tions into the inadequacies of protection for investors in Penn Central situation. We respectfully bring to the attention of the committee that the motor carrier industry has been virtually free from any similar situations. In light of this, plus the previously mentioned strengthening of ICC regulation, we feel no need for this legislation as it relates to the motor carrier industry. Senator HARTKE. Thank you, Mr. Kinnaird. The ICC has promised since 1971 is that they will improve their disclosure requirements. They have a proposed rule but they have not issued those rules at this time. Now, there is a well-established body of rules and regulations under the SEC for disclosure. If you go back through this with the ICC, you have to relitigate these issues with the SEC. Again, instead of going through that procedure with the ICC why not permit the SEC to go ahead with disclosure procedures they have at the present time? Mr. KINNAIRD. We feel that the SEC is going to definitely adopt these complete disclosure requirements. I might also point out to the chairman that I believe the ICC will testify tomorrow. Senator HARTKE. Yes. Mr. KINNAIRD. Perhaps they could shed more light on this subject. Senator HARTKE. I am not saying they are not going to. In fact, I understand they are going to have more disclosure proceedings. Mr. KINNAIRD. Yes. Senator HARTKE. The question arises as to whether or not, as far as the motor carrier industry is concerned they would be better advised to go under the established rules and regulations which have not proved difficult, or really have not proved that they have been unworkable as the FPC has indicated today; wouldn't you be better off` to go ahead where you knew the rules were instead of going through the new rules and regulations of the ICC discussed and litigated in that way? Mr. KINNAIRD. It is my understanding that the rules are set forth in the administrative proceeding; isn't that true? Mr. COONEY. It has been litigated since 1971 as you mentioned. Mr. COONEY. There were a set of regulations that came out 8 months ago, and we are awaiting a finalization. So most of this litigation has been going on and we expect any day to have these final set of rules. Senator HARTKE. What happened though, is that you have had 40 years of SEC rules and regulations and the cases have been litigated under those situations. That is not true under the ICC disclosure. As I understand it, your objection is really not to the disclosure features. Mr. KINNAIRD. No, sir. Senator HARTKE. The objection is really that the SEC should do it and it would be subject to concurrent jurisdiction; isn't that it? Mr. KINNAIRD. Our objection is twofold. First of all, we think the ICC's present jurisdiction is broader and more in the public interest in that it basically goes to the prudence of the venture involved. Whereas, SEC does not. If you are going to leave the protection of the public interest with respect to the prudence of the venture in the ICC and yet you are going to go to SEC for full disclosure or further disclosure requirements, we suggest that the ICC's action which is presently underway, meets that point. Second, the motor carrier industry consists of a number of motor carirers, some 15,000 as I recall, regulated motor carriers. They range on the one hand from multimillion-dollar carriers to small carriers. There are a lot more smaller carriers, moneywise, than larger ones. What this bill would impose, would be a financial burden on such smaller carriers, particularly as I have tried to point out in the case of a sale or merger, where they would have additional costs not only of the present legal requirements of complying with ICC, but they would be faced with additional expense of going to the SEC and subsequently getting approval. Now, the Chairman of the FPC testified previously about the rapport between the FPC on the one hand and the SEC on the other. I think that perhaps the chairman, perhaps, was not aware that with the FPC-regulated utilities, the Federal Power Act allows the companies simply to file their FPC reports with the SEC in lieu of the rest of required registration statement and other information. Thus, there is no duplication of regulations. There is no similar language in S. 3356. Isn't that right, Mr. Cooney? Mr. COONEY. Yes. Senator HARTKE. We will take a look at that. The thing about it is, as I understand, the small carriers would be exempt from SEC regulations. Mr. KINNAIRD. Under their present law? Senator HARTKE. Yes. Mr. KINNAIRD. I believe there is one area that that isn't correct, Mr. Chairman. I would like to refresh my memory on that first. Senator HARTKE. And submit it for the record? Mr. KINNAIRD. Yes. Senator HARTKE. All right. Fine. Senator HARTKE. Under the Securities Act of 1933, the investor is entitled to recovery upon proof of misstatement or omission of material fact in the registration statement or prospectus. The registration statement which contains the false material or omission of material fact imposes absolute liability upon the corporation which issues the security. This provision does not apply to the rail or motor carriers because they are exempt from registration. In similar fashion, the SEC's ability to resort to injunctive action whenever it determines that a person is engaged, or about to become engaged in acts or practices which constitute a violation of the Securities Act, are not available to the ICC enforcement regulations. Now, the securities portion is not exempt from the antifraud provisions of the Securities Act of 1933. However, that agency's lack of easy access to the information concerning such transactions will, as a practical matter, retard institution of antifraud sections of the act. Since you oppose SEC jurisdiction in that respect, would you oppose amending the ICC Act to put that authority under that act? Mr. KINNAIRD. Could I answer that question at another time? Frankly, our executive committee has not taken a position with respect thereto. I have no authority to commit them but in my personal opinion, I feel that they probably would not oppose such a change of the act. Senator HARTKE. Let's leave that open then and see if you can get a consensus on that. Mr. KINNAIRD. All right. Senator HARTKE. This is a question submitted here more for the General Counsel. This concerns a conflict on some facts concerning Navajo Freight Lines in acquiring Garrett, and these I understand are registered under the SEC, is that right? Are you familiar with the facts on that? Mr. COONEY. No, I am not familiar with the facts on that. Mr. KINNAIRD. As a trade association, Mr. Chairman, we never get into matters involving activities of that nature. Senator HARTKE. All right. Fine. We may submit more questions on that. Mr. KINNAIRD. Yes, sir; we will be delighted. Thank you. The other witness this morning pleaded something. He will come at a later date. The hearings are recessed until tomorrow morning at 10 o'clock. [Whereupon, at 11:04 a.m., the hearings were recessed, to resume at 10:00 a.m., Thursday, May 16, 1974.1 [The following information was subsequently received for the record:] AMERICAN TRUCKING ASSOCIATIONS, INC., Hon. VANCE HARTKE, DEAR MR. CHAIRMAN: This letter is to supplement my testimony of May 15, 1974, on the above-referenced bill. Having reviewed a transcript of the testimony, I find that there are two areas of discussion which require further comment. First, in my explanation that financial burdens would be imposed on the smaller carriers by enactment of the bill, particularly in seeking S.E.C. as well as I.C.C. approval for pending sales and mergers, you asked if the smaller carriers would not continue to be exempt from S.E.C. regulation under the terms of S. 3356. I mentioned that there is one area that that is not so. To explain more fully, there are several methods by which an acquisition is normally made. Where there is a new issuance of stock to the public, the transaction would come under the requirements of the Securities Act of 1933, and the financial burdens discussed above would fall upon the large and small carriers alike which choose this method of acquisition. The exemption you referred to involved the Securities Exchange Act of 1935 which gives the S.E.C. authority to regulate the trading of securities, proxy solicitations and trading by directors, officers and principal security holders. While some forms of acquisition would bring these requirements into play, section 12(g) renders that act applicable to over-the-counter securities only when there are assets in excess of $1 million and a class of equity securities held by at least 500 persons. Secondly, you requested that the views of A.T.A. be obtained on amending the Interstate Commerce Act by adding anti-fraud provisions, similar to provisions in the Securities Act of 1933, which would (1) impose absolute liability upon corporations which issue securities for false or omitted material in prospectuses, and (2) give the I.C.C. authority to seek an injunction against persons it feels are engaged in or will engage in fraud and misrepresentation in the issuance of securities. Our Executive Committee meets June 19 and 20, 1974, and I will bring this to their attention and inform you of their action as soon as it is taken. Thank you again for the opportunity of presenting our views on this piece of legislation. Sincerely yours, JOHN M. KINNAIRD. AMERICAN TRUCKING ASSOCIATIONS, INC., Hon. VANCE HARTKE, Chairman, Surface Transportation Subcommittee, Senate Commerce Committee, Dirksen Office Building, Washington, D.C. DEAR MR. CHAIRMAN: In my letter of June 7, 1974, I promised to notify you of the consideration given by ATA's Executive Committee relative to your suggestion that the anti-fraud provisions of the Securities Act of 1933 be added to the Interstate Commerce Act. The Executive Committee met in Washington on June 19, 1974, reviewed the whole subject of carrier securities including your suggestion, and adopted the following position. The Executive Committee reaffirmed its earlier position of opposition to removal of the exemptions afforded carriers regulated by the Interstate Commerce Commission from various provisions of the laws administered by the Securities Exchange Commission. It supports the promulgation by the ICC under its existing authority of regulations which would be similar in form to those of the SEC. Its opposition to an SEC takeover of the ICC's responsibilities in this area rests primarily upon an abiding interest to stem the ever-increasing costs and other administrative burdens resulting from compliance with the regulations of a proliferation of governmental agencies. Directing itself specifically to your suggestion, the Executive Committee voiced no opposition to the Interstate Commerce Commission having authority similar to that held by the SEC, which would allow the ICC to seek an injunction against persons it feels are engaged in or will engage in fraud and misrepresentation in the issuance of securities and which would impose absolute liability upon carriers which issue securities for false or omitted material in offering circulars. Sincerely yours, JOHN M. KINNAIRD. |