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EXEMPTED SOLICITATIONS Sec. 3. (a) The provisions of this act (other than the provisions of sections 16 and 23 hereof) shall not apply to the following solicitations:

(1) A solicitation of assents to a plan of readjustment, or of proxies or deposits in respect of the support, adoption, or approval of any plan if, prior to the effective date of this act, any person has commenced the solicitation of assents, proxies, or deposits in respect of such plan and has obtained such assents, proxies, or deposits from the owners of at least 50 per centum of the amount of any class of securities outstanding, determined in such manner as the Commission may by rules and regulations prescribe, exclusive of assents obtained by proxies or deposits made binding by reason of a failure to dissent.

(2) A solicitation in connection with a reorganization or readjustment of a "railroad corporation” as such term is defined in subsection (m) of section 77 of the Bankruptcy Act.

(3) A solicitation in connection with a reorganization or readjustment under the supervision of the Comptroller of the Currency of the United States, or of the bank commissioner, insurance commissioner, or any agency or officer performing like functions, of any State or Territory or the District of Columbia.

(4) A solicitation in respect of any note, draft, bill of exchange, or bankers' acceptance, which had a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which was likewise limited.

(5) A solicitation in respect of any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual.

(6) A solicitation in respect of any security issued by a farmers' cooperative association as defined in paragraphs (12), (13), and (14) of section 103 of the Revenue Act of 1932.

(7) A solicitation in respect of any security issued or guaranteed by the United States or any Territory thereof or by the District of Columbia, or by any State or by any person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States.

(8) A solicitation in respect of any security issued or guaranteed by any political subdivision of a State or Territory, or by any public instrumentality of one or more States or Territories, where such solicitation is made by such issuer or guarantor, or in its name and on its behalf by an employee of an issuer or guarantor, but this exemption shall not apply to any such solicitation by a person who occupies the position of independent contractor with respect to, or agent not in the regular employ of, such issuer or guarantor.

(9) A solicitation by a person in respect of securities in which he has a beneficial ownership or interest.

(10) A solicitation by a financial or investment service, except the solicitation of proxies or deposits the authority conferred by which is to be exercised by such financial or investment service, or its representatives or nominees.

(b) The Commission may by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of solicitations to the solicitations exempted as provided in this section, if it finds that the application of this act with respect to such solicitations is not necessary in the public interest or for the protection of investors, by reason of

(1) The small amount of the outstanding securities of the class in respect of which the solicitation is to be made, determined in such manner as such rules and regulations may prescribe; but no solicitation shall be exempted under this paragraph where such amount exceeds $100,000; or

(2) The limited character of the solicitation.

(c) The provisions of this act shall not prevent any security holder from acting solely on his own behalf and not on behalf of others through a representative or otherwise, nor prevent any group of not more than twelve security holders from acting jointly, through a representative or otherwise, on their own behalf and not on behalf of others.

PROHIBITIONS RELATING TO INTERSTATE COMMERCE AND THE Mails SEC. 4. (a) It shall be unlawful for any person, directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce, to solicit, cause to be solicited, or permit the use of his name to solicit any proxy or deposit in connection with a reorganization or a municipal or foreign debt arrangement,

or any proxy, deposit, or assent in connection with a voluntary readjustment unless

(1) A declaration filed pursuant to section 5 is effective as to such action by such person, and except in accordance with the order, if any, fixing the date on which such declaration shall become effective; and

(2) Unless a prospectus that meets the requirements of section 8 accompanies or precedes such solicitation.

(b) The following transactions shall be exempt from the provisions of the Securities Act of 1933:

(1) Any solicitation as to which a declaration is effective;

(2) The delivery of any security evidencing the deposit of a security, if a declaration is effective as to the solicitation of such deposit;

(3) The offering, sale, or delivery after sale of any security, pursuant to a plan to which an effective declaration relates, in exchange for a security or securities of the class or classes to which such declaration relates, or partly in such exchange and partly for cash, claims, or property interests; and (4) The offering, sale, or delivery after sale of any security

(A) upon the exercise of any right to convert, into such security, a security the offering, sale, or delivery after sale of which is exempted by paragraph (3) of this subsection; or

(B) upon the exercise of a right to subscribe to or purchase such security; if, pursuant to a plan to which an effective declaration relates, such right to convert, subscribe, or purchase was conferred upon the owners of securities of

the class to which such declaration relates. For the purposes of this subsection, a plan shall be deemed to be a plan to which an effective declaration relates if a declaration is effective as to the solicitation of assents to such plan, or as to the solicitation of proxies or deposits constituting an authorization to accept, approve, or assent to such plan.

DECLARATIONS AND THE TAKING EFFECT THEREOF Sec. 5. (a) A declaration regarding any of the acts enumerated in subsection (a) of section 4 shall be filed with the Commission in triplicate, at least one copy of which shall be signed by the person by whom the authority conferred by such proxy or deposit is exercisable or, if such person is a committee or group, by each member thereof; or, in the case of assents in connection with a voluntary readjustment, by the person who proposes to solicit, causes to be solicited, or permits the use of his name to solicit such assents. Such declaration shall be in such form as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors. Such declaration shall include

(1) In the case of reorganizations or voluntary readjustments, the information and documents specified in schedule A, and in the case of municipal or foreign debt arrangements, the information and documents specified in schedule B: Provided, however, That the Commission may by rule, regulation, or order provide that any such information or document need not be included in respect of any solicitation or class or classes thereof if the Commission deems that the inclusion thereof is not necessary in the public interest or for the protection of investors;

(2) The name of each other person whom the declarant proposes to authorize to solicit in his name or on his behalf, other than regular salaried employees of the declarant or of any authorized solicitor so designated;

(3) Such additional information and documents as the Commission may by rule, regulation, or order prescribe as necessary or appropriate in the public interest or for the protection of investors, regarding (A) the issuer, the underwriters, the declarant and each member thereof, and each authorized solicitor; the persons who participated in the negotiation or determination of the terms of the plan; the persons proposing the plan or causing the same to be proposed; and the respective associates of each of the foregoing; and (B) the various securities of the issuer and of its associates.

Notwithstanding the provisions of paragraphs (1) and (3) of this subsection, any information or documents required to be included in the declaration pursuant to either of such paragraphs may be omitted from the declaration if the obtaining of such information or documents would involve unreasonable effort or expense, or if such information rests peculiarly within the knowledge of another person neither controlling, controlled by, or under common control with the declarant or, if the declarant is a committee or group, any member thereof. The information and documents contained in or filed with any declaration shall be made available to the public under such regulations as the Commission may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every applicant therefor at such reasonable charge as the Commission may prescribe.

(b) The filing with the Commission of a declaration, or of an amendment to a declaration, shall be deemed to have taken place upon the receipt thereof by the Commission, but the filing of a declaration shall not be deemed to have taken place unless it is accompanied or preceded by payment to the Commission of a filing fee in the amount of $25, such payment to be made in cash or by United States postal money order or certified or bank check, or in such other medium of payment as the Commission may authorize by rule and regulation. If an amendment to a declaration is filed prior to the effective date of such declaration, the declaration shall be deemed to have been filed when such amendment was filed; except that an amendment filed with the consent of the Commission, prior to the effective date of the declaration, or filed pursuant to an order of the Commission, shall be treated as a part of the declaration. Amendments after the effective date of a declaration, including amendments for the purpose of rendering such declaration effective as to additional persons or as to the solicitation of assents, proxies, or deposits in respect of amendments to the plan to which such declaration relates, may be made upon such terms and conditions as the Commission may prescribe.

(c) A declaration filed under this section shall become effective within such reasonable period of time (but not less than twenty days) after the filing thereof as the Commission shall fix by rules and regulations, unless the Commission prior to the expiration of such period shall have issued an order to the declarant to show cause why such declaration should become effective. Within a reasonable time after an opportunity for hearing upon an order to show cause under this subsection, unless the declarant shall withdraw bis declaration, the Commission shall enter either an order fixing the date on which such declaration shall become effective as filed or amended, or an order refusing to permit such declaration to become effective as to any one or more or all of the persons designated therein. Whenever the Commission shall issue an order to show cause, it shall cause the same to be served upon the agent for such service designated in the declaration, in such manner as the Commission may by rules and regulations prescribe, and accord an opportunity for hearing thereon (at a time fixed by the Commission) within ten days after such service.

(d) Any order fixing the date on which a declaration is to become effective may contain such terms and conditions as the Commission deems necessary or appropriate to assure compliance with the provisions of this act. If and when the Commission deems that the objections on which a refusal order purusant to section 6 or section 7 was based have been met, the Commission shall enter an order rescinding such refusal order, and the application shall become effective at the date fixed pursuant to subsection (c) of this section or upon the date of such rescission, whichever shall be the later.

(e) A declaration shall be deemed effective only as to the declarant and the authorized solicitors, if any, designated therein and the regular salaried employees of the declarant or such authorized solicitors, and only as to the acts specified in such declaration.

(f) The Commission is hereby empowered to make an investigation in any case in order to determine whether a refusal order should issue under section 6 or section 7, or whether a stop order should issue under section 9. If the declarant or any authorized solicitor designated in the declaration or any director, officer, employee, agent, or attorney of either shall fail to cooperate, or shall obstruct or refuse to permit the making of such investigation, such conduct shall be proper ground for the issuance of a refusal order.

REQUIRED FINDINGS

REORGANIZATIONS

Sec. 6. (a) If a declaration filed pursuant to section 5 relates to solicitations in connection with a reorganization, the Commission shall not permit such declaration to become effective unless it finds

(1) That the declarant or, if the declarant is a committee or group, each member thereof, is either (A) the beneficial owner of securities of each of the classes to which the declaration relates, or (B) the representative of such a beneficial owner or owners;

(2) In case the declaration relates to the solicitation of proxies or deposits in respect of more than one class of securities, that there is no material conflict of interest between the several classes or that, in spite of such actual or potential conflict, it is necessary or appropriate in the public interest or for the protection of investors that declarant be permitted to represent such classes;

(3) That neither the declarant nor, if the declarant is a committee or group, any member thereof, (A) is the issuer, or (B) is or was an underwriter of any presently outstanding securities of the issuer, or (C) is or was, within one year prior to the filing of the declaration, a director, officer, partner, or employee of the issuer or of any such underwriter;

(4) That the solicitation of the proxy or deposit is to be on terms and conditions conforming to the requirements of subsection (a) of section 10; and

(5) In the case of solicitations in respect of the support, adoption, or approval of a reorganization plan, where the court, official, or agency before which such reorganization is pending has jurisdiction or is authorized by law to approve plans, that, after notice and opportunity for hearing at which all persons to be solicited had the right to appear, such plan has been approved as fair and equitable by such court, official, or agency, and in the case of an approval by a court, official, or agency of the United States or of a Territory (1) that prior to such approval such plan was referred to the Commission for report thereon, pursuant to section 13, and that, subject to the provisions of the last clause of subsection (a) of such section, a report of the Commission on such plan was submitted to such court, official, or agency; or (2) that such court, official, or agency has determined that the indebtedness of the issuer is less than $5,000,000;

(6) In the case of solicitations of proxies or deposits constituting an authorization to accept, approve, or assent to a reorganization plan, that such solicitations are to be made in respect of a specific plan.

VOLUNTARY READJUSTMENTS (b) If a declaration filed pursuant to section 5 relates to solicitations in connection with a voluntary readjustment, the Commission shall not permit such declaration to become effective unless it finds

(1) That the declarant or, if the declarant is a committee or group, each member thereof either (A) is the beneficial owner of securities of each class to which the declaration relates, or (B) is the representative of such a beneficial owner or owners, or (C) is the representative of a majority of the directors for the election of whom such class or each of such classes of securities was entitled to vote;

(2) In case the declaration relates to a solicitation in respect of more than one class of securities, that there is no material conflict of interest between the several classes or that, in spite of such actual or potential conflict, it is necessary or appropriate in the public interest and for protection of investors that declarant be permitted to represent such classes;

(3) That neither the declarant nor, if the declarant is a committee or group, any member thereof (A) is the issuer; or (B) is or was, within one year prior to the filing of the declaration, a director, officer, partner, or employee of the issuer, unless such declarant or member conforms to the requirements of clause (C) of paragraph (1) of this subsection (b); or (C) is or was an underwriter of any presently outstanding securities of the issuer; or (D) is or was, within one year prior to the filing of the declaration, a director, officer, partner, or employee of any such underwriter;

(4) That the solicitation of the proxy, deposit, or assent is to be on terms and conditions conforming to the requirements of subsection (a) of section 10; and

(5) In the case of assents or of proxies or deposits constituting an authorization to accept, approve, or assent to a plan of readjustment, that such solicitations are to be made in respect of a specific plan.

MUNICIPAL AND FOREIGN DEBT ARRANGEMENTS

(c) If a declaration filed pursuant to section 5 relates to solicitations in connection with a municipal or foreign debt arrangement, the Commission shall not permit such declaration to become effective unless it finds

(1) That the declarant or, if the declarant is a committee or group, each member thereof is either (A) the beneficial owner of securities of at least one of the classes to which the declaration relates, or (B) the representative of such a beneficial owner or owners;

(2) In case the declaration relates to the solicitation of proxies or deposits in respect of more than one class of securities, that there is no material conflict of interest between the several classes or that, in spite of such actual or potential conflict, it is necessary or appropriate in the public interest and for protection of investors that declarant be permitted to represent such classes;

(3) That either the declarant nor, if declarant is a committee or group, any member thereof (A) is or was an underwriter of any presently outstanding securities of the issuer or (B) is or was, within one year prior to the filing of the declaration, a director, officer, partner, or employee of any such underwriter;

(4) That the solicitation of the proxy or deposit is to be on terms and conditions conforming to the requirements of subsection (a) of section 10; or

(5) In the case of solicitations of proxies or deposits constituting assents to a plan of debt arrangement, that such solicitations are in respect of a sepcific plan..

(d) If a State commission or other governmental agency having jurisdiction over such solicitation shall have informed the Commission that State laws applicable thereto have not been complied with, the Commission shall not permit a declaration regarding such solicitation to become effective unless and until the Commission is satisfied that such compliance has been effected.

ADDITIONAL GROUNDS FOR ISSUANCE OF REFUSAL ORDER Sec. 7. The Commission may refuse to permit any declaration filed pursuant to section 5 to become effective if it finds

(1) That the declaration or prospectus does not conform to the requirements of this act and the rules and regulations thereunder;

(2) That the declaration or prospectus includes any 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;

(3) That the declarant or, if declarant is a committee or group, any member thereof owns or represents any securities, claims, or interests the ownership or representation of which is so likely to involve a material conflict with the interests of the owners of the securities to be solicited (whether by reason of the amount of such securities, claims, or interests so owned or represented, the nature or priorities thereof or the price at which the same were acquired, or for some other reason) as to make it necessary or appropriate in the public interest or for the protection of investors to disqualify declarant from occupying the fiduciary relationship toward such security holders which is contemplated by the declaration or from engaging in such solicitation;

(4) That the declarant or, if declarant is a committee or group, any member thereof is an associate of, or has some other direct or indirect connection with, any person who would be disqualified from being a declarant by paragraph 3 of the applicable subsection of section 6, or by paragraph 3 of this subsection, which association or connection is so likely to involve a material conflict with the interests of the owners of the securities to be solicited as to make it necessary or appropriate in the public interest or for the protection of investors to disqualify declarant from occupying the fiduciary relationship toward such security holders which is contemplated by the declaration or from engaging in such solicitation;

(5) That the declarant is being financed by, or is the nominee of, or has been delegated his powers and duties to, a person who would be disqualified from being a declarant by paragraph 3 of the applicable subsection of section 6 or by paragraph 3 of this subsection, or is otherwise utilizing the declaration in order to evade the purposes of this act;

(6) That the declarant has authorized any person to solicit proxies, deposits, or assents who would be disqualified from being a declarant;

(7) That the declarant or, if the declarant is a committee or group, any member thereof, of any person authorized to solicit proxies, deposits, or assents by or on behalf of any of the foregoing, has solicited or caused to be solicited any proxy, deposit, assent, or dissent in violation of any provision of this act or of any rule, regulation, or order thereunder, or has made any untrue statement of a material fact, or has omitted to state any fact necessary to make any statement not misleading, in connection with any such solicitation;

(8) That the solicitation of the proxy, deposit, or assent is not to be on terms and conditions conforming to the requirements of subsection (b) of section 10; or

(9) That, in the case of solicitations in respect of the support, proposal, adoption, or approval of a plan (A) such plan is not being properly proposed in good faith, or (B) such plan is not being properly proposed within the meaning of section 11, or (C) such plan does not conform to the requirements of section 12.

INFORMATION REQUIRED IN PROSPECTUS Sec. 8. The prospectus required by paragraph (2) of subsection (a) of section 4 shall contain

(1) Such of the information and documents contained in the declaration as the Commission may by rules and regulations or order prescribe as necessary or appropriate in the public interest or for the protection of investors; and

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