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Solicitation of Proxies, etc., in Reorganizations, etc.

HEARING

BEFORE THE

COMMITTEE ON
INTERSTATE AND FOREIGN COMMERCE

HO

SEVENTY-FIFTH CONGRESS

FIRST SESSION

ON

H. R. 6968

TO AMEND THE SECURITIES ACT OF 1933, AS AMENDED, BY ADDING
THERETO A NEW TITLE, PROVIDING FOR THE REGULATION OF
THE SOLICITATION, IN INTERSTATE AND FOREIGN COM-
MERCE AND THROUGH THE MAILS, OF PROXIES,
DEPOSITS, AND ASSENTS IN CONNECTION WITH
CERTAIN REORGANIZATIONS, VOLUNTARY
READJUSTMENTS AND DEBT ARRANGE-
MENTS; AND FOR OTHER PURPOSES

JUNE 8-JULY 21, 1937

Printed for the use of the
Committee on Interstate and Foreign Commerce

UNITED STATES
GOVERNMENT PRINTING OFFICE

WASHINGTON: 1937

1E08

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE

CLARENCE F. LEA, California, Chairman ROBERT CROSSER, Ohio

CARL E. MAPES, Michigan ALFRED L. BULWINKLE, North Carolina CHARLES A. WOLVERTON, New Jersey VIRGIL CHAMPAN, Kentucky

JAMES WOLFENDEN, Pennsylvania PAUL H. MALONEY, Louisiana

PEHR G. HOLMES, Massachusetts WILLIAM P. COLE, JR., Maryland

B. CARROLL REECE, Tennessee SAMUEL B. PETTENGILL, Indians JAMES W. WADSWORTH, New York EDWARD A. KELLY, Illinois

CHARLES A. HALLECK, Indiana EDWARD A, KENNEY, New Jersey

GARDNER R. WITHROW, Wisconsin GEORGE G. SADOWSKI, Michigan JOHN A. MARTIN, Colorado EDWARD O. EICHER, Iowa THEODORE A. PEYSER, New York THOMAS J. O'BRIEN, Minois HENRY ELLENBOGEN, Pennsylvania HERRON PEARSON, Tennessee JERRY J. O'CONNELL, Montana GEORGE B. KELLY, New York LYLE H. BOREN, Oklahoma

ELTON J. LAYTON, Clerk

LIBRARY OF CONGRESS

AUG 26 1937
DIVISION OF DOCUMENTS

TO AMEND THE SECURITIES ACT OF 1933

TUESDAY, JUNE 8, 1937

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The committee met, pursuant to call, at 10 o'clock a. m., in the committee room, New House Office Building, Hon. Clarence F. Lea (chairman) presiding.

The CHAIRMAN. The committee will please come to order.

We have met this morning for a hearing on H. R. 6968, a bill to amend the Securities Act of 1933, as amended, by adding thereto a new title, providing for the regulation of the solicitation, in interstate and foreign commerce, and through the mails, of proxies, deposits, and assents in connection with certain reorganizations, voluntary readjustments and debt arrangements; and for other purposes.

(The bill H. R. 6968, above referred to, is as follows:)

(H: R. 6968, 75th Cong. Ist sess.) A BILL To amend the Securities Act of 1933, as amended, by adding thereto a new title, providing for the

regulation of the solicitation, in interstate and foreign commerce and through the mails, of proxies, deposits, and assents in connection with certain reorganizations, voluntary readjustments and debt arrangements; and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this title may be cited as the “Committee Act of 1937''.

NECESSITY FOR REGULATION

(a) Upon the basis of facts disclosed by the reports of the Securities and Exchange Commission made to the Congress pursuant to section 211 of the Securities Exchange Act of 1934, and by the reports of the Select Committee to Investigate Real Estate Bondholders' Reorganizations made to Congress pursuant to House Resolutions 412 of the Seventy-third Congress and 39, 79, and 354 of the Seventyfourth Congress, and otherwise disclosed and ascertained, it is hereby declared that the interest of investors in securities of issuers which are in the process of reorganization, readjustment or debt arrangement, the fair and orderly administration of reorganization proceedings in the district courts (including reorganizations under the Bankruptcy Act) and the national public interest are adversely affected

(1) When such securities are widely dispersed through many States; when individual action by such investors for the purpose of protecting and enforcing their rights is rendered impracticable by reason of the unavailability to such investors of adequate information with regard to the financial condition of the issuer and other material matters, and the expense of acquiring such information and of taking such action; when concerted action by such investors in their common interest through representatives of their own selection is impeded by the suppression and monopolization, by the issuer, underwriters, and others, of information as to the names and addresses of such investors; when the issuer, its management, and the underwriters, who may be interested in concealing possible causes of action against themselves or in preserving their control of the continuing or successor company or who may have other interests materially conflicting, actually or potentially, with the interests of such investors, are thereby in a posi

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