DECLARATION OF STATUS

HOLDING COMPANY

Corporation and its subsidiary having filed an application under Section 2 (a) (7) of the Act for an order declaring that each is not a holding company, order denied, the Commission being unable to find that the applicants do not "directly or indirectly, exercise (either alone or pursuant to an arrangement or understanding with one or more other persons) such a controlling influence over the management or policies of any public utility or holding company as to make it necessary or appropriate in the public interest or for the protection of investors or consumers that the applicant be subject to the obligations, duties, and liabilities imposed in this title upon holding companies" ... Page 639.

VOTING TRUST CERTIFICATES-CONTROLLING INFLUENCE

Where corporation, in order to avoid the duties which the Act imposes upon registered holding companies, entered into a voting trust agreement with three voting trustees concerning 330,000 shares of common stock which it owned of a registered holding company and received from the trustees a voting trust certificate after transfer of the stock to the trustees, the Commission was of the opinion that it is doubtful whether a voting trust can ever operate effectively to insulate the control which ownership of a block of stock carries, and apart from that fact, a voting trust in which the voting trustees are not completely independent of the depositors does not operate to insulate control, and in spite of the creation of the voting trust, the corporation continued to retain a controlling influence over the registered holding company ... Page 639.

CONDITIONS

DIVIDENDS

Approval of an application regarding the declaration and payment out of capital or unearned surplus, granted, upon the condition, among others, that the dividends allowed shall be charged to capital surplus, and that the amount of such dividends so charged shall be restored to capital surplus from the first available earnings after December 31, 1938 . . . Pages 29, 149.

Application with respect to the declaration and payment out of capital or unearned surplus of a dividend on prior preferred stock, approved, subject to the condition, among others, that the proposed dividends shall be charged to capital surplus, and that the amount of such dividends so charged shall be restored to capital surplus from the first available earnings after December 31, 1938, after providing for 1939 dividends declared and paid . . . Pages 746, 772. DECLARATION AND PAYMENT OUT OF CAPITAL Or unearned SURPLUS

Application having been filed by a registered holding company pursuant to Section 12 (c) of the Act and Rule U-12C-2 promulgated thereunder, for approval of the declaration and payment out of capital or unearned surplus of dividend of $1.4375 per share on its $1.75 preferred stock on account of accumulated unpaid dividends, the present findings and opinion of the Commission being pursuant to a provision of a prior order of the Commission reserving jurisdiction as to approval of the declaration and payment of a dividend on its $1.75 preferred stock, the applicant having subsequently amended its application to request approval of the declaration and payment out of capital or unearned surplus of

DIVIDENDS-Continued

the fourth quarterly dividend on the $3.50 prior preferred of 871⁄2¢ per share, approved as to the prior preferred stock and a payment of a dividend of 56¢ per share permitted on the $1.75 preferred stock, subject to certain conditions, the Commission finding that in view of the applicant's large cash funds and the other circumstances of the case, the payments of 871⁄2¢ per share on the prior preferred stock and 56¢ per share on the preferred stock in the light of the standards of Section 12 (c) will not impair the financial integrity of any companies in the holding company system or prejudice the working capital of public utility companies in the system . . . Page 29.

Application having been filed by a subsidiary of a registered holding company, pursuant to Section 12 (c) of the Act and Rule U-12C-2 promulgated thereunder, for approval of the declaration and payment out of capital or unearned surplus of a regular quarterly dividend at the rate of $1.75 per share on its cumulative preferred stock, $7 series, and of a regular quarterly dividend at the rate of $1.50 per share on its cumulative preferred stock, $6 series, approved, subject to certain conditions, the Commission finding that the proposed dividend payments are not unreasonable under Rule U-12C-2, taking into consideration the fact that the applicant is neither an operating utility nor a utility holding company, that after the payment of the proposed dividend a substantial protective common equity will remain behind the preferred stock, that neither the $7 series nor the $6 series appears to be prejudiced by the payment of dividends on the other, and that the preferred stock, of both series, is held exclusively by the public. . Pages 149, 772.

A registered holding company, having filed an application pursuant to Section 12 (c) of the Act and Rule U-12C-2 promulgated thereunder, for approval of the declaration and payment of a dividend on its cumulative preference stock, and the debiting to its capital surplus account of the amount of such dividend in excess of the balance in its earned surplus account at the date of declaration, and having proposed further that, upon the declaration and payment of the full amount of these dividends in arrears, the corporation shall be permitted, without further authority from the Commission, to declare and pay the regular dividends on the $3 cumulative preference stock out of income accruing after the payment of the dividend in arrears upon condition that the excess of such income above the amounts required to pay the regular dividends on the preference stock shall be credited to the capital surplus account until the full amount of the dividend charged thereto shall be restored to that account, and that no dividends shall be declared or paid upon the common stock of the corporation until such amount shall have been restored to the capital surplus account, approval granted, subject to certain conditions, the Commission finding that the proposed payment will not impair the financial integrity of the applicant or its associate companies or prejudice the working capital of its public utility subsidiaries... Page 318.

Motion for interim order permitting payment of interest on a 5% income note, denied, where note, payable to registered holding company as a dividend, was declared out of capital surplus, and stands in the same position as a cash dividend declared but not paid, the Commission finding that the payment of interest thereon would be in substance the payment of a dividend from unearned surplus, and a violation of the policy of Section 12 (c) of the Act, and such payment would impair the financial integrity of the company by imperilling its ability to pay interest on the debts having prior claims to earnings... Page 605.

DIVIDENDS-Continued

The Commission having entered an order pursuant to Section 12 (c) of the
Act that a registered holding company show cause why the Commission should
not enter an order preventing the declaration or payment of further dividends to
protect the financial integrity of companies in the holding company system, to
safeguard the working capital of public utility companies in such system, to pre-
vent the payment of dividends out of capital or unearned surplus, and to prevent
the circumvention of the provisions of the Act or the rules, regulations, or orders
thereunder, company forbidden to declare or pay any dividends on its capital
stock until the further order of the Commission, the Commission finding that the
payment of dividends would impair the financial integrity of the company . . .
Page 605.

Where a company purports to segregate earned and capital surplus, the financial
statements are perverted when dividends are charged to capital surplus while
there is an earned surplus credit balance, and the showing of an earned surplus
credit balance after the payment of dividends gives a false picture of corporate
strength when the earned surplus credit remains only because the dividends
have been charged to capital surplus . . . Page 605.

Applications, having been filed by four subsidiaries of a registered holding
company, pursuant to Section 12 (c) and Rule U-12C-3 adopted thereunder,
for approval of the payment of interest for the 3 months ending December 31,
1939, on such portions of outstanding 6% demand notes of the applicant as
were issued as dividends paid out of capital or unearned surplus, approved, the
Commission observing no basis for making adverse findings under Rule U-12C-3
... Page 732.

Application, having been filed by a registered holding company pursuant to
Section 12 (c) of the Act and Rule U-12C-2 adopted thereunder, for approval of
the declaration and payment out of capital or unearned surplus of a regular
quarterly dividend at the rate of 87%1⁄2¢ per share on its $3.50 prior preferred
stock, and payment of 43% per share on its $1.75 preferred stock on account of
accumulated unpaid dividends, approved, with respect to the prior preferred stock,
subject to certain conditions, the Commission finding that the proposed dividend
is not unreasonable under the standards of Section 12 (c), the proposed payment,
in view of the applicant's large cash resources and other circumstances, not ap-
pearing to impair the financial integrity of the applicant nor the financial integrity
of companies in the holding company system, the Commission retaining jurisdic-
tion with respect to the proposed payment on the $1.75 preferred stock, the
record being incomplete. Page 746.

Application, having been filed by a registered holding company pursuant to
Section 12 (c) of the Act and Rule U-12C-2 adopted thereunder, for approval of
the declaration and payment out of capital or unearned surplus of a regular
quarterly dividend at the rate of 43 per share on its $1.75 preferred stock on
account of accumulated unpaid dividends, denied, the Commission being of the
opinion that the proposed dividend payment is unwarranted in view of several
uncertainties confronting the applicant, and the fact that the proposed dividend
payment would of necessity be made out of anticipated future income, and in view
of the fact that such a payment would tend to jeopardize the position of the
holders of prior preferred stock of applicant and deprive them of a part of the
protection to which they are entitled . . . Page 801.

DIVIDENDS-Continued

INTERIM ORDER PERMITTING PAYMENT OF INTEREST

Application, having been filed by a registered holding company, pursuant to
Rule U-12C-3 promulgated under Section 12 (c) of the Act, for permission to
make various payments on its debentures due 1973 and income debentures due
1978, and having made a motion for an interim order permitting it to pay interest
on its debentures due 1973, motion for an interim order granted, subject to
certain conditions, it appearing to the Commission that such payments would go
to innocent purchasers outside the holding company system who had no part
in certain transactions under consideration .. Page 241.

LIQUIDATING DIVIDEND

...

A registered holding company having filed an application pursuant to Rule
U-12C-2 promulgated under the Act, for approval of the transfer by the holding
company to the five holders of its preferred shares of beneficial interest, as a
liquidating dividend of 66,499 shares of common stock of a subsidiary company,
approval granted, subject to certain conditions, the Commission not considering
that the proposed distribution will be adverse to the public interest or the
interest of investors and consumers, and with respect to certain other applica-
tions filed jointly by the registered holding company and a subsidiary pursuant
to Sections 5 (d) and 10 of the Act and Rule U-12D-1 relating to the donation
by the holding company of certain portfolio securities to its subsidiary, and an
order of the Commission declaring that upon consummation of such transactions
the registered holding company will have ceased to be a holding company, the
Commission pursuant to request of the applicants, reserved jurisdiction to con-
sider at a later date such applications
... Page 525.

EXEMPTION OF ACQUISITION OF SECURITIES BY REGISTERED
HOLDING COMPANY OR SUBSIDIARY

Application by the trustees under a pension trust agreement, said trustees, hav-
ing been held to be a subsidiary of a registered holding company, having filed an
application pursuant to Section 9 (c) (3) of the Act for exemption from the
provisions of Section 9 (a) (1) of the Act, or in the alternative, pursuant to Section
10 (a) (1) of the Act, for the approval of a program of investment of its present
and future available funds, exemption granted, subject to certain conditions, the
Commission finding that the proposed investment program as limited by the
conditions imposed is appropriate to the ordinary course of applicant's business
and is not detrimental to the public interest or the interest of investors or con-
sumers .. Page 16.

Acquisition by registered holding company of 12,000 shares of a subsidiary's
common stock in return for 3,000 old shares, and the acquisition of 2,000 shares
of the common stock as a dividend are exempt from the provisions of Section
9 (a) of the Act by virtue of Rule U-9C-3 (5), which provides in part that Sec-
tion 9 (a) shall not apply to the acquisition by a registered holding company
of a security issued or delivered as a result of a change in respect to the par value
of stock which the issuer has outstanding nor to the acquisition by a registered
holding company of a stock dividend which is issued without any option on the
part of any recipient to accept or receive other kinds of property... Page 368.

6 S. E. C.

EXEMPTION OF ACQUISITION OF SECURITIES BY REGISTERED
HOLDING COMPANY OR SUBSIDIARY-Continued

CONDITION

Where trustees under pension trust agreement were performing services of
a type which would bring them within Section 13 (b) of the Act, trustees' appli-
cation with respect to the investment of current funds granted an exemption
pursuant to Section 9 (c) (3) of the Act, upon condition the trustees stipulate
that they will file an application for a determination whether they should be
approved as a subsidiary service company within the meaning of, and under
Section 13 (b) of the Act and the rules and regulations of the Commission there-
under, within 10 days after the issuance of the Commission's order, and that they
will maintain such application until final determination by the Commission
thereon . . . Page 16.

EXEMPTION OF HOLDING COMPANY OR SUBSIDIARY

COMPANY DERIVING MATERIAL PART OF ITS INCOME FROM PUBLIC UTILITY

SUBSIDIARIES

Holding company, having filed an application pursuant to Section 2 (a) (7)
of the Act for an order declaring it not to be a holding company, and such order
having been denied, and as alternative relief, applicant applied for order exempt-
ing it from the provisions of the Act under Sections 3 (a) (3) and 3 (a) (5) on the
basis that if it be deemed a holding company within the meaning of the Act, it is
only incidentally so, its primary business being investment banking, the applicant
further contending that it does not derive, directly or indirectly, any material
part of its income from a subsidiary public utility, inasmuch as when it partici-
pates in an underwriting it is merely buying a commodity-securities, held, that
in an underwriting agreement where the underwriter agrees to use its best efforts
to sell the securities of the issuer, and where it receives a designated fee on the
basis of the securities it sells, the underwriter is deriving its compensation from
the issuer and in the present case the underwriting of securities of a subsidiary
registered holding company by the applicant, which comprised 46.3 percent of
all of the applicant's underwriting business, constituted a material part of the
applicant's business, the Commission finding it necessary to deny the applica-
tion... Page 639.

COMPANY NOT DERIVING ANY MATERIAL PART OF ITS INCOME FROM
PUBLIC UTILITY SUBSIDIARIES

A holding company having applied for exemption from the provisions of the
Act, pursuant to the provisions of Section 3 (a) (3) (A) of the Act, ordered exempted
from all provisions of the Act that would require its registration thereunder
because of its control over its two subsidiary public utility companies, the Com-
mission finding that applicant's interests in its natural gas subsidiaries had beer
acquired as an incident to its principal business and that applicant did not derive
a material part of its income from its subsidiaries. . . Page 23.

6 S. E. C.