent's Drug Ics and from order of July I, 1957, requirmg management of sub-
Store and Wright & Lawrence, sidianes to give notice to the Chapter X trustee 20 days in ad-
Inc., appellants (2d Clrcuit). vance of substantial commitments and authorizmg veto by trustee
unless reversed by court. Appellants' brref and appendix filed ap-
proxrmately Sept. 13, 1957. Briefs for Richard Goodman, appel-
lee, filed approximately Oct. 16, 1957. Commission's brief flied
Nov. 4, 1957, in opposition to appeals. Briefs and appendix of
reorgaruzanon trustee, appellee, filed Nov. 4, 1957, and approxi-
mately Nov. 20,1957 Reply brief for appellant and supplemen-
tal appendix filed Nov 27, 1957. CommISSIOn's memorandum
filed Dec. 20, 1957. opinion Jan. 6, 1958, by CA-2 affirming or-
ders of May 2,1957, and July 1,1957. Closed.
Inland Gas Corp., et al., debtors, Appeals from order of Mar 14, 1956, mter alia denymg eonfirrnatron
Ben Williamson, Jr., Paul E. Kern, of Trustees' Ameuded Plan of Reorganization refusing to find
Green Committee, ClInton M. worthy of eonsrderation a plan submitted by a security holder
Harbison, Allen Oomrrnttee, Van- and refusmg to confu m a plan of reorganlzation because it pro-
ston Committee and Gregory Com- vided for post-bankruptcy mterest and smce It was not accepted
mittee, appellants (6th CirCUIt). by the requisite majority of creditors affected by the plan. Brief
of Oomrmssion filed Aug 1,1956, supporting certain of the appeals.
Decision of CA-6 Feb 14,1957, affirming the order of the district
court. Petition of Kentucky Debenture Holders Committee
and Paul E. Kern, Mar 4, 1957, for rehearmg and memorandum
of Commission, Mar 4, 1957, in support of petition for reheanng,
Order entered by CA-6, May 8, 1957, denying the petition for
rehearing. Petltrons by appellants for "Tit of certiorari to review
Judgment entered by CA-6. Feb 14, 1957. Memorandum of the
Commission III support of petition, Aug 15, 1957. Brief and
consohdated brief of Oolumbia Gas System, Ine., in opposition
to petitions for "Tit of certiorari, Scpt 9, 1957 Reply brief of
Allen Committee and Edward D. Spilman, Sept. 19, 1957, to
brief of Columbia Gas System, Inc, III opposition to petrtlon for
writ of certiorari and memorandum of the Commission. Writ
of certiorart denied, Oct 14, 1957. Petlnon of Panl E. Kern for
reheurmg, Nov. I, 1957. Petttion for rehearing denied by Su-
prcme Court, Nov. 19, 1957. Closed.
Inland Gas Oorp., et al., debtors; Appeals from orders of May 13, 1958, and June 2, 1958, finding the
Thomas Choate and Harmon L plan for reorgamzation of Feb. 25, 1958, as amended, is fair,
Remmel, Charles J. Gregory and equitable and feasible. Motion by Clinton M. Harbison, as
Clyde L. Paul, Paul EKern, trustee of American Fuel & Power Company, to dismiss appeal
Elmo E. Allen, George H. Green- of Paul E. Kern, et al .approxunately June 20, 1958. Memoran-
wald and Edward D. Spilman, dum June 25, 1958, of appellee, The Columbia Gas System, Ine.,
appellants (6th Olrcuit). in support of motion to dISmISS appeals. Memorandum June
27, 1958, of Green Committee m support of American's trustee's
motion to dtsrmss appeals from order of May 13, 1958. Pending.
Magnolia Park, Inc ,debtor; Stephen Appeal from order of Feb 25, 1958, approving pennon for reor-
Goldring and Malcolm Wolden- gamzation, Motion by Stephen Goldrmg and Malcolm Wolden-
berg, appellants (5th CIrCUIt). berg for leave to file petition, petition for writ of mandamus and
prohibltron or for a supersedeas or stay of the district court's
order of Feb. 25, 1958, and brief in support thereof served Apr.
16. 1958. Comnnaston's memorandum May 2, 1958, in oppositIon
to petition for writs of mandamus and prohibition, etc. TrIlS-
tee's memorandum May 7, 1958, m opposition to motion of
appellants. Rejomder memorandum on behalf of petitioners
filed May 9, 1958. Order by CA-5 May 21, 1958, denying leave
to file petItion for writ of mandamus and refusing the alternate
application for supersedeas. Pend mg.
Selected Investments Oorp., et al .. Appeals from order of Mar 3. 1958, declaring Selected Investmenia
debtors; Selected Investments Corporation and Selected Investments Trust Fund to be bank.
Oorp., Selected Investments Trost rupt, and finding certain trust certificates issued by Selected
Fund, Hugh A. Carroll, Julia L. Investments Trust Fund not to be debt securities within the
Moore Carroll, Wllllam A. Rigg, meaning of the Bankruptcy Act and therefore not under the
H. P. and Zona Willis; C. M. [urrsdtetion of the district court. Application Apr. 4, 1958, of
Holliday and Herschel Hillery, et appellants for order staying proceedings in district court pending
al., appellants (10th CirCUIt). determination and final decision of appeal to CA-lO; denied Apr.
7, 1958. Oommisslon's designation of additional portions of the
record on appeal, Apr. 9, 1958 Pending.
Selected Investments Corp, et al., Petition for writ of prohibition directed to Hon, Stephen S.
debtors; C. M. Holliday, Herschel Chandler commandlng hIm to desist .snd refrain from further
M. Hillery, J. S. Pledger and proceedmg m the district court and exercising further Juris-
Lucille Pledger, appellants (loth diotron. Debtors' petttion Apr. 4, 1958, for intervention and
Clrcult). consohdatton and for stay of proceedings In the district court.
Oomnnsston's statement m opposition to petition for writ of
prohibrtron, Apr 4, 1958. Brief and response of Hon. Stephen S.
Chandler, Apr. 7, 1958. CA-lO Apr. 7, 1958, deuled appllcatlon
for writ of prohibition. Closed.
Third Avenue Transit Corp., et al., Appeal from opmion of Feb. 6,1958, denying application of Amen,
debtors; Hiram S. Gans, appellant Gans, Weisman and Butler for compensation and denying
(2d Clrcult). the application for approval of a certain transfer of securities.
Pending.
TWENTY-FOURTH AN1\TUALREPORT 253
TABLE 26.-A B5-year summary of criminal case« detJeloped by tne Commission-
1994- through 1958 by fiscal year
[See table 29 for classification of defendants aa broker-dealers, eto.]
Number
Number of these
Number defend.
Number of persons of such
cases in ants as to Number
of cases ssto WhICh Number Number Number whom of these
referred whom indict. of de- or these of these proceed- defend.
Flacal year to De- proseeu-
ments
lendants defend. defend. lngs were ants as to
partment tlon was indICted ants can. ants ae- dismissed whom
orJustice recam ... were ob- ill such
tained by cases I victed quitted on motion cases are
in each mended of pending'
year Unlted
in each States United
year States
attorneys
attorneys
---- ---- ---- ---- ---- ---- ----
1934._ •• _•• ______._ •• 7 36 3 32 17 0 15 o
1935 ••• _. __ ._ •••• __•• 29 177 14 149 84 5 60 o
1936 ___ • __•• _•• _. ____
1937 __ • ______• __••• __
43 379 34 368 164 46 158 o
42 128 30 144 78 32 34 o
1938_ •••• _._. __•• ____ 40 113 33 134 75 13 45 1
1939 _____________ • ___ 52 245 47 292 199 33 60 o
1940 __ ._. __• ____._. _. 59 174 51 200 96 38 66 0
1941 ••• _______•• _. ___ 54 150 47 145 94 15 36 0
1942 __ • _____________ •
50 144 46 194 108 23 49 14
1943_ •• ________• _____ 62 10 33 3
31 91 28 1O~
1944_ •• _. __._._. _____ 27 69 24 79 48 6 20 5
1945_ •• __ ._ •• __•• ____ 19 47 18 61 36 10 14 1
1946_ •••••••••••••••• 16 44 14 40 13 8 4 15
1947 ••••••••••••••• __ 20 50 13 34 9 5 16 4
1948 ••• , ••••••••••••• 16 32 15 29 20 3 6 0
1949 •••••••••••••••• _ 27 44 25 57 19 13 25 0
1950 •••••••••••••••• _ 18 28 15 27 21 1 5 0
1961 ••• "' ••• ".' •• _. 29 42 24 48 37 5 6 0
1962_ ••• "." •••••••• 14 26 13 24 17 4 3 0
1953_ •••••••••••••• _. 18 32 15 33 20 6 5 2
1954 ____________ • ____ 19 44 19 52 26 4 6 16
1955 _________________ 12 8 13 7 0
8 6 0
1956 _________________ 17 43 16 44 18 3 6 17
1957 _______ . ___. _____ 26 132 15 53 23 1 2 27
1958. _____________ ._. 315 51 8 16 4 0 0 12
TotaL _______•
---- ---- ----
696 2,333 • 575
----
2,376
----
1,295
---- ---- ----
284 • 680 117
I The number of defendants ill a case Is sometimes Increased by the Department of Justice over the number
against whom prosecution was recommended by the Comrnissron. For the purpose of this table, an indi-
vidual named as a delendant m 2 or more Indictments in the same case Is counted as a single defendant.
, See table 27 for breakdown of pending cases.
3 Six of these references as to 33 proposed defendants were still being processed by the Department of
Justice as of the close of the fiscal year, and also 9 of the 1957 relerences as to 82 proposed defendants .
• 546 of these cases have been completed as to 1 or more defendants, Convictions have been obtained In
473 or 87 percent of such cases. Only 73 or 13 percent of such cases have resulted m acquittals or dismissals
as to all defendants, this includes numerous cases in which indIctments were dtsnussed without tnal because
of the death of defendants or for other admimstratlve reasons. See note 5, infra .
• Includes 54 defendants who died alter Indictment.
TABLE 27.-Summary of criminal cases developed by the Commission which were

still pending at June 30, 1958
Number ot such detendants as to

Number whom cases are still pending and
otsuch reasons therefor
Numberot defendants
Oases defendants es to whom
In such cases have Not yet Awaiting Awaiting
cases been appre- trial appeal
rompleted hended
-----
Pending, referred to Depart-
ment 01 Justice in the fiscal
year:
1ll38 _________________________
1939_________________________ I 2 1 1 0 0
1940_________________________ 0 0 0 0 0 0
194L ________________________ 0 0 0 0 0 0
1942_________________________ 0 0 0 0 0 0
1943_________________________ 2 18 4 13 1 0
1941. ________________________ I 5 2 2 1 0
1945_________________________ 1 7 2 5 0 0
1946_________________________ 1 1 0 1 0 0
1947_________________________ 4 16 1 15 0 0
I 5 1 4 0 0
1948 0 0 0 0 0 0
1949_::::::::::::: ::::: ::::::
1950_________________________ 0 0 0 0 0 0
0 0 0 0 0 0
1951. ________________________ 0 0 0 0 0 0
1952_________________________
1953_________________________ 0 0 0 0 0 0
2 12 10 1 1 0
1954_________________________ 2 2.'\ 9 7 9 0
1955________________________
1956_________________________ 0 0 0 0 0 0
1957_________________________ 8 23 6 0 12 5
1958_________________________ 9 35 8 1 21 5
4 12 0 0 12 0
TotaL ____________________ 136 1161 44 50 57 10
Total cases pending ' SUMMARY

• •• 51
Total defendants ' • 276
Total defendants as to whom cases are pending , 232
I Except for 1957 and 1958 Indictments have been returned in all pendin~ cases. As of the close of tha
fiscal YeBf,I ndictments had not yet been returned as to U5.proposed. defendants In 15 cases referred to the
Department of Justice In 1957 and 19li8. - These Bre-reftected only in the recapitulation or totals At the
bottom of the table.
TABLE 28.-A S5-year summary classifying all defendants in criminal cases developed
by the Commission-1934- to June 90, 1958
Number as
to whom
cases were Number 89
Number Number Number dlsmtssed to whom
Indicted convicted acquitted on motion cases are
01 United pending
States
attorneys
Registered broker-dealers ' (including prin-

c1pals of such firms} _____________________ 360 224 24 100 12
Employees of such registered
ers .. ____________• broker-deal-
_______________________
128 65 17 43 3
Persons In general securities business but
not as r:fslstered
{f,lncl broker-dealers
and employees) (Includes
_______________
A others P s ___________________________• ____ 722 368 57 261 36
1,166 638 186 276 66
Total. ________• ______________________
2, 376 1,295 284 680 U7
I Includes persons registered at or prior to time or indictment.

S The persons referred to In this column, whlle not engagcd In a general business In securities, were almost
wlthont exception prosecuted for violations oflaw involving securities transactions.
TABLE 29.-A ~5-year summary of all injunction cases instituted by the CommissIOn,
1994 to June 30, 1958, by calendar year
Number of eases Instituted Number of cases In which

by the Commission and injunctions were granted
the number of defend. and the number of de-
Calendar year ants Involved fendants enjoined.'
Cases Defendants Cases Defendants
1934____________________________________________
1936____________________________________________ 7 24 2 4
1936 ____________________________________________ 36 242 17 66
1937____________________________________________ 42 116 36 108
1938____________________________________________ 96 240 91 211
1939____________________________________________ 70 152 73 153
67 164 61 165
1940____________________________________________ 40 42
1941. ___________________________________________ 100 99
1942____________________________________________ 40 112 3Ii 90
1943____________________________________________ 21 73 20 64
19«.. __________________________________________• 19 81 18 72
1945____________________________________________ 18 80 14 36
21 74 21 57
1946____________________________________________ 21 45 15
1947____________________________________________ 34
1943____________________________________________ 20 40 20 47
1949 _________ • _______________________________ 19 44 15 26
1950____________________________________________ 25 59 24 SO
1951____________________________________________ 27 73 26 71
1962____________________________________________ 22 67 17 43
1963 ________________________________________•___ 27 103 18 50
20 41 23 68
19M ________•• _______________• _______ 22 59 22
1955____________________________________________ 62
eo. _______ •
1956 ____________________________________________
23 64 19 43
1957 _______• ____________________________________ 53 122 42 89
58 192 32 93
(to June 30) _______________________________ 162 107
1958 38 38
Total. ___________________________________ 842 2,509 '742 1,892
SUMMARY
Cases Defendants
Actions Instltuted ___________________________________________________________

842 2,509
Injunctions obtained __________________________________________ 0 _________
731 1,892
Actions pendlng_________________________________________________________
Other dispositions' ______ e.______________________________________________ 36
75
• 173
444
TotaL ___________________• ____• ________________________________________
842 2,liW
I These columns show disposition of cases by year of disposition and do not necessarlly reflect the dis-
position of the eases shown as having been instituted in the same years.
, Includes 11 cases which were counted twice in this column because injunctions against different defend-
ants in the same cases were granted in different years •
• Includes 39 defendants in 12 cases in which injunctions have been obtained as to 39 co-defendants .
• Includes (a) actions dismissed (as to 376 defendants); (b) actions discontinued, abated, vacated, aban-
doned, stipulated, or settled (as to 63 defendants); (c) actions in which judgment was denied (as to 11 de-
fendants); (d) actions In which prosecution was stayed on stipulation to discontinue misconduct charged
(as to 4 defendants).
256 SECURITIES AND EXCHANGE CO~fMISSION
TABLE 3O.-0all0IlS of Ethics far Members of the Securities and Bechanoe

Commission:
PREAMBLE
Members of the 'f';pcurities and Exchange Commtsslon are entrusted by various
enactments of the Congress with powers and duties of great social and eco-
nomic significance to the American people. It is their task to regulate varied
aspects of the American economy, within the limits prescribed by Congress,
to insure that our private enterprise system serves the welfare of all citizens.
Their success in this endeavor is a bulwark against possible abuses and in-
justice which, if left unchecked, might jeopardize the strength of our economic
institutions.
It is imperative that the members of this Commission continue to conduct
themselves in their official and personal relationships in a manner which com.
mands the respect and confidence of their fellow citizens. Members of this
Commission should continue to be mindful of, and strictly abide by, the stand-
ards of personal conduct set forth in its Regulation regarding Conduct of
Members and Employees and Former Members and Employees of the Com-
mission, most of which has been in effect for many years and which was codified
in substantially its present form in 1953. Rule 1 of said Regulation enunciates
a General Statement of Policy as follows:
"Lt is deemed contrary to Commission policy for a member or employee of
the Commission to--
"(a) engage, directly or indirectly, in any personal business transaction
or private arrangement for personal profit which accrues from or is based
upon his official position or authority or upon confidential information
which he gains by reason of such position or authority;
.. (b) accept, directly or indirectly, any valuable gift, favor, or service
from any person with Whom he transacts business on behalf of the United
States;
"(c) discuss or entertain proposals for future employment by any person
outside the Government with whom he is transacting business on behalf
of the United States;
"( d) divulge confidential commercial or economic information to any
unauthorized person, or release any such information in advance of authori-
zation for its release;
"(e) become unduly involved, through frequent or expensive social en-
gagements or otherwise, with any person outside the Government with whom
he transacts business on behalf of the United States; or
"(f) act in any official matter with respect to which there exists a
personal interest incompatible with an unbiased exercise of official judgment.
"(g) fail reasonably to restrict his personal business affairs so as to avoid
conflicts of interest with his official duties."
In addition to the continued observance of these foregoing principles of
personal conduct, it is fitting and proper for the members of this Commission
to restate and resubscribe to the standards of conduct applicable to its executive,
legislative and judicial responsibilities.
1. Constitutional Obligations
The members of this Commlsslon have undertaken in their oaths of office to

support the Federal Constitution. Insofar as the enactments of the Congress
impose executive duties upon the members, they must faithfully execute the
laws which they are charged with administering. Members shall also care-
fully guard against any infringement of the constitutional rights, privileges or
immunities of those who are subject to regulation by this Commission.
2. Statutory Obligations
In administering the law, members of this Commission should vigorously

enforce compliance with the law by all persons affected thereby. In the exercise
of the rule-making powers delegated this Commission by the Congress, mem-
bers should always be concerned that the rule-making power be confined to
the proper limits of the law and be consistent with the statutory purpose ex-
pressed by the Congress. In the exercise of their judicial functions, members
shall honestly, fairly and impartially determine the rights of all persons under
the law.
3. Personal Conduct
Appointment to the office of member of this Commission is a high honor

and requires that the conduct of a member, not only in the performance of
the duties of his officebut also in his everyday life, should be beyond reproach.
4. Relationship with Other Members
Each member should recognize that his conscience and those of other mem-
bers are distinct entities and that differing shades of opinion should be antic-
ipated. The free expression of opinion is a safeguard against the domination
of this Commission by less than a majority, and is a keystone of the commission
type of administration. However, a member should never permit his personal
opinion so to conflict with the opinion of another member as to develop ani-
mosity or unfriendliness in the Commission, and every effort should be made
to promote solidarity of conclusion.
5. Maintenance of Independence
This Commission has been established to administer laws enacted by the

Congress. Its members are appointed by the President by and with the advice
and consent of the Senate to serve terms as provided by law. However, under
the law, this is an independent Agency, and in performing their duties, mem-
bers should exhibit a spirit of firm independence and reject any effort by repre-
sentatives of the executive or legislative branches of the government to affect
their independent determination of any matter being considered by this Com-
mission. A member should not be swayed by partisan demands, public clamor
or considerations of persona! popularity or notoriety; so also he should be
above fear of unjust criticism by anyone.
6. Relationship with Persons Subject to Regulation
In all matters before him, a member should administer the law without regard
to any personality Involved, and with regard only to the issues. Members should
not become indebted in any way to persons who are or may become subject to
their jurisdiction. No member should accept loans, presents or favors of undue
value from persons who are regulated or who represent those who are regulated.
In performing their judicial functions, members should avoid discussion of a
matter with any person outside this Commission and its staff while that matter
is pending. In the performance of his rule-making and administrative functions,
a member has a duty to solicit the views of interested persons. Care must be
taken by a member in his relationship with persons within or outside of the
Commission to separate the judicial and the rule-making functions and to observe
the liberties of discussion respectively appropriate. Insofar as it is consistent
with the dignity of his official position, he should maintain contact with the per-
sons outside the agency who may be affected by his rule-making functions, but he
should not accept unreasonable or lavish hospitality in so doing.
7. Qualification to Participate in Particular Matters

The question of qualification of an individual member to vote or participate
in a particular matter rests with that individual member. Each member should
weigh carefully the question of his qualification with respect to any matter
wherein he or any relatives or former business associates or clients are involved.
He should disqualify himself in the event he obtained knowledge prior to becom-
ing a member of the facts at issue before him in a quasi-judicial proceeding,
or in other types of proceeding in any matter involving parties in whom he has
any interest or relationship directly or indirectly. If an interested person sug-
gests that a member should disqualify himself in a particular matter because
of bias or prejudice, the member shall be the judge of his own qualification.
8. Impressions of Influence
A member should not, by his conduct, permit the impression to prevail that
any person can improperly influence him, that any person unduly enjoys his
favor or that he is affected in any way by the rank, position, prestige or affluence
of any person.
9. Ex parte Communications
Matters of a quasi-judicial nature should be determined by a member solely

upon the record made in the proceeding and the arguments of the parties or
their counsel properly made in the regular course of such proceeding. All com-
munications by parties or their counsel to a member in a quasi-judicial proceed-
ing which are intended or calculated to influence action by the member should
at once be made known by him to all parties concerned. A member should not
at any time permit ex parte interviews, arguments or communications designed
to influence his action in such a matter.
10. Commission Opinions
The opinions of the Commission should state the reasons for the action taken
and contain a clear showing that no serious argument of counsel has been dis-
regarded or overlooked. In such manner, a member shows a full understanding
of the matter before him, avoids the suspicion of arbitrary conclusion, promotes
confidence in his intellectual integrity and may contribute some useful precedent
to the growth of the law. A member should be guided in his decisions by a
deep regard for the integrity of the system of law which he administers. He
should recall that he is not a repository of arbitrary power, but is acting on
behalf of the public under the sanction of the law.
11. Judicial Review

The Congress has provided for review by the courts of the decisions and orders
by this Commission. Members should recognize that their obligation to pre-
serve the sanctity of the laws administered by them requires that they pursue
and prosecute, vigorously and diligently but at the same time fairly and im-
partially and with dignity, all matters which they or others take to the courts
for judicial review.
12. Legislative Proposals
Members must recognize that the changing conditions in a volatile economy

may require that they bring to the attention of the Congress proposals to
amend, modify or repeal the laws administered by them. They should urge
the Congress, whenever necessary, to effect such amendment, modification or
repeal of particular parts of the statutes which they administer. In any such
action a member's motivation should be the common weal and not the particular
interests of any particular group.
13. Investigations
The power to investigate carries with it the power to defame and destroy.
In determining to exercise their investigatory power, members should concern
themselves only with the facts known to them and the reasonable inferences
from those facts. A member should never suggest, vote for or participate in
an investigation aimed at a particular individual for reasons of animus, preju-
dice or vindictiveness. The requirements of the particular case alone should
induce the exercise of the investigatory power, and no public pronouncement
of the pendency of such an investigation should be made in the absence of
reasonable evidence that the law has been violated and that the public welfare
demands it.
14. The Power to Adopt Rules
In exercising its rule-making power, this Commission performs a legislative
function. The delegation of this power by the Congress imposes the obligation
upon the members to adopt rules necessary to effectuate the stated policies of the
statute in the interest of all of the people. Care should be taken to avoid the
adoption of rules which seek to extend the power of the Commission beyond
proper statutory limits. Its rules should never tend to stifle or discourage
legitimate business enterprise or activities, nor should they be interpreted so as
unduly and unnecessarily to burden those regulated with onerous obligations.
On the other hand, the very statutory enactments evidence the need for regu-
lation, and the necessary rules should be adopted or modifications made or
rules should be repealed as changing requirements demand without fear or
favor.
15. Promptness
Each member should promptly perform the duties with which he is charged
by the statutes. The Commission should evaluate continuously its practices and
procedures to assure that it promptly disposes of all matters affecting the rights
of those regulated. This is particularly desirable in quasi-judicial proceedings.
While avoiding arbitrary action in unreasonably or unjustly forcing matters to
trial, members should endeavor to hold counsel to a proper appreciation of their
duties to the public, their clients and others who are interested. Requests for
continuances of matters should be determined in a manner consistent with this
policy.
16. Conduct Toward Parties and Their Counsel
Members should be temperate, attentive, patient and impartial when hearing
the arguments of parties or their counsel. Members should not condone unpro-
fessional conduct by attorneys in their representation of parties. The Commis-
sion should continuously assure that its staff follows the same principles in
their relationships with parties and counsel.
17. Business Promotions
A member must not engage in any other business, employment or vocation

while in office, nor may he ever use the power of his office or the influence of
his name to promote the business interests of others.
18. Fiduciary Relationships
A member should avoid serving as a fiduciary if it would interfere or seem to

interfere with the proper performance of his duties, or if the interests of those
represented require investments in enterprises which are involved in questions to
be determined by him. Such relationships would include trustees, executors,
corporate directors and the like.
19. Organization
Members and particularly the Chairman of the Commission should scrutinize

continuously its internal organization in order to assure that such organization.
handles all matters before it efficiently and expeditiously, while recognizing that
changing times bring changing emphasis in the administration of the laws.

Securities and Exchange Commission: Fiscal Year Ended June 30, 1958

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

Securities and Exchange Commission: Fiscal Year Ended June 30, 1958

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Securities and Exchange Commission: Fiscal Year Ended June 30, 1958

Uploaded by

Copyright:

Available Formats

J-t & Lf--s -.

)J"~' Securities and Exchange

Fiscal Year Ended June 30, 1958

UNITED STATES GOVERNMENT PRINTING OFFICE. WASHINGTON. 1959

For .ale by the Superintendent or Documents. U. S. GoYerDDlent Printing Omce

COMl\fiSSIONERS /" - (.')

REVISION OF RULES AND FORMS-Continued Page

ADl\IINISTRATION OF THE SECURITIES EXCHANGE ACT OF

PART VIII Page

AD~nI:\ISTRATION OF THE TRUST INDENTURE ACT OF 1939__ 145

Table 15. Summarv of cases instituted against the Commission, cases in

Secretary : ORVAL L. DuBOIS

1 Designated Associate Executive Director, July 1, 1958.

Chairman Gadsby was born in North Adams, Mass., on April 11,

Andrew Downey Orrick

Commissioner Orrick was born in San Francisco, Calif., on Oc-

Commissioner Patterson was born in Newport, R. 1., on March 12,

Commissioner Hastings was born in Los Angeles, Calif., on April

Commissioner Sargent was born in New Haven, Conn., on Febru-

west Pacific. He was separated to inactive duty in January 1946

mission. These conditions have attracted into the securities field a

THE PROBLEM OF "BOILER ROOMS"

The term "boiler room", which unfortunately has become quite

SALES OF UNREGISTERED SECURITIES BASED ON CLAIMED

It appears that a substantial but undetermined number of securities

Various devices have been employed in an effort to evade registra-

1 Securities Exchnnge Act Relense No. 5774.

EVASION OF REGISTRATION REQUIREMENTS THROUGH THE

Under Rule 133,which embodies an interpretation of long standing,

Recent economic conditions have been relatively favorable for the

• Securities A.ct Release No. 3965.

distributed interstate either through registration or under Regulation

STOP ORDER AND SUSPENSION PROCEEDINGS FOR NEW ISSUES

The Commission believes that an adequate and effective enforce-

of the Bankruptcy Act. Chapter XI affords a means of effecting a

Small Business Subcommittee of the Senate Committee on Bank-

exempt, by rule or regulation, from the provisions of the Securities

The Chairman and members of the Commission, as well as several

• Congressional Record, February 5, 1957, p. 1383.

REVISION OF RULES AND FORMS

Rule 133 provides in general that for the purpose of determining

• Securities Act Release No. 8698.

During the fiscal year the Commission invited public comments on

• Secnritles Act Release No. 38811(January 7, 19(8) •

Rule 161 provides that securities offered in conformity with the

Regulation A provides an exemption from registration for issues

• Securities Act Release No. 3935 (;ruue 11,1958).

Revision of Fol'llUlS-2 and S-3

THE SECURITIES EXCHANGE Acr OF 1934

Amendment of Rule lSb-8

Rule 17a-3 specifies the books and records required to be main-

Rule 17a-5 designates the members, brokers and dealers required

a SecurIties Exchange Act Release No. 117011.

11 Securities Exchange Act Release No, 5560.

THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

1< Securities Exchange Act Release No. 5701 (May 26,1958).

• Holding Company Act Release No. 13833.

THE INVESTMENT COMPANY ACT OF 1940

1954 ]957