They are, undoubtedly, basic reasons for this stagnant condition of capital and labor far beyond any relation that the sale of securities and the operation of stock exchanges may have to the problem. It is manifest, however, that any conditions that contribute to the employment, or to the idleness of available capital, are of important interest to the country. Idle capital means idle men and weaker demands for materials.

This country largely finances its industrial and commercial enterprises through the sale of securities of our business corporations. Generally speaking, we have the corporate system of carrying on great enterprises. The business of financing these enterprises is of importance to all classes of our people. It is the legitimate function of these regulatory measures passed by Congress to give a greater degree of integrity to securities and the business of selling securities. They should be protective aids to business. Anything that unnecessarily handicaps the investment of capital in the legitimate enterprises of the country, whether it be due to burdensome expenses, delays, or other causes, militates against the economic welfare of the country.

Now, after more than 7 years' experience under each of these acts we may legitimately inquire what is there, if anything, in these laws, or their administration, that may be changed to encourage investment, increase employment, and secure improvement in their administrative functions? Broadly speaking, this hearing is directed to that end. There is no purpose to break down necessary or desirable regulations. Our members are not committed to any specific action on these proposals, but we are hoping by the aid of those who will appear here to take up the consideration of these acts to the constructive benefit of the country.

A tentative program has been worked out by which the principal proposed amendments may be discussed separately and consecutively as the hearings proceed.

We have before us a study made by the Commission, and representatives of the industry, the bill, H. R. 4344, introduced by our colleague, Mr. Wadsworth, of New York, and the bill, H. R. 5065, introduced by our colleague, Mr. Paddock, of Illinois, and H. R. 5832, introduced by Mr. Oliver. Mr. Wadsworth has given much time and patient study to problems arising under these two laws, and at the appropriate time qualified persons will discuss these various measures. The committee will have the benefit of his contribution to these problems. It is planned, so far as possible, to hear from interested persons on various subjects as they are separately discussed.

Certain representatives of local exchanges through the country feel that these institutions have some problems of their own that are of great importance to them and their communities. I understand the general desire of these exchanges is that the Commission first make a study and report of their problems as a basis of information and proposed remedies. These exchanges feel that the Commission is in position to give information and aid beyond what they are able to produce for themselves. The Commission is engaged upon such a study which in due time will be presented to this committee. The Commission is not able to state at the present time just how soon this report may be ready, but we expect that when it does arrive it will be of such

importance as to justify the attention of our committee, whether it be before or after the present hearings are concluded.

The plans are that the first witness this morning will be Commissioner Purcell, representing the Commission, who will have charge of the presentation of the Commission's side.

STATEMENT OF COMMISSIONER EDWARD C. EICHER, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION

Commissioner EICHER. Mr. Chairman, I wish to take only a minute at this time to introduce to my former colleagues on this committee my present colleague, Commissioner Purcell, of the Securities and Exchange Commission. He, while director of our Trading Exchange Division, was assigned by the Commission to act as its representative in conferences with the representatives of the securities industry concerning amendments to the two acts.

I think it will be admitted that very full and comprehensive work has been done during the year; the result of the study and conferences have been presented to this committee now in the form of the two reports that were submitted to you early in August.

Mr. Purcell has had very broad experience in the practical administration and interpretation of the two acts that are up before the committee now for review. The Commission feels that he is amply qualified to present its views on any questions that may arise during the progress of the hearings. The Securities and Exchange Commission, therefore, has delegated to him the work of representing us before this committee.

I introduce Mr. Purcell.

The CHAIRMAN. We are very glad to hear from Mr. Eicher. He was formerly a splendid member of this committee and an introduction by him to this committee is a good introduction.

STATEMENT OF COMMISSIONER GANSON PURCELL, SECURITIES AND EXCHANGE COMMISSION

Commissioner PURCELL, Mr. Chairman and gentlemen of the committee, as the chairman has stated to you, these hearings are being held for the purpose of considering proposals made by the securities industry for amendments to the Securities Act of 1933 and the Securities Exchange Act of 1934.

These proposals are, in the main, those of the industry and, hence, they generally will carry the burden of supporting them.

The chairman of this committee has asked the Commission to appear first in the hearings in order to give the committee a résumé of these acts of Congress, including their background, the necessity for their passage, a description of their purpose and scope, and in addition, an account of the Commission's experience in administering them.

BACKGROUND OF PROPOSALS

Right at the outset I would like to make quite clear that the impetus for amendment of these statutes comes from groups in the

They are, undoubtedly, basic reasons for this stagnant condition of capital and labor far beyond any relation that the sale of securities and the operation of stock exchanges may have to the problem. It is manifest, however, that any conditions that contribute to the employment, or to the idleness of available capital, are of important interest to the country. Idle capital means idle men and weaker demands for

materials.

This country largely finances its industrial and commercial enterprises through the sale of securities of our business corporations. Generally speaking, we have the corporate system of carrying on great enterprises. The business of financing these enterprises is of importance to all classes of our people. It is the legitimate function of these regulatory measures passed by Congress to give a greater degree of integrity to securities and the business of selling securities. They should be protective aids to business. Anything that unnecessarily handicaps the investment of capital in the legitimate enterprises of the country, whether it be due to burdensome expenses, delays, or other causes, militates against the economic welfare of the country.

Now, after more than 7 years' experience under each of these acts we may legitimately inquire what is there, if anything, in these laws, or their administration, that may be changed to encourage investment, increase employment, and secure improvement in their administrative functions? Broadly speaking, this hearing is directed to that end. There is no purpose to break down necessary or desirable regulations. Our members are not committed to any specific action on these proposals, but we are hoping by the aid of those who will appear here to take up the consideration of these acts to the constructive benefit of the country.

A tentative program has been worked out by which the principal proposed amendments may be discussed separately and consecutively as the hearings proceed.

We have before us a study made by the Commission, and representatives of the industry, the bill, H. R. 4344, introduced by our colleague, Mr. Wadsworth, of New York, and the bill, H. R. 5065, introduced by our colleague, Mr. Paddock, of Illinois, and H. R. 5832, introduced by Mr. Oliver. Mr. Wadsworth has given much time and patient study to problems arising under these two laws, and at the appropriate time qualified persons will discuss these various measures. The committee will have the benefit of his contribution to these problems. It is planned, so far as possible, to hear from interested persons on various subjects as they are separately discussed.

Certain representatives of local exchanges through the country feel that these institutions have some problems of their own that are of great importance to them and their communities. I understand the general desire of these exchanges is that the Commission first make a study and report of their problems as a basis of information and proposed remedies. These exchanges feel that the Commission is in position to give information and aid beyond what they are able to produce for themselves. The Commission is engaged upon such a study which in due time will be presented to this committee. The Commission is not able to state at the present time just how soon this report. may be ready, but we expect that when it does arrive it will be of such

importance as to justify the attention of our committee, whether it be before or after the present hearings are concluded.

The plans are that the first witness this morning will be Commissioner Purcell, representing the Commission, who will have charge of the presentation of the Commission's side.

STATEMENT OF COMMISSIONER EDWARD C. EICHER, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION

Commissioner EICHER. Mr. Chairman, I wish to take only a minute at this time to introduce to my former colleagues on this committee my present colleague, Commissioner Purcell, of the Securities and Exchange Commission. He, while director of our Trading Exchange Division, was assigned by the Commission to act as its representative in conferences with the representatives of the securities industry concerning amendments to the two acts.

I think it will be admitted that very full and comprehensive work has been done during the year; the result of the study and conferences have been presented to this committee now in the form of the two reports that were submitted to you early in August.

Mr. Purcell has had very broad experience in the practical administration and interpretation of the two acts that are up before the committee now for review. The Commission feels that he is amply qualified to present its views on any questions that may arise during the progress of the hearings. The Securities and Exchange Commission, therefore, has delegated to him the work of representing us before this committee.

I introduce Mr. Purcell.

The CHAIRMAN. We are very glad to hear from Mr. Eicher. He was formerly a splendid member of this committee and an introduction by him to this committee is a good introduction.

STATEMENT OF COMMISSIONER GANSON PURCELL, SECURITIES AND EXCHANGE COMMISSION

Commissioner PURCELL. Mr. Chairman and gentlemen of the committee, as the chairman has stated to you, these hearings are being held for the purpose of considering proposals made by the securities industry for amendments to the Securities Act of 1933 and the Securities Exchange Act of 1934.

These proposals are, in the main, those of the industry and, hence, they generally will carry the burden of supporting them.

The chairman of this committee has asked the Commission to appear first in the hearings in order to give the committee a résumé of these acts of Congress, including their background, the necessity for their passage, a description of their purpose and scope, and in addition, an account of the Commission's experience in administering them.

BACKGROUND OF PROPOSALS

Right at the outset I would like to make quite clear that the impetus for amendment of these statutes comes from groups in the

securities industry and not from the Commission. I should not wish our appearance at the beginning of the hearings to indicate in any way that the Commission initiated this program for amendment to the legislation or would wish to initiate any program for enlarging its authority.

The proposals for amendment of the Securities Act had their origin at the last session of Congress' with the introduction of two bills. As you will doubtless recall, one was introduced in the Senate by Senator Brown, of Michigan, and the other was introduced by your own chairman in the House of Representatives.

After the introduction of Chairman Lea's bill, the committee through him requested the views of our Commission on these proposed amendments. After we had made an examination of the provisions of the bill it became quite obvious that they dealt with fundamental provisions of the act and, therefore, required the closest sort of study and consideration in order to appreciate not only their impact on the various interrelated provisions of the law, but also their effect on the congressional intent behind them.

As a consequence the chairman of our Commission in June of last year asked the committee through Mr. Lea to permit us an opportunity to examine and consider the proposals contained in the bills and any other proposals which had been or might be suggested for amendment to the two acts, and then after thorough consideration to report back our views. In this connection our Chairman made it quite clear that we would discuss these proposals and other matters with certain representative groups in the securities industry and with any others who might express an interest.

Beginning with a meeting in July of 1940 with the representatives of certain of these groups, a committee of the staff of the Commission proceeded to discuss and consider the provisions of the Lea and Brown bills as well as a great many other suggestions for amendments of the acts. The various industry groups retired after that meeting and devoted the summer to formulating a program of specific proposals to submit for the Commission's consideration. After that the actual work of discussion and conferences on all of these items got under way in September. From that point until August of this year we met together on frequent occasions, just as frequently as we possibly could.

First, the staff committee of the Commission met with the industry groups over a period of about 3 or 4 months until we had the proposals in sufficiently well-defined form so as to be able to take them before the Commission itself for discussion.

After that point was reached and right up to the time of the submission of our reports to the committee and also to the Senate Committee on Banking and Currency, the Commission and the representatives of the securities industry gave just about as much of their time as it was possible to give in order to get the most thorough and complete consideration of every proposal which was advanced.

I think the industry representatives will bear me out that the Commission itself was unstinting in its efforts to give time and careful consideration to the proposals, and I want to say on behalf of the Commission that, although we must inevitably strongly oppose cer