Senator WILLIAMS. The Uniform Commercial Code, has been generally accepted. Am I right?

Senator PROXMIRE. They tell me all except one.

Mr. COHEN. Let me say one thing. I adverted to our attempt to coordinate activities and I am going to blow our own horn here for a moment, forgive me. I think in the past 3 years, in part because we have had the privilege of having on our Commission a former blue sky administrator and because all of us have felt for some period of time that greater coordination should exist, we have developed a very good relationship with the States. I think we have saved them money. We have helped to train some of their people. We have been able to turn matters over to them. And by the same token, when they run into trouble they can't handle they come to us. I think it has worked pretty well.

In this sense, if I can use that expression that Senator Bennett used, we have attempted to add some flesh and blood to the concept of creative federalism.

Senator PROXMIRE. I have just one other question. Do you think that disclosure statements should also include the local market price of comparable land in the vicinity as determined by FHA appraisal? Now the bill doesn't provide that and I can see that it might be difficult under many circumstances.

On the other hand, in terms of giving the purchaser some notion of what he could liquidate at in case the development doesn't go through, it might be helpful.

Mr. COHEN. I think we have always looked upon the Securities Acts as statutes which are designed to elicit facts, not opinions, or projections.

Senator PROXMIRE. The fact would be that FHA made an appraisal and this is their opinion.

Mr. COHEN. They make an appraisal which might be for loan purposes, for example. I think the problem to which you speak is an important one, but a very difficult one. I would think that in appropriate cases such information would have to be provided. In other cases I think there might be some real danger.

Senator PROXMIRE. I didn't get that.

Mr. COHEN. One reason is that in the law-at least when I went to law school, and I must confess it was a long time ago-one of the precepts was that every piece of land was different from every other piece of land. The sales of these subdivision lots are beginning to erode that concept. We are now dealing with a situation where each piece is like every other, except that someone may be closer to the lake, or to the swamp. There are lots of problems.

But I would agree with you, Senator Proxmire, that this is an element that would have to be considered in the administration of the statute. I am not sure it is necessary to put it on the face of the statute.

Senator PROXMIRE. Thank you, Mr. Chairman.

Thank you, Senator Bennett. for vielding.

Senator BENNETT. That is all right.

Senator WILLIAMS. You say that in some instances it might be ap propriate. That means in other instances it wouldn't be.

Mr. COHEN. We have those monsters staring us in the face every day of the week, unfortunately.

All jesting aside, if you are dealing with a subdivision in the desert, I think it is pretty difficult to find out the going market value for lots in another part of the desert. And if someone engages in another kind of operation, and he creates a price, which upon examination is a price created deliberately so that he could, as to another portion, say they are selling lots down the road for $100 a lot, even though they haven't sold one in 10 years, there would be a problem.

Senator PROXMIRE. That wouldn't prevent the seller from specifying in prospectus this is developed land, and had all kinds of advantages. It would simply say that it would be a caveat to the buyer that, if anything happened to development and he had to liquidate, in some cases, there would be virtually no recovery and in other cases there would be.

Mr. COHEN. Yes. There is no prohibition against the seller engaging in any statements of that character. In fact, I would hope that the prospectus used here would really be a selling document and all of the proper sales techniques would be used. The only inhibitions are that he tell the whole truth, not omit material facts, and no untruths. Subject only to that standard, the seller would be permitted full freedom of action.

Senator PROXMIRE. Thank you.

Senator WILLIAMS. I was talking with our staff director. I missed that point.

Senator PROXMIRE. It was simply a followup on this same question and Mr. Cohen answered it very satisfactorily. I am finished.

Mr. COHEN. I had better ask my General Counsel whether I have misstated anything?

Mr. LOOMIS. No, I don't think so. I should think on this business of market values, if there were market values for this type of lot that you could rely on, I think it should be in. If there weren't, maybe there should be a statement to that effect.

Mr. COHEN. This really is an administrative matter.

Senator PROXMIRE. That would be fine.

Mr. COHEN. We have had some little experience in registration, Senator Proxmire, which would rub off in this area, too.

Senator PROXMIRE. I think his latter suggestion would be very useful. The only thing I am getting at, Mr. Chairman, is that you give the fullest possible disclosure for the buyer so that he would have some idea of his recourse in the event that the development wasn't finished. I frankly cheated a little bit by going ahead and reading the very fine statement by the attorney general from the State of Washington, which gave an example of how useful this might have been.

Mr. COHEN. Well, as a matter of fact, in the securities offerings where there is a market price, particularly in the over-the-counter market where the current price is perhaps not as readily available, we frequently find in the prospectus a listing of the prices over a reasonable period, so that people can judge. Now, the situation here is a little different.

Senator WILLIAMS. It is.

Mr. COHEN. And prices will have a tendency to change. I would imagine, and unfortunately I was once a real estate lawyer, that as a

development does develop, this necessarily might increase values, although the extent of the increase might be a matter of argument. That is why I say that this is something that I think can best be handled administratively.

Senator WILLIAMS. Senator Bennett?

Senator BENNETT. I will be very happy to have Senator Mondale or Senator Brooke.

Senator WILLIAMS. We have three other witnesses. I don't know how long your inquiry will take. I think we should contemplate adjourning over until this afternoon, after Commissioner Cohen completes his testimony.

Mr. COHEN. I hope you fellows let me go.

Senator WILLIAMS. You seem to have quite a sheaf of papers. Senator BENNETT. I tried to analyze the problem and I am trying to develop

Senator WILLIAMS. Which is perfectly proper.

Senator BENNETT. I have to leave at 12 o'clock and

Senator WILLIAMS. I don't know if our other witnesses can stay. Mr. Van Horn and Mrs. Harger, could you come back this afternoon?

Mr. VAN HORN. Yes.

Senator WILLIAMS. And Assistant Attorney General Hansen, could you come back?

Mr. HANSEN. Yes.

Senator WILLIAMS. After we finish a thorough discussion with the chairman.

(Discussion off the record.)

Senator BENNETT. Would you like me to yield to you, Senator Brooke?

Senator BROOKE. Thank you, Senator Bennett.

I have just this question: Mr. Cohen, I gather from your presenta tion that you are, No. 1, in favor of Federal legislation in the field? Mr. COHEN. Well, I didn't quite say that, Senator Brooke. I said that we had not made an independent investigation. But having read previous hearings and the report, I have no basis for suggesting anything different than what was said this morning, that some Federal legislation is necessary. And if that is so, I think that a bill like S. 275 would most effectively, expeditiously, economically take care of the problem.

Senator BROOKE. Is it because you feel the States cannot do the job or will not do the job or, as Senators Proxmire and Mondale have suggested, the States might take too long to do the job?

Mr. COHEN. I think it is for all of those reasons, depending on the particular States you are talking about.

In

Senator BROOKE. As I read your testimony given last year, I seemed to sense a reluctance on your part at that time to have SEC act. listening to you today, I seem to sense a shift in your feeling about this?

Mr. COHEN. Let me try to answer that by saying this, that I did testify last year and indicated that there might be other agencies of the Government that have greater expertise in the area of land matters. I read some of the letters some of those agencies have sent to the com

mittee and all of them seemed to say the SEC is the most qualified one. So, as I said earlier, it looks as if we are to be the patsy and, if we are talking about this type of legislation, which is designed to be preventive, then I have to confess, albeit without any modesty, that we are probably better equipped than anybody else to do it.

Therefore, I say that if there is to be legislation, and I sense that everyone agrees that there ought to be legislation, I think that this bill would be an appropriate way of dealing with it.

I did go further and say that is probably the most appropriate way of dealing with it.

Senator BROOKE. You sort of accepted your fate, if it must be? Mr. COHEN. There is one other thing which I might add, Senator Brooke. After I testified, I had occasion to visit some of our regional offices, particularly in the western part of the country. And while I always understood that this was a problem, having read the testimony given before the Senate subcommittee dealing with the problems of the elderly, all of my regional administrators and their staffs told me that I didn't really begin to appreciate how troublesome this problem really is and that it was not diminishing, despite the valiant efforts of many of the States to cope with it.

On a personal basis, I am more convinced than I was last year, that such legislation would be most appropriate. In fact, I guess, I come around to the end by saying flatly, Senator Brooke, that I do think it is an appropriate thing. Now, I am speaking for myself on this point.

Senator BROOKE. Well, this is certainly beyond the scope of your presentation and I am not asking you to do what others have done to SEC and point a finger, but can you think of any other agencies?

Mr. COHEN. We mentioned a few but, as I say, as you look at the letters in the back of this book, everybody says the SEC can do it better. And I have to agree we can do it better.

Senator BROOKE. What about HUD, since they handle FHA financing?

Mr. COHEN. They wrote a letter declining the honor. I think HEW did the same, the Federal Trade Commission did the same, and the Bureau of Land Management did the same. I find myself in the unusual, perhaps, and certainly unenviable position of being the fellow that everybody says can do it better than he can. I am George

now.

Senator BROOKE. You feel that if we go with Federal legislation, SEC is the best?

Mr. COHEN. I might say that this is a little bit beyond the normal range of our activities. And I also indicated we closed the new business department some years ago, but this legislation is important. There are a great many people affected by it, and it runs into the hundreds of millions of dollars each year. The Commission would undertake it and give it all of the attention and effort it deserves.

Senator BROOKE. Thank you, Mr. Chairman and Senator Bennett. Senator WILLIAMS. You are welcome.

You took all of my questions away from me, but I am glad you did. We also appreciate your responses.

Senator Bennett?

Mr. COHEN. Of course, I should add I would assume that this committee would urge on the appropriate other committees that, the wherewithal would be provided.

Senator BROOKE. Yes...

Senator BENNETT. You might find that the SEC has the same problem of getting funds that the State agencies had.

Mr. COHEN. I found that out a long time ago, Senator.

Senator BENNETT. Under section 6(a) of the bill, the registration requirement would state the price that the developer paid for the land. Do you think this is essential in the administration and couldn't this create a lot of problems for you because

Mr. COHEN. First, you are quite right, Senator Bennett, in some cases it would be significant and important information and in many others it would not be. That is the reason why we are asking for one of the amendments which I suggested this morning, which would give us the power to exclude that requirement in an appropriate situation. The particular amendment is referred to at the bottom of page 7 of my statement.

The Commission may by rules and regulations provide

And I will skip some words-

that certain information would not be included in respect to any class of developers, subdivisions or interests in any subdivisions.

I think the Commission has developed a very effective arrangement with registrants. We have a rule which in effect says whatever form you use is the right form unless we object. This makes it possible for a particular offering to be registered under a form which is simpler and which requires less information.

In addition to that, we have these problems continually; we have discussions with issuers, with underwriters, their counsel, their accountants and other experts, in which we agree with them, that perhaps this information is not material, and so it goes. There is that flexibility, and that would be provided by this language which I have suggested.

Senator BENNETT. What conditions would you think would require a statement of the purchase price of the land?

Mr. COHEN. I guess we can conjure up some situations, but, if a man, for example, purchased a plot of 50 acres and he paid $1,000 for it and wanted to subdivide it into 5,000 lots for each of which he wants the amount he paid for the whole business. I think it might be a factor that someone who is being asked to pay that price would want to know. This goes to the point that Senator Proxmire raised, there might not be any extrinsic or objective value. The only thing that anybody could look to as a test of value might be the price that this fellow paid within a matter of months for the whole subdivision.

Senator BENNETT. Well, wouldn't your needs be served if the requirement were made that this should be disclosed to you, but without a requirement that it be disclosed to the public?

Mr. COHEN. No, sir; the information is for the investor. He has to make up his mind. We don't want to be involved in any way in reaching a judgment for him.