ment, made in a letter dated March 29, 1949, which he transmitted in connection with the filing of a report of his financial condition under Rule X-17A-5 and to which he refers in his request for cancellation, that he had conducted no business up to that date since the filing of his registration. It is only after the completion of the hearings before our hearing officer that we can ascertain what the facts are and determine what final disposition should be made of respondent's registration. We feel that orderly and expeditious procedure requires the denial at this time of both respondent's request for cancellation and his petition for withdrawal, without prejudice to their renewal at the time the case is finally submitted to us. We find no merit in respondent's contention that withdrawal should be permitted because, he asserts, the conduct alleged in the notice and order for proceedings relates to his employment as salesman, and not to any activity as a broker-dealer and so no violation by him as a broker-dealer is involved. Assuming for present purposes that he acted solely as an employee-salesman, that would not remove him from the ambit of the revocation provisions of Section 15 (b) of the Securities Exchange Act. That section provides, inter alia, that we may revoke the registration of a broker-dealer if he, whether prior to or subsequent to becoming such, has willfully violated the Securities Act, the Securities Exchange Act or our rules thereunder. In the light of this broad provision, there would appear to be no question as to our power to revoke the registration of a broker-dealer if he is found to have engaged in activity constituting a willful violation even though in doing so he purported to act as the employee of another brokerdealer. IT IS THEREFORE ORDERED that respondent's request for cancellation and his petition for withdrawal of his registration as a broker and dealer be, and they hereby are, denied without prejudice to their renewal at the conclusion of the hearings scheduled to be held in these proceedings. By the Commission (Commissioners McEntire, Cook, and McCormick), Chairman McDonald and Commissioner Rowen being absent and not participating. IN THE MATTER OF THE UNITED LIGHT AND RAILWAYS COMPANY AMERICAN LIGHT & TRACTION COMPANY, ET AL. File Nos. 59-11, 59–17 and 54-25. Promulgated December 12, 1949. (Public Utility Holding Company Ac of 1935-Section 11(e)) SIMPLIFICATION OF HOLDING COMPANY SYSTEM Fees and Expenses Where requests are filed for allowances for fees and expenses incurred in the formulation and development of a plan of simplification of registered holding companies and where the fees and expenses are reasonable in view of the benefits conferred by the services, the complexities of the problems involved, the amount and quality of the work, and the size of the estate, held that the requests for allowances for fees and expenses will be granted and jurisdiction theretofore reserved over fees and expenses will be released. MEMORANDUM OPINION On December 30, 1947, the Commission approved an Amended Plan filed pursuant to Section 11 (e) of the Public Utility Holding Company Act of 1935 ("Act"), by the United Light and Railways Company ("Railways"), a registered holding company, and its subsidiary, American Light & Traction Company (now American Natural Gas Company-"American Natural"), also a registered holding company, designed to effectuate compliance with the standards of Section 11 of the Act and our Order of August 5, 1941 issued thereunder.2 The Commission reserved jurisdiction, inter alia, over the payment of all fees, expenses and remuneration to be incurred and paid in connection with the Plan and the several transactions required in consummation thereof. By separate orders jurisdiction has heretofore been released with respect to the fees and expenses incurred in connection with the consummation of certain of the transactions contemplated by the Plan. We now have 1 The United Light and Railways Company, et al., 27 S.E.C. 441 (1947). 'The United Light and Power Company, et al., 9 S.E.C. 833. There is attached hereto as appendix A a list of the principal transactions consummated under the Plan together with the estimated fees and expenses in connection therewith. 30 S.E.C.-35-9577 before us for consideration requests for allowances for services rendered in connection with the formulation and development of the Plan itself, as well as fees and expenses related to the steps contemplated by the Plan over which jurisdiction has been reserved, as follows: Submitted by companies TABLE I Sidley, Austin, Burgess & Harper (counsel). Arthur Andersen & Co. (accountants)........ Drexel & Co. (Edward Hopkinson, Jr. financial adviser).. Companies' expenses: Railways... American. Submitted by others George 8. Rosier (counsel for Carl J. Austrian and Robert G. Butcher, Total.. TRANSACTIONS CONTEMPLATED BY PLAN First rights offering of common stock of American Natural by Railways: Second rights offering of common stock of American Natural by Railways bankloan of $19,500,000 and redemption of its preferred stock: As indicated in table I, fees and expenses in connection with the plan itself aggregate $202,420.90 over which jurisdiction has been reserved. In addition, fees and expenses incurred in carrying out the various steps contemplated by the plan aggregate $500,597 (see appendix A) of which $393,885 has heretofore been approved for payment and jurisdiction has been reserved over the remaining $106,712 as shown in the above table. The major This does not include fees and expenses in connection with the issuance and sale of $66,000,000 principal amount of First Mortgage Pipe Line Bonds by Michigan-Wisconsin Pipe Line Company, which was filed as a separate proceeding and is not covered by this opinion. items of cost of the reorganization itself and of the specific steps contemplated by the plan are printing expenses in the aggregate amount of approximately $167,000, accounting fees in the aggregate amount of approximately $50,000 and legal fees amounting to $191,750, of which approximately $122,000 are for services of Sidley, Austin, Burgess & Harper, counsel for Railways and American Natural. Our Order of August 5, 1941 required, among other things, that Railways dispose of its interest in American Natural and its subsidiaries and that American Natural divest itself of certain of its subsidiary companies and interests, including its investment in The Detroit Edison Company. The Section 11 (e) Plan satisfied the requirements of this Order, and in addition, provided for the retirement of the preferred stocks of Railways and American Natural and for financing of the construction of an interstate natural gas transmission line to be owned by American Natural's subsidiary, Michigan-Wisconsin Pipe Line Company, which would supply natural gas to the gas utility properties owned by Michigan Consolidated Gas Company and Milwaukee Gas Light Company. This plan also provided for the continuation of the existence of American Natural as a holding company and the retention by American Natural of its interest in these companies together with its interest in Austin Field Pipe Line Company. This Plan was carried out through a series of transactions, the principal ones of which are listed in appendix A. As indicated below no separate requests for allowances have been made for certain of the steps in the consummation of the Plan and compensation for services on these matters has been included in the request for allowances in connection with the Plan itself. The Plan provided that Railways and American Natural will pay such fees and expenses incurred in connection with the Plan as the Commission may award. In the pending application Railways and American Natural have requested allowances for the persons and firms employed by them in connection with the Plan. While Railways and American Natural have indicated that they have no objection to the payment of all the fees and expenses shown on Table I, we are, nevertheless, not relieved of the duty of determining whether the allowances requested are reasonable in amount and are for services compensable out of the estate. In passing on allowances for fees and expenses in connection with Section 11 (e) plans, the Commission has consistently held that compensation may be paid out of the estate only for such services as have contributed to the formulation and development of the Plan as finally adopted, or to the defeat of a plan found to be unsatisfactory, or which have otherwise benefited the estate." REQUESTED ALLOWANCES FOR SERVICES FOR FORMULATING AND DEVELOPING THE PLAN SIDLEY, AUSTIN, BURGESS & HARPER The request for allowance of fees and expenses on behalf of Sidley, Austin, Burgess & Harper in the amount of $47,500 and $2,851.75, respectively, is for services rendered as counsel for applicants in connection with the Plan from May 1947 to April 1949. This firm actively assisted the management in formulating the Plan and in the preparation and revision of exhibits to be used in connection with the hearings, and generally prepared the case for hearing. They also considered various alternative provisions which it was thought might be required as amendments to meet anticipated objections to the Plan, particularly with respect to the offer by American Natural to purchase its noncallable preferred stock. The firm participated in the hearings, oral arguments, staff conferences, the preparation of briefs in support of the Plan, and did considerable work in connection with the appeals from our order approving the Plan. This firm also advised the managements of Railways and American Natural with respect to the considerations involved in connection with the consummation of the transactions during the pendency of the appeals. They prepared all applications, notices, corporate resolutions, letters to stockholders and other documents required in connection with the quarterly distributions by American Natural and Railways of the common stock of The Detroit Edison Company and American Natural respectively, and the distributions of Madison Gas and Electric Company common stock. All of these distributions as well as other transactions involved in the Plan presented difficult tax problems with respect to their impact on American Natural, Railways and the stockholders receiving the various distributions, all of which tax problems were considered by counsel. The consummation of the Plan also necessitated accounting reorganizations of both Railways and American Natural. No separate allowance for fees and expenses has been requested for the services of counsel in connection with such distributions, the tax problems, or the accounting reorganizations. 'Republic Service Corporation, et al., 30 S. E. C. 340 (1949); New England Gas and Electric Association, 28 S. E. C. 897 (1948); The Middle West Corporation, 28 S. E. C. 653 (1948); Cities Service Company, 28 S. E. C. 382 (1948); The Laclede Gas Light Company et al., 25 S. E. C. 382 (1947); Columbia Gas & Electric Corporation et al., 17 S. E. C. 549 (1944). |