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accounts, might be considered to be the beneficial owners

of the securities held in the trusts or the accounts,

respectively.

Rather than exclude such institutions from the definition of "beneficial owner," which might result in a 'definition that was too narrowly drawn, we are considering ways of alleviating some of the burdens that surely would devolve upon these institutions if our broad definition required them to file unnecessarily extensive disclosure reports. Section 13(d) (5) of the Act authorizes the Commission to promulgate a short form notice of acquisition, where the acquisition is in the ordinary course of business and is not made for the purpose, and does not have the effect, of changing or influencing corporate control. A short form notice could be used by certain financial institutions to report their holdings, and we are considering rules to that effect.

These rules, if adopted in any form similar to what I have discussed, would in part accomplish the objectives contained in certain of the proposed amendments to Section 13(d) Perhaps the most significant rule, and the one most difficult to formulate, is one defining the term "beneficial owner" for purposes of Section 13(d). Whether or not S. 425 is adopted, there will still be a need for such a rule, since S. 425 does not presently contain such a definition.

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We are not contemplating proposing any rules, however,

which would require all 5 percent owners of equity securities

to file personal financial statements with the Commission, as S. 425 would require. When I testified before the Subcommittee on Securities I did not express our concern with this provision. Having considered it further, we do not believe it is necessary for the protection of investors when the acquiring person is not seeking control of the issuer. The public benefits would be too remote in such cases, the burdens of compliance too heavy, and the invasion of privacy unwarranted.

In addition to amending Section 13(d) of the Exchange Act to increase disclosure about owners of more than five percent of a class of equity securities, S. 425 also would add a new Section 14(g) to the Securities Exchange Act, creating a multi-tiered reporting procedure by record holders to issuers, so that American companies with a registered class of equity securities could obtain information to compile a list of the names, residences and nationalities of all the beneficial owners of such securities, as well as information with respect to the locus of authority to exercist the voting rights of the securities held of record by other persons.

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Disclosure of beneficial ownership when separate from
Under the present

record ownership, however, is another matter.

law there is no general requirement for such disclosure below the 5 percent level, nor is there any adequate means of enforcement against fiduciaries. We generally favor increased statutory authority in this direction.

As to creating a multi-tiered reporting procedure by

holders of record, we agree with the objective of this provision, but believe that its scope and extent are not necessary for the protection of investors. The burden on nominees would appear to be excessive and the benefits to the public too remote.

However, we are considering a rule proposal that would require the issuer to disclose in its annual report filed with us, as well as in certain registration statements, the 30 largest holders of record of any class of voting security and the extent of their voting authority, if known to the issuer. If such proposal is made, it probably would exempt disclosures of very small holdings. Our staff is, in developing this proposal, taking into careful consideration the recommendations of an Interagency Steering Committee on Uniform Corporate Reporting, which, in cooperation with Senator Metcalf's staff,

has developed a form of Model Corporate Disclosure Regulations (January, 1975).

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There comes a point, of course, at which disclosure of ownership, when balanced against the need for such disclosure, becomes too burdensome, and constitutes an unreasonable and unnecessary invasion of personal privacy. In that regard, we have several problems with the solution proposed by S. 425. We are concerned, for one thing, about the substantial costs that this proposed amendment would impose on brokerage firms, banks, trust companies and, especially transfer agents, as well as the issuing companies, if the precise provisions of S: 425 were enacted, since the bill would apply to all beneficial owners, even the owner of one share of common stock. It is not unusual for a large company to have over 100,000 record holders of its common stock. AT&T has millions. So much

data is too expensive to provide and more than anyone can effectively and properly use.

If the intention of this section of the bill is to elicit significant information regarding beneficial owners, the Congress should consider less burdensome, alternative means of accomplishing this goal. At the very least, the disclosure in filings should be limited, perhaps, to the 20 or 30 largest holders, or any holder of more than some percentage, such as 2 percent or 1 percent. This Subcommittee should be aware that many large companies with 50,000 or more record shareholders may have no more than three

or four who own beneficially as much as one percent of the company's shares.

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The problem in obtaining meaningful disclosure of stock ownership has always been the holding of record by fiduciaries who feel constrained, by law or custom or good business practice, from their point of view, to decline to disclose the identities of the persons for whom they hold the stock, except in response to legal process. Foreign fiduciaries, in many cases, will not even recognize our legal process for this purpose. Most fiduciaries will disclose the extent

to which they hold shares for others but possess sole or joint voting power, but not the identity of the beneficial owner or of any other person who holds the power solely or jointly with the fiduciary.

The idea of requiring fiduciaires to disclose their beneficiaries, or at least those beneficiaries with voting power, on a regular basis for public filings raises other considerations that must be carefully weighed. One is the long-standing tradition and policy in our law of protecting the privacy of private trusts. Compelling the public disclosure of the portfolios of private trusts

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even if only to the

extent that they hold equity securities of publicly-owned U.S. companies for which the beneficiaries hold the voting power is a fundamental departure from our settled norms.

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