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SUBCOMMITTEE OF THE .
COMMITTEE ON BANKING AND CURRENCY

UNITED STATES SENATE

SEVENTY-FIFTH CONGRESS

FIRST SESSION

ON

S. 2344

A BILL TO PROVIDE FOR THE REGULATION OF THE SALE
OF CERTAIN SECURITIES IN INTERSTATE AND FOR-
EIGN COMMERCE, AND THE TRUST INDEN-
TURES UNDER WHICH THE SAME

ARE ISSUED, AND FOR

OTHER PURPOSES

JUNE 9, 15, 22, and 29, 1937

Printed for the use of the Committee on Banking and Currency

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COMMITTEE ON BANKING AND CURRENCY

ROBERT F. WAGNER, New York, Chairman CARTER GLASS, Virginia

JOHN G. TOWNSEND, JR., Delaware ALBEN W. BARKLEY, Kentucky

FREDERICK STEIWER, Oregon ROBERT J. BULKLEY, Ohio

LYNN J. FRAZIER, North Dakota ROBERT R. REYNOLDS, North Carolina HENRY CABOT LODGE, JR., Massachusetts JAMES F. BYRNES, South Carolina JOHN H. BANKHEAD, Alabama WILLIAM GIBBS MCADOO, California ALVA B. ADAMS, Colorado FRANCIS T. MALONEY, Connecticut GEORGE L. RADCLIFFE, Maryland PRENTISS M. BROWN, Michigan HERBERT E. HITCHCOCK, South Dakota JAMES H. HUGHES, Delaware CLYDE L, HERRING, Iowa WILLIAM H. SMATHERS, New Jersey

LEON H. KEYSERLING, Clerk

SUBCOMMITTEE ON SECURITIES AND EXCHANGE

ROBERT F. WAGNER, New York, Chairman CARTER GLASS, Virginia

JOHN G. TOWNSEND, JR., Delaware
ROBERT J. BULKLEY, Ohio

LYNN J. FRAZIER, North Dakota
JAMES F. BYRNES, South Carolina
WILLIAM GIBBS MCADOO, California
FRANCIS T. MALONEY, Connecticut
JAMES H. HUGHES, Delaware
CLYDE L. HERRING, Iowa

II

Eust, tre,

7421-37

91, 93

Statement of -

Page

Barkley, Hon. Alben W., senior Senator from Kentucky-

16

Bradley, Charles B., general solicitor, Prudential Insurance Co. of

America, Newark, N. J.

Brown, Edward E., president, First National Bank, Chicago, Ill.-- 122

Burke, Edmund, Jr., member of the staff of the Securities and Exchange

Commission, Washington, D. C..

41

Buttenwieser, Benjamin J., chairman, Investment Bankers Associa-

tion of America Special Committee on Trust Indentures, New York

City--

185

Canright, G. S., counsel for the corporate trust division, Continental

Illinois National Bank & Trust Co. of Chicago, Ill -

131

Douglas, William 0., commissioner, Securities and Exchange Com-

mission, Washington, D. C.--

17

Hanes, Robert M., chairman, committee on federal legislation of

the American Bankers Association, and

president of the Wachovia

Bank & Trust Co., Winston-Salem, N. C-

87

Loeb, Howard A., chairman, Tradesmen’s National Bank & Trust Co.,

Philadelphia, Pa...

146

McCollom, H. C., New York City -

156

Oliver, Fred N.,' general counsel, National Association of Mutual

Savings Banks, 60 East Forty-second Street, New York City -

148

Page, R. G., vice president, Bankers Trust Co., New York City -- 88, 154

Posner, Louis S., member of the Mortgage Commission of the State

of New York, New York City-

108

Ransom, Ronald, vice chairman, Board of Governors of the Federal

Reserve System, Washington, D. C...

107

Tilney, A. A., chairman of the board of directors, Bankers Trust Co.,

New York City -

89, 92

Untermyer, Samuel, New York City -

94

Exhibits:

Committee Print No. 2..

1

Analysis thereof..

77

Committee Print No. 3.

196

Analysis thereof.

211

Letter from the President of the United States.

15

Table submitted by the Securities and Exchange Commission..

42

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III

REGULATION OF SALE OF SECURITIES

WEDNESDAY, JUNE 9, 1937

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,
SECURITIES AND EXCHANGE SUBCOMMITTEE,

Washington, D. C. The subcommittee met, pursuant to call, at 10:30 a. m., in the room of the Senate Committee on Banking and Currency, Senate Office Building, Senator Robert F. Wagner (chairman) presiding.

Present: Senators Wagner (chairman), Bulkley, McAdoo, Maloney, Hughes, Herring, and Frazier.

Present also: Senators Alben W. Barkley and William H. Smathers.

The CHAIRMAN. We will come to order. This is the subcommittee which meets to hear witnesses in reference to Senate bill 2344, introduced by Senator Barkley.

I wish to have printed here as a part of the record, a copy of Committee Print No. 2 of the bill, and a letter I have received from the President in regard to the proposed legislation, as follows:

[S. 2344, 75th Cong., 1st sess., Committee Print No. 2, June 10, 1937.)

[Omit the part enclosed in black brackets and insert the part printed in italic) A BILL To provide for the regulation of the sale of certain securities in interstate and foreign commerce,

and the trust indentures under which the same are issued, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the “Trust Indenture Act of 1937.

NECESSITY FOR REGULATION SECTION 1. (a) Upon the basis of facts disclosed by the reports of the Securities and Exchange Commission made to the Congress pursuant to section 211 of the Securities Exchange Act of 1934 and otherwise disclosed and ascertained, it is hereby declared that the national public interest and the interest of investors in notes, bonds, debentures and evidences of indebtedness publicly offered by the use of means and instruments of transportation and communication in interstate commerce and of the mails are adversely affected

[(1) when the obtaining of adequate current information with respect to the financial condition of the obligor and its performance of its obligations with respect to such securities, and the enforcement of such obligations, is. impeded through the failure to provide a trustee to protect and enforce the: rights and to represent the interests of such investors; when the trustee: designated does not have resources commensurate with its responsibilities, or has any relationship to or connection with the obligor or any underwriter of any securities of the obligor, or holds, beneficially or otherwise, any interest in the obligor or any such underwriter, which relationship, connection or interest involves a material conflict, actual or potential, with the interests of such investors;

[(2) when the trustee does not have adequate rights and powers, or adequate duties and responsibilities, in connection with matters relating to the protection and enforcement of the rights of such investors; when, by reason of provisions exculpating the trustee from liability for its failure to exercise its rights and powers or to discharge its duties and obligations, the protection afforded to such investors is rendered illusory; or

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