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finding with respect to the present proposals. In finding that these proposals may be omitted, we emphasize, as we have previously, that we of course do not suggest that it is proper for a company to engage in false advertising or false communications with stockholders.
MANAGEMENT'S STATEMENTS IN THE PROXY MATERIAL
1. Dyer has objected to management's statement in opposition to his proposal included in the proxy material calling for action of the board of directors to amend the articles of incorporation to restore preemptive rights. Dyer argues that the management's statement is too long because it exceeds 100 words and that the assertions therein are not borne out by the record.
Where a stockholder's proposal which is included in management's solicitation material pursuant to Rule 14a-8 is opposed by management, that rule provides that the stockholder may have included in the proxy statement a statement by him of not more than 100 words in support of his proposal. Ae we indicated in our 1958 opinion, the limitation on the length of the stockholder's statement is a reasonable qualification of the right given him by the rule to have included in the management's material, at the expense of the corporation, a statement in support of his own proposal, and that the same considerations of policy do not apply to statements made by management in its own solicitation material. We accordingly reject Dyer's contention.
Both Dyer and the Division have objected to management's assertion in the proxy material that "it has consistently said that, unless circumstances develop which made such a course disadvantageous, such rights would be granted in advance of any sale to the public." The record indicates only that a statement to this effect was made by Union's president at the annual meeting of stockholders in 1958. Accordingly, we shall require Union to delete this sentence or revise it to state only that the president expressed such a view at the 1958 meeting. Furthermore, we think that the assertion that “The management has never taken a position against the granting to common stockholders of rights to subscribe to additional issues of common stock," does not distinguish sufficiently between the mandatory grant of general subscription rights by charter amendment, which the management opposes, and the granting of such rights voluntarily by the board of directors in connection with a particular proposed issuance of common stock. Accordingly, this sentence also should be deleted, or revised to make this distinction.
We find no merit in Dyer's further objections to the management statement in opposition to his preemptive rights proposal. The statement of management's opinion that stockholders' rights are adequately protected by the present charter provisions is permissible argument.10
2. The Division has objected to a management statement that at the 1958 annual stockholders meeting 96% of the vote cast was against 7 proposals similar to those which are omitted from the present proxy material. Four of the 1958 proposals had not been listed on Union's proxy material and were presented to stockholders for the first time at the meeting, and the Division contends that such fact should be disclosed. Union has indicated its willingness to amend its statement to meet this objection and has submitted a proposed change in language. This change is to be incorporated in the proxy statement.
3. Dyer has raised numerous other objections to Union's proxy statement and form of proxy, most of which he has not pressed in his proposed findings. We have, however, examined all such objections and find them without merit. Many of such objections are similar to those which we have rejected in previous years. OTHER MATTERS
Fees and Expenses Rule 65 under the Holding Company Act provides that, except pursuant to a declaration which has been permitted to become effective, no registered holding company may expend any money in connection with the solicitation of any proxy regarding any security of such company. An exception permits a company to expend sums for “ordinary expenditures in connection with preparing, assembling, and mailing proxies ...; or other expenditures not in excess of $1,000 during any one calendar year.”
Union has estimated that it will expend $24,700 in connection with soliciting of proxies for its 1959 annual meeting and asserts that the expenses of its solicitation are ordinary expenditures in connection with assembling and mailing proxies, proxy statements and accompanying data. Union has furnished the material it proposes to send to shareholders upon the effectiveness of the declaration. This material has been examined and it appears that it comes within the definition of "ordinary expenditures" in connection with proxies, as contemplated by Rule 65(b).
Union further states that it has no present intention of engaging in any further activities in connection with the solicitation of proxies for the 1959 annual meeting of stockholders,11 and that, if any change in this regard should occur, it will be reported promptly to us. Union has consented to the reservation of jurisdiction by us with respect to any additional type of solicitation in which it may engage with respect to the 1959 annual stockholders meeting. 12
10 We do not discuss Dyer's objections to management's statement in opposition to his resolution declaring the directors of the company disqualified for office, since as indicated above, Union intends to omit this resolution from the proxy material.
11 Except that Union states in its declaration that proxies may be solicited by personal interviews, or by telephone or telegraph, and banks, brokers, nominees and other custodians and fiduciaries may be reimbursed for their reasonable out-of-pocket expenses in forwarding soliciting material to their principals, the beneficial owners of stock of Union. Proxles may be solocited by officers, directors and key employees of Union on a voluntary basis without compensation therefor.
Exceptions to Rulings by Hearing Examiner Dyer has objected to rulings of the hearing examiner excluding offers of proof made by Dyer to support his charges that the directors and proxy agents of the company are disqualified for office. The present proceedings are not a proper forum in which to try such charges and we, accordingly, affirm these rulings of the hearing examiner.
Dyer has also contended that the proxy statement should set forth a recital of the results of an investigation by the Department of Justice and this Commission of what Dyer refers to as "the company's 1955 Illinois lobbying negotiations.” Dyer argues that the results of such investigations were not properly described in the company's previous communications to stockholders in June and September 1957. We cannot find any basis for requiring such a recital in the present proxy statement and sustain the hearing examiner's ruling rejecting Dyer's offers of proof with respect to such communications.
Effective Date of Order Union has requested that there be no waiting period between the issuance of our order and the date of its effectiveness. Dyer has objected to this request. We find no legal requirement or other reason for withholding the effectiveness of our order and it shall become effective upon the filing of the amendments required herein. Our order will reserve jurisdiction to pass upon any additional solicitation material proposed to be used by Union which material shall be filed as a post-effective amendment herein and which material, unless we order a hearing thereon, may be used for solicitation after 5 business days have elapsed from the filing thereof or after such shorter period as we may authorize upon good cause shown.
12 Dyer has requested that Union be required to furnish an accounting of expenditures for proxy solicitations in 1957 and 1958 as well as for expenditures in connection with the present solicitation material. The expenditures in 1957 and 1958 are not relevant to the issues in this proceeding. In view of our conclusion that Union's proposed expenditures in 1959 come within the category of "ordinary” proxy solicitation expenditures, and since Union has agreed to report to us promptly if any change in its solicitation activities 18 contemplated, we see no reason for requiring an accounting of 1959 expenditures.
Dyer has requested that he be given the opportunity to object to any amendments submitted by Union to comply with our findings. Dyer's interests have been fully protected through the opportunity accorded him to participate in the hearing, to file proposed findings, exceptions and briefs, and to present oral argument. Under the circumstances we see no need or occasion for the further procedure of prior submission to him of amendments to be filed with us by Union in response to our findings, and we accordingly deny his request.
In view of our findings as set forth above, we will enter an order permitting Union's declaration to become effective upon the filing of an amendment making changes in conformity with the views expressed herein.
By the Commission (Chairman Gadsby and Commissioners Orrick, Patterson, Hastings, and Sargent).
IN THE MATTER OF
SILLS AND COMPANY
File No. 8-5881. Promulgated March 27, 1959
(Securities Exchange Act of 1934—Sections 15(b) and 15A (b) (4))
Violations of Securities Act
Conversion of Customers' Funds and Securities
Effective Transactions While Insolvent
Failure to comply with Records Requirements Where registered broker-dealer converted to its own use customers' funds in connection with purchases and sales of securities, solicited and effected security transactions without disclosing that it was insolvent, filed a false financial report, and failed to comply with net capital requirements, to keep accurate books and records and to correct information in registration application, held, in public interest to revoke broker-dealer registration.
FINDINGS AND OPINION OF THE COMMISSION
These proceedings were instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) to determine whether to revoke the registration as a broker and dealer of Sills and Company (“registrant”), and whether under Section 15A (b) (4) of the Exchange Act Robert Bernard Sills, president and director of registrant and Arthur P. Green, an employee, should each be held to be a cause of any order of revocation which may be issued.1
1 Section 15(b) of the Exchange Act, as here applicable, provides that we shall revoke the registration of a broker or dealer if we find that it is in the public interest and that such broker or dealer or any officer, director, or controlling or controlled person of such broker or dealer, has willfully violated any provision of that Act or of the Securities Act of 1933 or any rule or regulation thereunder.
Under Section 15A (b) (4) of the Exchange Act, in the absence of our approval or direction, no broker or dealer may be admitted to or continued in membership in a national securities association if the broker or dealer or any partner, officer, director or controlling or controlled person of such broker or dealer was a cause of any order of revocation which is in effect.