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• Estimated

1/ Represents pending at the beginning of the year plus filed during the year.



Mr. COHEN. We believe that we have kept our manpower requests to a minimum consistent with the increase in our workload.

We recognize that when our workload begins to backlog, investors and the public in general are necessarily deprived to an extent of the protections so essential to maintaining a free and open securities market. Improvements in our procedures have enabled us to keep our request down to 40 additional positions even though we are now experiencing a period of the highest activity ever in our Nation's securities markets.

This surge in activity began toward the end of the last calendar year, and shows very little sign of subsiding. In fact it is on the

The past year has been marked by continued high trading volume on our Nation's securities exchanges, and in the over-the-counter markets, an increasing number of takeover bids, and a recordbreaking number of proxy contests subject to our jurisdiction.

I need not remind the chairman that a proxy contest involves an expenditure of manpower and time that is almost impossible to calculate.

We expect this increased activity to continue next year. To carry out our congressional mandate adequately in the face of this increased activity and the increased workload resulting from the 1964 amendments, it is necessary for us to have a larger staff. We nonetheless have kept our request modest. It now appears that we may need more; we do believe, however, that the request for 40 additional positions is the bare minimum number necessary to keep our work on a current basis and to provide investors and the public with the protections the securities acts were intended to provide. The Commission has accomplished much in the past to protect investors. We know we can accomplish much more in the future if we can secure the necessary staff resources.


Before I close, I wish to express our thanks to the committee for assisting us in obtaining the necessary funds this year for relocating our offices to commercial leased space.

It is the first time in the history of this Commission that we have quarters worthy of the name office. We are very proud of them, and we hope you will pay us a visit very soon, Mr. Chairman.

Senator MAGNUSON. Thank you, Mr. Cohen. You mentioned the rental. What is the annual rent in your budget per year?

Mr. DONATY. $829,000.
Senator MagnUSON. Was that included in last year's budget?
Mr. DONATY. Yes, it was. We were given $1 million.
Senator MAGNUSON. And you said you might get it cheaper, which

Mr. COHEN. We were not able to get into the building as soon as we wished. There was excess of funds of $618,000. The chairman will recall that with his cooperation we were able to use $250,000 of this amount to replace most of our office furniture in this year rather than on a 4-year basis. The remaining amount of $368,000 was used to fund a portion of the pay increase cost of last October 10.

you have.


Senator MAGNUSON. How many people do you have now aboard? Mr. DONATY. We have, including commitments, due to be filled in the next 2 weeks, 1,398. Our ceiling is 1,410.

Mr. COHEN. And I should say that the vacancies largely stem from turnover within the past 2 or 3 months.

Senator MAGNUSON. I am talking about how many permanent positions you have available. 1,410?

Mr. DONATY. 1,410, yes, sir.

Senator MAGNUSON. And you are asking for 1,450?

Mr. DONATY. Yes, sir.

Senator MAGNUSON. In 1965 you had 1,462. And last year, 1,410. Mr. COHEN. Fifty-two positions abolished last year. In the previous year we lost about 6, and the year earlier about 13 positions.


Mr. DONATY. We dropped down to 1,410 this year because we had to absorb certain recurring costs.

Senator MAGNUSON. Why is it you keep referring to the need for added manpower under the 1964 Act? Why wouldn't that appear last year, in 1965?

Mr. COHEN. Well, the way the statute was passed

Senator MAGNUSON. What was the effective date?

Mr. COHEN. It was passed in August, and various sections of it became effective at different times.

Senator MAGNUSON. Most of the impact occurred during the past year?

Mr. COHEN. A good deal of it began last year. It continues into next year. A great portion of it will be felt for the first time next year.

Senator MAGNUSON. However, it did not begin until last year?

Mr. COHEN. As you know, we had to start preparing for it. We had to start preparing rules, procedures, and various other things. In fact, we had to begin working on it just as soon as the Congress passed the legislation.

Senator MAGNUSON. Yes, I understand that.

What would these 40 people do?

Mr. COHEN. Largely they would be assigned to Mr. Worthy's division, the Division of Corporation Finance, to assist in the processing of the new filings and reports of the new companies including those companies that have never submitted information to us before.

Senator MAGNUSON. The ones you have no information on now, and bringing up to date a lot of them that only have preliminary or incomplete filings?

Mr. COHEN. Exactly. And also because of this great surge of activity in the markets, new issues, proxy statements, proxy contests, we have been falling behind on our regular processing of material, and backlogs, unfortunately, are approaching alarming proportions. These people will assist in reducing that to a reasonable level.


Senator MAGNUSON. How much further are you behind this year than you were last year in this regulatory lag?

Mr. COHEN. I don't think I have an exact percentage. But it is substantial.

Senator MAGNUSON. Place in the record the number of cases you are behind on this year, up to now, as compared to last year.

Mr. Cohen. All right.
I think we can give you some exact figures on that.
Senator MAGNUSON. Well, you can place them in the record.
(The information follows:


YEARS 1965 AND 1966

Impact of new legislation in the Division of Corporation Finance

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Examination of annual reports (form 10-K):

Pending at beginning of year.
Filed during the year.

Total for disposition.
Examined during the year.

Pending at end of year.
Examination of semiannual reports (form 9-K):

Pending at beginning of year
Filed during the year.

Total for disposition.
Examined during the year.

Pending at end of year..
Examination of current reports (form 8-K):

Pending at beginning of year
Filed during the year.

Total for disposition..
Examined during the year.

Pending at end of year..

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Senator Magnuson. How many people do you have in the field compared to the number of people here in Washington?

Mr. Conen. I think roughly the breakdown is about 60-40.
Senator MAGNUSON. Sixty here, forty in the field?
Mr. COHEN. Approximately.

Senator MAGNUSON. Have you augmented any field officials or do you have the same amount?

Mr. COHEN. We have nine regional offices. We once had 10.


Senator MAGNUSON. Do any of the people you have requested go in the field?

Mr. COHEN. Some of the people for whom we are asking funds will go in the field-about four, I believe, will be assigned to the field. Senator MAGNUSON. So five field offices won't have any increase at all?

Mr. COHEN. This is true.

Senator MAGNUSON. You would have most of them here in Washington?

Mr. COHEN. Most of the people would be here. The majority would be in the Division of Corporation Finance to examine the additional filings and reports filed with the Commission.


Senator MAGNUSON. You mentioned something about assisting some of these newer companies, who have filed.

Mr. COHEN. We try to do that in Washington.

Senator MAGNUSON. How can you do it in Washington, when they are out in the field?

Mr. COHEN. They make these filings in Washington, and when their attorneys or accountants have problems, they normally come to Washington. Financial and other pertinent data of companies is located in Washington. Under a decentralized system, such data would be required to be located in each of the nine regional offices. As you know, Mr. Chairman, we have found that it is more economical and effective from the point of view of the public. It provides for a more coordinated scheme of regulation if we conduct those operations in Washington.

Senator MAGNUSON. Let's say I am a new company out in my State, I am a small company, and I have to file under the new law, and 1 want some assistance. Do I have to get a lawyer, an accountant, and assume all that expense, and come all the way to Washington?

Mr. COHEN. NO. Perhaps I overstated the situation. We do have these regional offices, and they will continue to provide answers to questions of that kind.

Senator MAGNUSON. In other words, I could go to any of the nine regional offices, but there would not be any extra help there to help me with this?

Mr. COHEN. No. And that is where we are pinching the staff, Mr. Chairman.

Senator MAGNUSON. Why don't you put some more out in the field, instead of keeping them all here?

Mr. COHEN. If we did that, we could not service them as well in Washington. It is one of those balances we had to make. We felt we could serve them best by this allocation. If it turns out that it would serve the job better, we will consider a possible reallocation of personnel.

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