Investment Trusts and Investment Companies, Hearings Before a Subcommittee of ..., 76:3 on S. 3580 ....

cation of reports and records should be confined to corporate documents and corporate accounts.

23. Unlawful representations and names, section 35 of the present bill: The prohibition in the present bill in respect to unlawful representations is satisfactory and the adoption of misleading names should be prohibited. There is no necessity for any discretion to the Commission.

24. Rules, regulations, and orders-General powers of Commission, section 36 of the present bill: The general authority contained in subparagraph (a) of section 36 of the present bill should be made to apply only to specific sections of the bill which may require rules and regulations and should also be more limited in the scope of the power granted to the Commission.

25. Hearings by Commission, section 37 of the present bill: A policy should be expressed for consultation by the Commission with representatives of the industry, and for public hearings in the discretion of the Commission whenever it appears that there is a substantial demand for such hearings. Neither should be mandatory. Provision should be made for hearings in respect of any formal proceeding before the Commission in relation to any proposed order. 26. Court review of orders-Jurisdiction of offenses and suits, sections 39 and 40 of the present bill: The provisions of sections 39 and 40 in the present bill are satisfactory.

27. Information filed with the Commission, section 41 of the present bill: This section is satisfactory as applied to the bill herein proposed. The effect of these provisions, however, if applied to the bill as introduced are much too far-reaching.

28. Annual reports of Commission, etc., section 42 of the present bill: This is satisfactory.

29. Penalties, section 43 of the present bill: There can be no question that penalties must be provided for violation of the act. The extent of the penalties is a matter in respect of which we would prefer to make no suggestions to the committee.

30. Effect of existing law, section 44 of the present bill: This section as it now stands is satisfactory.

31. General definitions, section 45 of the present bill: Many of these definitions need revision, but this is a matter for detailed drafting.

32. Separability of provisions, section 46 of the present bill: This is satisfactory.

Unit investment trusts, periodic payment plans, face amount certificate companies, sections 26, 27, 28, and 29 of the present bill: As the characteristics of these companies are essentially different from those of the ordinary investment company, it seems desirable that these subjects be dealt with under a separate title of the bill. Sections which have been eliminated: There have been eliminated from this framework sections 11, 14, 24, 25, 33, and 38. These have to do with the recurrent promotion of investment companies, limitation on size, additional requirements in respect to prospectuses and sales literature, absolute jurisdiction to the Commission over voluntary reorganizations and recapitalizations, settlement of civil actions, and broad powers of investigation to the Commission. All of these subjects have been dealt with in the hearings before you. I might

just add the following brief comments as to a few of the sections eliminated.

Section 24 dealt with registration and sales literature in connection with the selling of securities. It is believed by us that this is properly taken care of by the Securities Act of 1933. If any additional provisions are needed, it should be by amendment to that

act.

As has already been pointed out, Section 25 dealing with reorganizations and recapitalizations is one of the most drastic provisions of the bill. So far as insolvent companies are affected, this is covered by the Bankruptcy Act. Proxy regulations give the Commission power to require full disclosure to stockholders. This would seem to be adequate and there seems to be no reason why investment companies should be treated differently from any other type of company in respect to this matter.

Similarly in respect to section 33 dealing with the settlement of civil actions, there is no reason why investment companies should be treated in any manner different from other companies. The implications of these provisions are much too far reaching to be accepted without a most thorough study of the subject matter.

That, gentlemen, completes our comments.

I also, as Judge Healy has done, would like to thank this committee very earnestly for their sincere attention to and interest in the material which we had to present on the part of the industry.

Senator HUGHES (presiding). Thank you, Mr. Bunker. I am sure that your statement will be very valuable to the committee.

Mr. BUNKER. I also want to thank Judge Healy for his consideration in all these matters and for his courtesy and kindness to the members of the industry.

Senator HUGHES (presiding). The hearings are closed. If there is a further meeting the chairman will call it.

(Whereupon, at 4:15 p. m., the hearings were closed.)