Shreve, Charles E., Chief, Branch of Interpretations and Review, Division of Corporation Finance, Securities and Exchange Com- Stahl, F. A., president, and George C. Baron, counsel, Standard & Wallace, David W., executive vice president and director; Thomas J. Woodle, Joseph C., Director, and Lawrence M. Greene, Assistant Woodside, Byron D., Director, Division of Corporation Finance, Securities and Exchange Commission.. Yearley, Alexander IV, chairman; James G. Dern, member, board of governors; Wallace H. Fulton, executive director; and Marc A. White, counsel, National Association of Securities Dealers, Inc. Letters, memorandums, statements, etc., submitted for the record by— Letter on modification of SEC amendments, S. 1181. Memorandum on section 3 (c) (9), Investment Company Act.... 183 224 127 545 548 American Bankers Association: Letter on Investment Counsel Asso- 174 American Stock Exchange: Letter on amendments to Securities Ex- 62 241 Atlantic Coast Line Co., Prime F. Osborn, counsel and attorney, Connell, John, vice president, Loomis Sayles & Co., Inc.: Statement before the U.S. House of Representatives, Interstate and Foreign Commerce Committee, Subcommittee on Commerce and Finance.. Delaware & Hudson Co., Donald D. Dart, general counsel, New York, N.Y.: Letter to Senator Williams and reply... Hicks, Beryl C., president, Unified Funds, Inc., Indianapolis, Ind.: Moody's Investors Service, Donald B. McCruden, president, and 180 National Association of Investment Companies: Letter on memorandum on S. 1181.... 154 Letter on number of companies and shareholders represented by 156 Memorandum on S. 1181 amendments.. 159 Letters, memorandums, statements, etc.-Continued National Association of Securities Dealers: Letter on section 15, S. 1179_. Memorandum on SEC proposals in S. 1178 and H.R. 5001. Memorandum on SEC proposals in S. 1179 and H.R. 2480. Supplemental statement on S. 1179. Letter on amendment to section 8(d), Securities Exchange Act__ Letter on modification of SEC amendents to section 7 of S. 1179 Supplemental statement on various sections of S. 1179 and S. 1178_ Rules and requirements related to segregation of customers' Securities and Exchange Commission: Proposed modifications of amendment to section 3(c)(a), Invest- Letter to Mr. Dart on section 3 (c) (9), Investment Company Act. SEC LEGISLATION MONDAY, JUNE 15, 1959 U.S. SENATE, COMMITTEE ON BANKING AND CURRENCY, SUBCOMMITTEE ON SECURITIES, Washington, D.C. The subcommittee met, pursuant to notice, in room 5302, New Senate Office Building, at 10:10 a.m., Senator Harrison A. Williams (chairman of the subcommittee) presiding. Present: Senators Williams and Bush. Senator WILLIAMS. The hearing will come to order. Today we begin several days of hearings on amendments to acts administered by the Securities and Exchange Commission and recommended by it. These amendments are incorporated in the following bills, all introduced by Chairman Robertson, for himself and for Senator Capehart, at the request of the Securities and Exchange Commission. The bills are S. 1178, to amend certain provisions of the Securities Act of 1933, as amended; S. 1179, to amend certain provisions of the Securities Exchange Act of 1934, as amended; S. 1180, to amend certain provisions of the Trust Indenture Act of 1939, as amended; S. 1181, to amend certain provisions of the Investment Company Act of 1940, as amended; and S. 1182, to amend certain provisions of the Investment Advisers Act of 1940, as amended. If these bills are enacted, they will represent the first changes in these acts since 1954. Today we will receive testimony from Mr. Edward N. Gadsby, Chairman of the Securities and Exchange Commission, who will make an introductory statement on all of the bills. His testimony will be followed by that of Mr. Byron D. Woodside, Director of the Division of Corporation Finance, who will speak on S. 1178, and that of Mr. Philip A. Loomis, Jr., Director of the Division of Trading and Exchanges, who will testify on S. 1179. After 2 days of testimony by nongovernmental witnesses, primarily on these two bills, we will receive further testimony from the Securities and Exchange Commission on Thursday, June 18. This testimony will be presented by Commissioner Örrick and members of the staff of the Commission and will be related to the remaining bills, S. 1180, 1181, and 1182. This legislation was requested by the Securities and Exchange Commission, and it is recommended by the SEC as being in the public interest. I ask that the SEC explain and justify each of the bills thoroughly and clearly. In this way, the Congress and the public may have a 1 better understanding of the work of the Securities and Exchange Commission and may understand fully and clearly the need for these particular amendments and the intentions of the Commission in administering them. Without objection, I would like to insert in the appendix of the record the following: First, a copy of each of the bills; a comparative print, showing the changes in existing law which would be made by each bill; each of the statutes which the bills would amend; a justification of each bill prepared by the SEC at the request of the committee; and a staff memorandum on each bill. (See p. 251.) Also any reports that may be received from Government agencies regarding this legislation. (See p. 637.) Commissioner Gadsby is our first witness. We welcome you to the committee hearing, Commissioner, and hope you will proceed in any way you choose. STATEMENT OF EDWARD N. GADSBY, CHAIRMAN, SECURITIES AND Mr. GADSBY. Mr. Chairman and members of the committee, my name is Edward N. Gadsby, and I am Chairman of the Securities and Exchange Commission. I am accompanied today by Commissioner Sargent, of New York, Commissioner Patterson, of Virginia, and Commissioner Orrick, of California; and by various members of the Commission staff. As the chairman stated, we are here today to begin our testimony on Senate bills 1178, 1179, 1180, 1181, and 1182, bills which embody certain proposals our Commission has made to amend various provisions of the statutes we administer. As was stated, the bills were introduced at our request by Senator A. Willis Robertson, Chairman of the Committee on Banking and Currency, for himself and for Senator Homer E. Capehart. Companion bills were also introduced at our request in the House of Representatives by Representative Oren Harris, chairman of the Committee on Interstate and Foreign Commerce, as H.R. 2480, H.R. 2481, H.R. 2482, H.R. 5001, and H.R. 5002. The subcommittee on Commerce and Finance of the House committee held initial hearings on these bills on June 3, 1959. For the benefit of the new members of this subcommittee, I should like to describe very briefly the statutes which we administer. These statutes, six in number, relate in general to the protection of investors in the field of securities and finance. The bills before this committee propose amendments to five of these statutes. In addition to the statutes directly administered by the Commission, we are charged with certain functions in corporate reorganization proceedings under chapter X of the Bankruptcy Act. The securities laws were initiated as the result of investigations of the financial practices of the twenties and their disastrous consequences. The first of these statutes was the Securities Act of 1933, sometimes referred to as the "truth in securities" law. This statute has two basic objectives. One purpose is to provide investors with pertinent information concerning securities offered for public sale |