would lose three major things that I can think of, and perhaps there are plenty more. You would lose the work that has been done so far with reference to securities, which I think is too good a work to lose. Mr. MERRITT. How would you lose it?

Commissioner LANDIS. The work that is done in the Securities Division by those men?

Mr. MERRITT. Could men be taken on?

Commissioner LANDIS. Yes; but it will almost mean putting in an entirely new organization; it is bound to mean that.

Mr. MAPES. Even though you were made a member of the new organization?

Commissioner LANDIS. It would mean the same thing, I guess; it is bound to mean the loss of a great deal of that work. And furthermore you would lose the benefit of having a commission which has traditions already in existence, and which is available to take up on this new work.

I was on the Securities Division before I became a Commissioner, for some time, in the general administrative work of the Securities Division. It was a good thing to have at your hand, men in the economic division who were expert accountants, men who like the chief counsel of the division, like Judge Healy, who, as a matter of fact, had nothing to do with the Securities Division, but you saw his knowledge of the subject, and to be able to advise with experts of that type.

With reference to the investigation of complaints under the Securities Act, what we did was to call upon examiners who had made a great many investigations for the Commission, and whose training fitted them for this work, and we had the benefit of their knowledge.

Furthermore, there is this thing that I was talking about: You have the traditions of service, of responsibility and of good work. All of those things, of course, are not built up overnight. That will not be true about any commission that is newly created. You do not get those things immediately.

Mr. MAPES. Is there any intimate relationship between unfair trade practices and the work of administration of the Securities Act? Commissioner LANDIS. You mean is there an intimate relationship? Mr. MAPES. There is not any intimate relationship, is there? Commissioner LANDIS. There is quite a bit.

Mr. MAPES. There is?

Commissioner LANDIS. There is quite a bit. Now, our entire economic investigation into the public utilities carried us into their books and accounts, and their methods of operating. We used accountants who knew a great deal about examining accounts, and we transferred some of these men to the Securities Division, which meant that their knowledge was available to us.

There is a much more intimate relationship than would be casually supposed.

Mr. MAPES. There is one special provision in this bill that I want to ask you about. On page 62, paragraph (b), line 17. Was that put in there on your recommendation, that paragraph?

Commissioner LANDIS. Yes, it was.

Mr. MAPES. Have you been taking on employees in the Securities Division of the Commission regardless of the civil-service law? Commissioner LANDIS. No.

Mr. MAPES. And regulations?

Commissioner LANDIS. No.

Mr. MAPES. You come under the civil-service law and regulations now?

Commissioner LANDIS. We come under the classification law; you recognize there is a distinction between the two.

Mr. MAPES. Yes.

Commissioner LANDIS. Civil service and classification.

Mr. MAPES. The employees generally, of the Federal Trade Commission, are under civil-service law; under the law and regulations? Commissioner LANDIS. No, not all; but they are under the classification law.

Mr. MAPES. Then what is the purpose of this provision insofar as it applies to the securities act?

Commissioner LANDIS. The purpose of that provision is just this: We have considerable difficulty, even in the Securities Division, in going and getting competent men and having them classified according to the present requirements of the civil service.

Mr. MAPES. Then there is a distinction in the two groups

Commissioner LANDIS (interposing). The classification act is what they are subject to.

Mr. MAPES. Yes, they are under the classification act.
Commissioner LANDIS. Yes.

Mr. MAPES. But you would have to employ them according to the civil-service law and regulations?

Commissioner LANDIS. Not experts.

Mr. MAPES. Not experts?

Commissioner LANDIS. No.

Mr. MAPES. Well, do you have to classify them according to the classification act?

Commissioner LANDIS. Yes.

Mr. MAPES. Even though they are not employed under civil service?

Commissioner LANDIS. Yes.

Mr. MAPES. Or its rules and regulations?

Commissioner LANDIS. They do not have to take the civil-service examination, but when you go out to employ an attorney you have got to pay them either $3,800 or $4,600, or something like that. It cannot be $4,300; they have to take the proper grade, P-4 or P-5, whatever the classification law requires.

Mr. MAPES. Now why should any different rule apply here than any other organization in the Government?

Commissioner LANDIS. The answer to that is that what you say is not quite the case. This section, of course, has parallels in existing legislation. The original Federal Trade Commission Act had a provision of this nature.

Mr. MAPES. The statements have been made in a letter which I have received that all legislation passed since the 4th of March 1933, has contained the provision taking employees out of the civil-service law and regulation of the Government.

Commissioner LANDIS. That is not true, I think.

Mr. MAPES. Why has that been done?

Commissioner LANDIS. I cannot answer with reference to the other legislation; I can only answer with reference to this.

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Mr. MAPES. Do you not think that shows an insistent tendency on the part of Congress to tear down the civil service?

Commissioner LANDIS. Well, I should not think so to tear it

down?

Mr. MAPES. Yes, to tear it down, if in every bill that we have passed for year or more we take the employees out from under the civilservice laws and regulations.

Commissioner LANDIS. I do think that is true. When you are dealing with a situation where you have got to provide immediately for experts, as you have to here, you do not have the the opportunity to create them, as the Interstate Commerce Commission had. You must be able to pay the price to get them.

Mr. MAPES. That argument could be made with reference to every agency of the Government, could it not?

Commissioner LANDIS. Perhaps it could. The argument is made here for what it is worth.

Mr. PETTENGILL. What is your understanding about the provision on page 31, line 14 "An undertaking by the issuer, to comply, and so far as within its power to enforce compliance by its officers" and so forth.

Commissioner LANDIS. What is the reason for that?

Mr. PETTENGILL. Yes.

Commissioner LANDIS. That provision is a common provision that is now used by the various exchanges.

Mr. PETTENGILL. That is a common regulation, so far as the issuer is concerned?

Commissioner LANDIS. Yes.

Mr. PETTENGILL. That is as far as I think it should go.
The CHAIRMAN. Are there any further questions?

Mr. Landis, do you have anything else you want to add?

Commissioner LANDIS. There is one word I would like to add. Of course, I have taken up the various sections of this bill at different times with members of the commission. We have never formally approved this bill, as a commission, though its principles have generally the approval of the commission. With reference to Commissioner Mathews, I think I can speak his thoughts on this bill. I have had, as I said a moment ago talked frequently with Commissioner Mathews who has had a great deal of experience in these matters; we have worked out problems together, and I think I speak his thoughts concerning this bill.

Mr. HOLMES. May I ask a question?

The CHAIRMAN. Mr. Holmes.

Mr. HOLMES. Commissioner Landis, may I ask you if you can tell me how many new securities have been issued since the Securities Act was passed; can you give me an idea on that?

Commissioner LANDIS. I cannot give you the exact figures.
Mr. HOLMES. Well, about the number.

Commissioner LANDIS. About 800.

Mr. HOLMES. About 800 have registered?

Commissioner LANDIS. Registered, and only about 500 of them have become effective. Many of them are still pending examination. Mr. HOLMES. I have never heard the figure given how many there had been registered.

Commissioner LANDIS. I will be glad to supply you the figures more accurately.

Mr. HOLMES. I will appreciate having it.

Mr. MAPES. May I ask you one question there? What has been the cost of administering the Securities Act; can you tell us approximately?

Commissioner LANDIS. The cost is what the appropriation was; it was a quarter of a million dollars.

Mr. MAPES. A quarter of a million?
Commissioner LANDIS. Per year.
Mr. MAPES. Per year?

Commissioner LANDIS. Yes.

Mr. MAPES. What is the top salary paid by the Commission? Commissioner LANDIS. The top salary is the chief of the Securities Division, who receives $8,000. Nobody else receives more than $6,500. Those are gross figures, not net; $8,000.

Mr. HOLMES. State divisions are not excluded from this act, and you would probably have issues, sometimes of fifty or a hundred thousand, in your municipal units, and that would increase your relative cost very much, for the over-counter bonds. Would the commission be in position to take that up immediately?

Commissioner LANDIS. Well, I think not, Mr. Holmes—those securities would ordinarily come outside of this act unless they came within section 14 of the act where there are certain regulations in that section of the over-the-counter market. Those regulations may exempt that type of security.

Mr. HOLMES. I was going to make that observation. For instance, you have municipal bonds, county bonds, and so on.

Commissioner LANDIS. Yes; but they are very seldom registered on the exchange.

Mr. HOLMES. Yes; I understand.

Commissioner LANDIS. I think they are not registered, but some steps should be taken

Mr. HOLMES (interposing). I do not profess to know how general the situation is in the inland sections of the country and the municipal divisions thereof, but in my own State, I believe at times the Massachusetts bonds have been registered.

Commissioner LANDIS. Yes.

Mr. HOLMES. I know in my own State of Massachusetts, if we had to register the bonds with the Commission it would frequently mean considerable expense.

Commissioner LANDIS. Yes.

Mr. HOLMES. I am just thinking of the inconvenience it would cause Massachusetts and its subdivisions, if they were going to issue any bonds, if they had to come down here and get permission of the Federal Trade Commission, or take it up with them.

Commissioner LANDIS. Well, no; that is not in this bill. That is under the Securities Act.

Mr. HOLMES. I think this bill also covers it.

Commissioner LANDIS. This bill does not affect the situation except insofar as section 14 is concerned.

Mr. HOLMES. If they are going to have to secure the approval of the Federal Trade Commission, or if they are going to be exempted like the Federal Government-the discretion is in the Federal Trade Commission, and that is going to be necessary under this act, is it not?

Commissioner LANDIS. No; not necessary. That question of issuing new securities, the matter of original issue, would ordinarily not come under the provisions of this bill; that would be regulated primarily by the Securities Act. And they are exempted specifically under the Securities Act.

Mr. HOLMES. That was my understanding.

Commissioner LANDIS. That is a special exemption.

Mr. HOLMES. My understanding was that they were not exempted under this bill.

Commissioner LANDIS. It may be desirable to do that. In that connection, a rule can easily be made exempting them.

Mr. HOLMES. By the approval of the Commission?

Mr. LANDIS. By request to the Commission.

Mr. HOLMES. That is what I meant, but you would have to come down here to get that permission, would you not?

Commissioner LANDIS. Of course, the conditions governing exemptions are set out in the bill; you have certain rights of exemption there. The CHAIRMAN. Gentlemen, there is a good deal of confusion in the room and we cannot hear Mr. Landis' answer to Mr. Holmes' questions. All right, Mr. Holmes.

Mr. HOLMES. I grant that, Commissioner. But my point is that— before you can issue municipal bonds you will have to get the permission of the Federal Trade Commission, and that would be cumbersome, and would put an unnecessary expense on the municipality.

Commissioner LANDIS. Not under this act, and not under the securities act; not under this act unless the securities are registered on an exchange. And if they are not on the exchange they are covered by this act only insofar as section 14 is concerned. That is where the Federal Trade Commission may, by rule, require certain things to be done on over-the-counter markets.

It is obvious, however, that the Commission would not put a burden, an unnecessary burden upon financing of that character. Mr. HOLMES. I may have interpreted it wrong.

Commissioner LANDIS. Yes.

Mr. HOLMES. But my impression or interpretation of it was that you would have to actually get the approval from the Federal Trade Commission before you could issue those bonds.

Commissioner LANDIS. No, unless they come under 14; that applies to dealings off the exchange.

Mr. HOLMES. Well, there may be a bond issue in Worcester, Mass.
Commissioner LANDIS. Yes.

Mr. HOLMES. Where the bonds are taken by one or more brokers who are also dealers. They have got to sell those bonds, and this bill prohibits the disposition of those bonds, if the bonds fall under

Commissioner LANDIS. No; there is nothing in this bill that would prevent the broker from selling the municipal bonds, unless the

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