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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, A.88istant Olerk

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Page

Statement of

Stewart, R. McLean, Investment Bankers Association of America,

New York City -

363, 407, 563

Bollard, Ralph H., vice president, Dillon, Read & Co., New York

City -

431

Folger, J. C., representing Folger, Nolan & Co., Inc., Washington,
D. Ć.

467

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

City-

502

Brown, Francis C., General Counsel, Federal Deposit Insurance

Corporation, Washington, D. C.--

517

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

City-

548

Oliver, Fred N., general counsel, National Association of Mutual

Savings Banks, New York City --

554

Purcell, Hon. Ganson, Commissioner, Securities and Exchange Com-

mission-

571, 655

Davis, Arthur G., Investors Bankers Association, Chicago, Ill. -

601

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

639

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----- 460

Sales of public-utility bonds in the District of Columbia---

467

Table I. Corporate bonds purchased privately from issuers by the

26 largest legal reserve life insurance companies--

; 487

Table II. Total corporate private financing-

488

Table III. Analysis of 1940 private placements which would have been

subject to proposed section 2 (14) --

497

Table IV. Total funds invested in stocks and bonds by the 49 legal

reserve life insurance companies---

498

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.-

365

Table E. From January 1, 1941, to September 15, 1941

369

Table F. Largest purchasers, 1934 to 1940, inclusive..

370

Table B. Classifications..

371

Table C. Number of issues.-

373

Table G. Purchases by commercial banks..

394
Percentage relationship between corporate securities sold as exempt

from registration and total domestic corporation and foreign
financing, table D..

366
Supplementary tables to last above-
Total dollar amount of domestic corporation and foreign issues in
all financing --

405
Total dollar amount of bond issues in all domestic corporation
and foreign financing---

405
Three telephone issues, price prevailing at a given time.

418

III

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Page 418 419 420

434

436

438

443

458 525 556

567

632

641

641

645

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-

actions
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 and 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

of Connecticut.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-

ness Bureau.
Letter from T. F. Leahy, manager, Scranton, Pa., Better Business

Bureau.
Letter from Edward T. Wigg, manager, Tulsa, Okla., Better Business

Bureau..
Table showing issues classified by amounts in 1938, 1939, and 1940,

indicating amount offered registration expense, compensation to
underwriters, and total cost of flotation..

512

515

517

519

520

520

667

668

670

670

671

671

673

PROPOSALS FOR AMENDMENTS TO SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934

FRIDAY, NOVEMBER 7, 1941

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

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