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Index-Digest The following digest of decisions presents a consolidated summary of the case headnotes arranged alphabetically according to topic headings. The digest is divided into three parts: Part I, containing decisions under the Securities Act of 1933; Part II, the Securities Exchange Act of 1934; and Part III, the Public Utility Holding Company Act of 1935.

The case headnotes have not been carried over verbatim into this digest. To facilitate the grouping together of decisions standing for a similar proposition under a single digest heading, it has been necessary in some cases to delete from the headnotes matter not pertinent to the general proposition for which the headnote stood, i. e., the names of companies, the principal amounts of security issues, etc. To the same end, certain case headnotes have been entirely redrafted for the digest so as to conform to a uniform statement of the general proposition. In a few instances, case headnotes, which were not considered important for the purposes of this digest, have been omitted from the digest altogether.

1125 285337m-41-72

68.E.O.

a matter which was then not entirely free from doubt,' the violation was willful and so I believe that no imposed.

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PART I

TIES AOT* OF 1933

ACCOUNTING

CATES

unably thorough investigation by accountants of registrant's nepreciation, depletion and amortization of development costs would led inadequacy of provisions therefor, held that in the absence of adjustment of such charges the accountants' certificate should have cond a definite expression of disagreement with registrant's policy ...

ge 850.

Accountant's certificate which failed to disclose that registrant's accounting procedures were highly improper held defective . . . Page 1062. Scope of Audit

Where a transaction of an unusual nature whereby persons connected with the management of the registrant receive in exchange for indebtedness owing from

the registrant for services and salaries properties worth far in excess of such - indebtedness is not disclosed in the financial statements of the registrant, and the

unusual nature of the transaction would have been revealed if reasonable care had been exercised in the conduct of the accountant's audit, it was incumbent on the accountant to point out the facts in his certificate. Failing such disclosure, held the accountant's certificate was materially deficient ... Page 1028. BALANCE SHEET Assets

Classification of Residue Inventories Where it appeared that residue inventories had accumulated over a period of years and could not be marketed at their book values even under the most favorable conditions, inclusion of residues in current assets held improper Page 850.

Notes Receivable in Installment Sales Not to be carried as Assets Where notes were accepted in part payment for sale of stock held preferable accounting procedure to set up capital account for full amount of subscriptions and to show as deduction therefrom, amounts remaining unpaid ... Page 1062.

Notes Receivable-Reserve for Collectibility Recital in a note to schedule to balance sheet (omitted in prospectus) showing source of notes receivable, held, inadequate to disclose status of notes where carried on balance sheet in excess of realizable value . . . Page 1062.

Where notes received in part payment of stock are secured by stock which may not be resalable at price adequate to realize amount owed held improper to carry notes in balance sheets in excess of expected realizable value thereof hor. Page 1062. The term “Act" as used in Part I of this Digest refers to the Securities Act of 1933, as amended.

PART I

SECURITIES ACT* OF 1933

ACCOUNTING

ACCOUNTANT'S CERTIFICATES
Form and Content

Where a reasonably thorough investigation by accountants of registrant's policy as to depreciation, depletion and amortization of development costs would have revealed inadequacy of provisions therefor, held that in the absence of proper adjustment of such charges the accountants' certificate should have contained a definite expression of disagreement with registrant's policy ... Page 850.

Accountant's certificate which failed to disclose that registrant's accounting procedures were highly improper held defective . . . Page 1062. Scope of Audit

Where a transaction of an unusual nature whereby persons connected with the management of the registrant receive in exchange for indebtedness owing from the registrant for services and salaries properties worth far in excess of such indebtedness is not disclosed in the financial statements of the registrant, and the unusual nature of the transaction would have been revealed if reasonable care had been exercised in the conduct of the accountant's audit, it was incumbent on the accountant to point out the facts in his certificate. Failing such disclosure, held the accountant's certificate was materially deficient . . Page 1028.

BALANCE SHEET

Assets

Classification of Residue Inventories Where it appeared that residue inventories had accumulated over a period of years and could not be marketed at their book values even under the most favorable conditions, inclusion of residues in current assets held improper Page 850.

Notes Receivable in Installment Sales Not to be Carried as Assets Where notes were accepted in part payment for sale of stock held preferable accounting procedure to set up capital account for full amount of subscriptions and to show as deduction therefrom, amounts remaining unpaid . . . Page 1062.

Notes Receivable-Reserve for Collectibility Recital in a note to schedule to balance sheet (omitted in prospectus) showing source of notes receivable, held, inadequate to disclose status of notes where carried on balance sheet in excess of realizable value . . . Page 1062.

Where notes received in part payment of stock are secured by stock which may not be resalable at price adequate to realize amount owed held improper to carry notes in balance sheets in excess of expected realizable value thereof l... Page 1062. The term "Act" as lised in Part I of this Digest refers to the Securities Act of 1933, as amended.

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