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OF 1933 AND TO THE SECURITIES
EXCHANGE ACT OF 1934
Printed for the use of the Committee on Interstate and Foreign Commerce
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
CLARENCE F. LEA, California, Chairman
ROBERT CROSSER, Ohio
CHARLES A. WOLVERTON, New Jersey
ALFRED L. BULWINKLE, North Carolina PEHR G. HOLMES, Massachusetts
VIRGIL CHAPMAN, Kentucky
B. CARROLL REECE, Tennessee
WILLIAM P. COLE, JR., Maryland
JAMES W. WADSWORTH, New York
EDWARD A. KELLY, Illinois
CHARLES A. HALLECK, Indiana
HERRON PEARSON, Tennessee
OSCAR YOUNGDAHL, Minnesota
LYLE H. BOREN, Oklahoma
CARL HINSHAW, California
MARTIN J. KENNEDY, New York
CLARENCE J. BROWN, Ohio
CHARLES L. SOUTH, Texas
RICHARD M. SIMPSON, Pennsylvania
JAMES P. MCGRANERY, Pennsylvania GEORGE A. PADDOCK, Illinois
DONALD L. O'TOOLE, New York
LUTHER PATRICK, Alabama
RUDOLPH G. TENEROWICZ, Michigan
JARED Y. SANDERS, JR., Louisiana
ELTON J. LAYTON, Clerk
F. P. RANDOLPH, A88istant Olerk
Stewart, R. McLean, Investment Bankers Association of America,
New York City --
363, 407, 563
Bollard, Ralph #., vice president, Dillon, Read & Co., New York
Folger, J. C., representing Folger, Nolan & Co., Inc., Washington,
Twombly, Edward B., of Putney, Twombly.& Hall, New York City - 474
Jones, Frayser, representing the National Association of Manu-
facturers, New York City.--
484, 493, 634
Ecker, F. W., vice president, Metropolitan Insurance Co., New York
Brown, Francis C., General Counsel, Federal Deposit Insurance
Corporation, Washington, D. C..
Wiggins, A. L. M., American Bankers Association, Hartsville, S. C. 523, 553
Brown, Edward E., president, First National Bank, Chicago, Ill_-- 527, 544
Love, Edward L., vice president, Chase National Bank, New York
Oliver, Fred N., general counsel, National Association of Mutual
Savings Banks, New York City -
Purcell, Hon. Ganson, Commissioner, Securities and Exchange Com-
Davis, Arthur G., Investors Bankers Association, Chicago, Ill.-
Dickson, Rush S., president, R. S. Dickson & Co., Charlotte, N. C.. 615
Loudon, Paul W., of Piper, Jaffray & Hopwood, Minneapolis, Minn.- 621
Reis, Bernard J., executive director, American Investors' Union, New
York City -
Putney, William B., 3d, of Putney, Twombly & Hall, New York City-- 646
Statistical tables submitted —
Second supplement to tabulation 2 above, investors without oppor-
tunity to buy $802,000,000 private placements issued in 1938.-
Sales of public-utility bonds in the District of Columbia.--.
Table I. Corporate bonds purchased privately from issuers by the
26 largest legal reserve life insurance companies.
Table II. Total corporate private financing-
Table III. Analysis of 1940 private placements which would have been
subject to proposed section 2 (14) -
Table IV. Total funds invested in stocks and bonds by the 49 legal
reserve life insurance companies ----
In re corporate securities sold in transactions exempted from Securities
Act registration as not involving any “public offering":
Table A. From 1933 to 1940, inclusive...
Table E. From January 1, 1941, to September 15, 1941.
Table F. Largest purchasers, 1934 to 1940, inclusive-
Table B. Classifications...
Table C. Number of issues.
Table G. Purchases by commercial banks.
Percentage relationship between corporate securities sold as exempt
from registration and total domestic corporation and foreign
financing, table D..-
Supplementary tables to last above-
Total dollar amount of domestic corporation and foreign issues in
all financing -
Total dollar amount of bond issues in all domestic corporation
and foreign financing --
Three telephone issues, price prevailing at a given time.
Statistical tables submitted— Continued.
Three industrial issues, prices prevailing at a given time.
Seven industrial issues, prices prevailing at a given time.
Seven public utilities issues, prices prevailing at a given time...
Tabulation 1. Certain reported “private placements” and outstanding
securities refunded by such “private placements”
Tabulation 2. Analysis of purchases of certain new bond and note
issues by insurance companies, foundations, universities, pension
funds, and savings banks (to the extent reported)--
Tabulation 3. Break-down of 1938 “reported private placements” on
tabulation 1 above.--
Tabulation 4. Institutional holders of new bond and note issues of
$1,000,000 or more whose registration became effective during 1938,
to the extent reported as of December 3, 1938..
Supplement to tabulation 2 above, distribution of $802,000,000. Pri-
vate placement issues in 1938.
Chart, supervision of the commercial banking system..
Appendix I. Showing increase in private placement problem.
List of issues in 1932 and 1933 said to have been sold in private trans-
Bulletin, November 1, 1941, securities division, department of com-
merce, State of Minnesota.
Table, Ratio of costs 1939 attributable to registration as compared to
total costs of flotations.--
Table showing cost for a $500,000 issue.
Tables showing certain break-downs prepared by the American In-
vestors' Union --
Communications and memoranda submitted-
Memorandum by Churchill Rodgers, assistant general counsel of
Metropolitan Life Insurance Co., on the securities industry proposal
affecting private placements ---
Letter from Carrol M. Shanks, vice president nd general counsel,
Prudential Insurance Co. of America..
Letter from Hon. Leo T. Crowley, Chairman, Federal Deposit Insur-
ance Corporation --
Letter from Hon. Marriner S. Eccles, Chairman, Board of Governors
of the Federal Reserve System.--
Letter from Hon. Preston Delano, Comptroller of the Currency,
Department of the Treasury --
Joint statement by the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, and the Federal Deposit
Insurance Corporation, re proposed new section 2 (14) of the Securi-
ties Act of 1933..
Letter from Clarance H. Adams, director of securities division, State
Letter from Edwin M. Dougherty, commissioner, division of corpora-
tions, State of California -
Letter from Robert Bauer, president, National Association of Better
Business Bureaus, Inc.--
Letter from J. L. Pritchett, manager, Fort Worth, Tex., Better Busi-
Letter from T. F. Leahy, manager, Scranton, Pa., Better Business
Letter from Edward T. Wigg, manager, Tulsa, Okla., Better Business
Table showing issues classified by amounts in 1938, 1939, and 1940,
indicating amount offered registration expense, compensation to
underwriters, and total cost of flotation..
PROPOSALS FOR AMENDMENTS TO SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934
HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C. The committee met, pursuant to adjournment, at 10 a, m., in the committee room, New House Office Building, Hon. Clarence F. Lea (chairman) presiding.
The CHAIRMAN. The committee will come to order. Mr. Stewart, you may proceed.
BEGINNING ITEM NO. 2 ON AGENDA FOR AMENDMENTS
TO SECURITIES ACT OF 1933
STATEMENT OF R. McLEAN STEWART, CHAIRMAN, SECURITIES ACTS COMMITTEE, INVESTMENT BANKERS' ASSOCIATION OF AMERICA—Resumed
Mr. STEWART. Mr. Chairman, I am addressing myself this morning to the proposed section 2 (14), which appears in the committee print beginning at page 9.
The whole scope of the Securities Act of 1933, as an act to provide for the full and fair disclosure of information as to the character of securities sold in interstate commerce, is determined by the interpretation placed on the meaning of the term "public offering."
We respectfully recommend that the term “public offering" be defined as proposed in the draft contained in the print, beginning at line 19, page 9, and continuing through lines 1 to 22, inclusive, on page 10. Although the Commisison does not propose, it does not oppose this amendment. As stated in the print, the Commission's position is discussed at pages 18 and 19 of its printed report. The position of the securities industry is discussed at pages 31 and 33 of our report of July 30, 1941.
It would be idle to pretend that we have no selfish interest in proposing this new section to 2 (14). We have. Under the situation which exists today we are denied the opportunity of competing with the large insurance companies and other large institutions on an equal basis under the law. A healthy investment banking organization cannot exist unless something is done along the lines of the proposed section 2 (14) to correct the situation which now exists. The public as a whole has a real interest in this situation. Investors