Bristle, Charles E., president, Frontier Mining Co., Denver, Colo... Brothers, Harrison S., Salt Lake City, Utah.. Bushnell, Dan S., Richard, Byrd Bushnell, Salt Lake City, Utah.. Cahn, Bernard D., attorney at law, New York, N. Y.. Calderwood, John N., Cravath, Swaine & Moore, New York, N. Y.. Carroll, Howard, Carroll, Kirchner & Jaquith, Denver, Colo.... Chadwell, William C., president, San Juan Uranium Exploration, Inc., Cook, Harold H., chairman, district 13, National Association of 634 Cooper, Alfred, New York, N. Y. 656 Cromer, Lyman L., president, Salt Lake Stock Exchange, Salt Lake 353 English, Earle W., Merrill Lynch, Pierce, Fenner & Beane, New York, 595 English, H. O., Mountain Mesa Uranium Corp., Casper, Wyo----- Forbes, Russell H., Denver, Colo... 198 Fulton, Wallace H., executive director, National Association of 673 Hansen, George T., Utah-Southern Oil Co., Salt Lake City, Utah.. Havenor, H. E., vice president and general manager, Unified Uranium Hicks, J. W., president, Hicks, Newton & Co., Denver, Colo.... 257 346 Javits, Hon. Jacob K., attorney general, State of New York.. 474 Keller, Alex J., Denver, Colo... 210 Kursh, Harry, Hollowbrook Lake, Peekskill, N. Y.. 659 Lindsey, John W., general counsel, National Association of Securities 673 Love, Milton H., director, securities commission, State of Utah.. 275 448 McCormick, Edward T., president, American Stock Exchange.. 499, 511 336 185 Palmer, Robert S., executive vice president, Colorado Mining Associa- 260 Peters, Gerald, president, Peters, Writer & Christensen, Denver, Colo. 200 Roberts, Malcolm F., vice president, Garrett-Bromfield & Co., Den- 548 221 Additional information submitted for the record by- Bushnell, Dan S.: New rules in securities sales under regulation A----- Cromer, Lyman L.: The Original Uranium Digest, information on the Page 447 Letter of January 18, 1956, from Wallace H. Fulton, executive director, transmitting information with respect to complaint Letters to Securities and Exchange Commission. Securities and Exchange Commission: Letters from J. Sinclair Consolidated Uranium Mines, Inc., report to stockholders, Data on regulation A offerings since January 1, 1954___ 563 169 Additional information submitted for the record by- Bennett, Hon. John B., statement of.. Securities and Exchange Commission: Civil liabilities arising in connection with prospectuses and communications (sec. 12 of Securities Act of 1933, as amended) - Civil liabilities on account of false registration statement (sec. 11 of Securities Act of 1933, as amended). Comparison of liabilities under section 11, section 12 (2), and proposed section 12 (b) of the Securities Act of 1933, table____ Fraudulent interstate transactions (sec. 17 of Securities Act of Information required in registration statement (sec. 7 of Securities 751 Letter from Hon. J. Sinclair Armstrong regarding proposed 781 Letter from Thomas G. Meeker, General Counsel, transmitting Registration of securities and signing of registration statement 763 AMENDMENTS TO SECURITIES ACT OF 1933 (EXEMPTIONS) H. R. 5701 WEDNESDAY, JULY 20, 1955 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The committee met at 10 a. m., Hon. Arthur G. Klein (subcommittee chairman) presiding. Mr. KLEIN. The committee will come to order. This hearing has been called to consider H. R. 5701 introduced by our colleague, Mr. Bennett, to repeal subsection 3 (b) of the Securities Act of 1933, relating to exemptions. (The bill referred to is as follows:) [H. R. 5701, 84th Cong., 1st sess.] A BILL To repeal subsection (b) of section 3 of the Securities Act of 1933, which authorizes the Securities and Exchange Commission to provide for exemptions in the case of certain classes of securities Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3 of the Securities Act of 1933, as amended (15 U. S. C., sec. 77c), is amended by striking out "(a)"; and subsection (b) of such section (which authorizes the Securities and Exchange Commission to exempt certain classes of securities from certain provisions of such Act, where the aggregate amount offered to the public does not exceed $300,000) is hereby repealed. SEC. 2. This Act shall take effect sixty days after the date of its enactment. Mr. KLEIN. At this time I would like to accord the privilege to the author of the bill to make a short statement for the record. STATEMENT OF HON. JOHN B. BENNETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. BENNETT. I want to thank you for the privilege of giving me this opportunity to explain the bill, H. R. 5701, which I introduced on April 20, 1955, and to give you my reasons as to why this bill is meritorious legislation and should be passed. I introduced this bill after giving very careful thought and consideration to the problems involved in this legislation and I have very definitely concluded that the bill is very much in the public interest and is needed for the protection of investors. 1 NEED FOR LEGISLATION H. R. 5701 proposes to repeal section 3 (b) of the Securities Act of 1933. This section authorizes the Securities and Exchange Commission to exempt by rule or regulation certain classes of securities from the registration provisions of this act, where the aggregate amount offered to the public does not exceed $300,000. I introduced this legislation because I am convinced that offerings made pursuant to this exemption do not provide prospective investors with full and adequate disclosure of information necessary to arrive at an informed judgment with respect to the securities being offered. Certainly, the disclosures made in the case of exempt securities are far less complete than the disclosures required by the Securities Act in the case of registered securities. Furthermore, investors in exempt securities are not getting the same degree of protection against false and misleading statements which the act provides for other investors in registered securities. Investors in exempt securities do not have the protection of section 11 of this act, which gives the investor in a registered security the right to sue, in case the registration statement or prospectus is found to be false and misleading, every person who signed the registration statement, the directors of the issuing company, its accountants, engineers, appraisers, attorneys, underwriters, and so forth. The Securities and Exchange Commission once described the importance of section 11 in the following language: This latter sanction against practically all persons concerned in the distribution of a security is one of the most important of implements in carrying out the policy of the act, since it results in a concerted effort on the part of all concerned to provide full and fair disclosure of the character of the securities offered. The above quotation comes from the Commission's 10th annual report to the Congress, page 20. It is also significant that only in the case of registered securities is there a requirement for an independently audited certified financial statement. I can see no reason at all why investors in securities issued pursuant to section 3 (b) of the 1933 act should have any lessor protection than investors in securities which do not qualify under this exemption and must be registered. Why should not an investor who has, say, $1,000 to invest be entitled to the same degree of protection, whether he buys a security that qualified under this exemption or whether he buys a registered security? The number of filings under the section 3 (b) exemption now are at the rate of 1,200 to 1,300 a year, and represent offerings of approximately $250 million a year. During the 9-year period July 1, 1945, through June 30, 1954, the aggregate amount of the proposed offerings was $1,758 million. Until 1953, under the SEC rules issued pursuant to section 3 (b), known as regulation A, the issuer of an exempt security was merely required to file a letter of notification 5 days in advance of the offering, stating his intention to issue the securities, and giving a few details with respect to the issuer, its officers and directors and promoters, the number of securities proposed to be offered, the offering price, when the securities were to be sold, and the purposes for which |