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Mr. CORCORAN. You must realize how big the problem is. We can only do a little toward it at this point. We can force a certain amount of publicity as to how much of the stock of a corporation a man has who is soliciting the proxies and saying, “Please let me vote for you."

You will notice further that there is a provision at the end here that the Commission may, by rules and regulations, prescribe in the public interest or for the protection of investors the form and details of proxies. Possibly if the suggestion that you make should prove practical, the Commission could require that some provision like that go in the proxy, or blanks so left for names.

Mr. COOPER. Mr. Chairman

Mr. CORCORAN (continuing). I do not know whether the Commission would want to go so far as to insert a provision to the effect that somebody representing the public interest should vote the proxy if a stockholder did not like the particular people named.

Mr. COOPER. Mr. Chairman. Are you through, Mr. Marland?
Mr. MARLAND. Yes.
The CHAIRMAN. Mr. Cooper.

Mr. COOPER. I am very much of the opinion, and I think that we are all agreed that we have got to have some regulation of the stock exchange. There is also another question in this bill I am interested in.

That is regulation of private capital. I have had some protests come to me against this measure, and I thought that it might expedite things if I should take about two minutes to tell the witness what these objections are and then have him reply.

Mr. HUDDLESTON. Mr. Cooper, may I ask a question about another provision, before you proceed to that?

Mr. COOPER. Certainly. Mr. HUDDLESTON. Right in line with what you have just said. The solicitation of proxies is usually made on the corporation's stationery and under stamps belonging to the corporation, and with the use of clerical staffs of the corporation, and under the color of the authority of the corporation.

Mr. CORCORAN. Yes.

Mr. HUDDLESTON. So that a distinct impression is made upon the stockholder that by giving his proxy, he is doing something to further the interests of the corporation.

Mr. CORCORAN. Yes, sir.
Mr. HUDDLESTON. Does this section touch upon that aspect?

Mr. CORCORAN. It permits the Commission, sir, to prescribe the form and detail of the proxy by rules and regulations.

Mr. HUDDLESTON. It does not prohibit the solicitation at the expense of the corporation?

Mr. CORCORAN. No. That ought to be done through State law. It does not.

Mr. HUDDLESTON. It does not.

Mr. CORCORAN. No. Of course, you might justify the use of the corporation's clerical help and its time and its stamps, and all of the rest, on the ground that all that makes it possible for the stockholders to vote at the meetings. If it were required to put at the bottom of the proxy, “It is not necessary for you to execute this proxy to have

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a corporate meeting—you will understand that this proxy has been prepared on corporate time and expense, for your convenience—there is no obligation on you to sign it,' then no pressure would be put on the stockholders.

Mr. HUDDLESTON. What I object to is that there is an implied statement to the stockholder, that by executing the returning the proxy, he is doing something to further the interests of the corporation.

Mr. CORCORAN. Yes. It might be desirable to omit the last sentence of the letter that accompanies the proxy in which the president urges the stockholder to return the proxy properly signed and witnessed, as soon as possible.

Mr. MERRITT. But you cannot have a meeting without those authorized to vote being represented.

Mr. CORCORAN. That is true, almost everywhere, except in Delaware. I think that they can have a very small quorum in Delaware.

Mr. MERRITT. You cannot have a legal meaning in Connecticut, unless you have a majority of the stockholders represented.

Mr. CORCORAN. No.

Mr. MERRITT. That is one of the reasons why it is wise to ask for proxies.

Mr. CORCORAN. I wonder if it is a wise thing to have a corporation meeting of that kind. Corporations have to work. That is your

Now, Mr. COOPER.

Mr. COOPER. Mr. Chairman, some of the complaints that I hear is that this measure goes far afield from the regulation of the stock exchange.

One of the provisions of the bill is that no corporation can place an issue of stock on the market to be sold unless the application for registration complies with the rules and regulations made by the Commission, which has the power to administer the act.

The question of setting up rules and regulations is entirely at the discretion of the Commission.

It seems to me the bill gives to the Government a monopoly of the control of the disposition of private capital.

For instance, if an industry or a business wanted to expand in order to meet competition, enlarge their plant, in order to do that, they would have to put some stock on the market; but they cannot put that stock on the market unless it is first approved of by the Commission.

Now, at the present time, the tendency of the Government is to curtail industrial production--and we might as well face the factswe are trying to control the farmer in his production, cotton grower, and the President has even gone so far as to send a message to Congress, to the Agricultural Committee, to control the sugar industry in our country, and the Agricultural Committee is now considering a bill to do that very thing. In other words, supposing it was said, "Well, we already have enough steel industries in our country. We already have enough leather industries, and we are not going to permit you to issue any stock and put it on the market for sale in order to expand that industry.”

Now, the industry may want to get up to date. It may want to put in improved machinery.

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The Commission under this bill will have power to prevent an industry from listing stock on the market, in order to get the money to make an improvement, and it does seem to me that it is Government control of private capital, and I want to get your viewpoint on that.

Now, just what do you think about that? You stated a few days ago that you would touch on those questions. Mr. CORCORAN. Yes.

Mr. COOPER. Now, as I say, it is far afield from a regulation of the stock market. I am in favor of the regulation of the stock market, but I do not know how much further we are going to go, and have Government control of private business and private capital.

Mr. CORCORAN. That is the argument that Mr. Whitney made in the letter he sent out to all of the corporation executives, trying to get them to oppose this bill.

Mr. COOPER. Pardon me. I have not heard from Mr. Whitney.
Mr. CORCORAN. I am not saying that you have.

Mr. COOPER. I have heard from the people that I represent, the industries, and businesses, and so forth.

Mr. CORCORAN. Yes.

Mr. COOPER. I have a right to speak for them as their representative.

Mr. CORCORAN. Yes, absolutely, and to be absolutely frank about it.

Mr. COOPER. Yes.

Mr. CORCORAN. That idea has become widely disseminated. I mean, I recognize the seriousness of it.

Mr. COOPER. Pardon me for just one further thing, that I forgot, and that is, you are requiring them to do something that they have never done before, and that is file these monthly reports, and so forth.

Mr. CORCORAN. That idea has received a very wide dissemination. Mr. Whitney has circulated letters among all of the big corporations executives telling them that is exactly what this bill does.

I think I have a circular right here (exhibiting paper). Here it is, right here.

Mr. COOPER. Will you tell the committee whether it will do that or not.

Mr. CORCORAN. Just one other point. I noticed yesterday that Mark Sullivan, writing for the New York Times, said the same thing. He said that this bill concealed "a technique of revolution.” The only technique of revolution that I know of in a revolutionless country, is the sort of thing that the stock market has been doing for the last 5 or 6 years. That might bring on a revolution.

Mr. COOPER. Do you think that in regulating the stock market, we should regulate private capital of American citizens?

Mr. CORCORAN. What the section comes down to is this: These registration requirements on securities, and provisions for reports are designed to take care of the fact that the stock exchange listing requirements, by which they have attempted to give those buying into a stock some idea of what the stock is worth, have been rather hopelessly inadequate. This section is designed to give the stockholder an idea of what his company is like.

The specific language that worries your correspondent, and worries you is on page 22. Section 11 (a) forbids dealing with a security on

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a national securities exchange, unless that security has been listed both with the Commission and with the stock exchange, This is to make sure that enough information gets out to the public. Listing has to be made with the Commission as well as the stock exchange so that the stock-exchange rules cannot be too lax as to what the public is entitled to know about the security.

The specific language you are worried about is down here in (b). A security may be registered with a national securities exchange; it may be listed on the exchange, upon application by the issuer, by filing with such exchange and with the Commission such undertakings, information, and documents as the Commission may by its rules and regulations require in the public interest and for the protection of the investors.

Now, if you go over to page 23, the next page, there are set out specifically, or set out insofar as they can be set out at the present time, the kinds of undertakings that the Commission would require of an issuing corporation. Notice under (c) (I) the Commission shall requirean undertaking by the issuer to comply with and so far as is within his power to enforce compliance by its officers, directors, and stockholders with the provisios of this act and any amendments thereto and with the rules and regulations made or to be made by the Commissioner thereunder and, unless the issuer is a member bank of the Federal Reserve System, not to lend any funds in the money market of any exchange or to any member thereof or to any person who transacts & business in securities through the medium of any such member except in accordance with such rules and regulations as the Commission may prescribe.

The objection has been made that under the broad language, "such undertakings as the Commission may, by its rules and regulations require, in the public interest and in the protection of investors," there is concealed a purpose to have the Federal Trade Commission act as a capital-issues committee for the whole country.

Mr. COOPER. They could do it under this act.
Mr. CORCORAN. No, I do not think so.
Mr. Cooper. They could set up their own rules and regulations.

Mr. CORCORAN. I know; but there is a very clear provision as to the kind of regulations which may be required for securities in here; the requirements ali relate to giving publicity about the position of the company. I mean, you must read this necessarily broad language, which has to be broad to give the Commission power to adjust itself to individual cases, in the light of the purpose of the whole section, which is to protect investors against nondisclosure of the condition of their company.

You must read that broad language in relation to the purposes of the bill. There is no purpose such as you suggest that an act designed to protect the stockholders against not knowing what is going on in a corporation is to be stretched to permit the Federal Trade Commission to run all of the industries of the United States, to decide how much of the capital savings of the country may go into the steel business, how much into the coal business, now, and next year, and the year after.

Mr. COOPER. But, the Commission could prevent the issuance of that stock, could it not?

Mr. CORCORAN. You mean under that language?
Mr. COOPER. Yes.

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Mr. CORCORAN. It could not, arbitrarily, because that would not be in the public interest.

Mr. COOPER. They can prohibit that stock from being put on the market?

Mr. CORCORAN. They cannot prohibit it from being put on the market; no.

Mr. COOPER. From being put on the exchanges?

Mr. CORCORAN. They can prevent it being listed on the exchanges. So far as any new investment, or new issues being listed on the exchange, is concerned they are not listed any way. The exchanges do not list securities until they have been seasoned. The Commission would not be in any position to prevent anybody who wanted to make an investment in a new company, because no exchange will list securities until they have been seasoned. When I say stock exchange, I am thinking in terms of the New York Exchange. I think that the seasoning term in that exchange is about 3 years. Since the exchanges want to wait a certain very definite length of time before a new issue will be admitted to listing anybody who wanted to evade any alleged power

of the Commission could simply incorporate a new company. That certainly shows there is no intent in here to steal a jurisdiction over the disposition of the capital of the country.

Mr. CORCORAN. There was a great deal of talk, you remember, at the time of the consideration of the Securities Act last year to the effect that it was not stringent enough. There was a very distinct school of thought that the Securities Act should have gone as far as setting up just exactly the kind of a body what you are worried about here, 5 or 6 men who would be empowered to say that certain industries were overcapitalized and that no more money could be advanced in those industries for 4 or 5 years every one who wanted to issue any stock would have to get a permit from this Commission, and have it pass upon the economic necessity of the issuance of the security. But the act very carefully disclaimed any such intention.

Mr. COOPER. Well, as I said å moment ago, the President has already endeavored to have Congress establish a policy of that kind, where the Federal Government can stop production.

The CHAIRMAN. How?
Mr. COOPER. In the sugar industry.

The CHAIRMAN. You mentioned cotton a while ago. How about cotton?

Mr. COOPER. Mr. Chairman, I am not familiar with cotton. I read his message with regard to the sugar industry.

The Chairman. I know that he is not doing anything, or trying to do anything about cotton. I do not know anything about sugar,

Mr. CORCORAN. Now really that worry is a red herring drawn across the trail by the Stock Exchange.

Mr. COOPER. That is your statement?

Mr. Corcoran. I mean, that if you are afraid that the language in section (c) goes beyond what might decently be necessary for the protection of investors, I do not think that anybody interested in this bill will object to the changing of the language to make sure that you are not going to have the commission passing as an economic matter, upon the designation of the amount of capital that may go into particular industries.

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