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to railroads, we ought not to be required to pay this fee, which contemplates the payment of such a fee to the Federal Trade Commission, when, apparently under the provisions of the proviso I have referred to, all railroad reports are to be made to the Interstate Commerce Commission.

Now, with reference to section 8, and then I will have concluded: It has to do with the advertisement or prospectus which is issued by anyone offering stock. It seems to me that the entire information there required can be obtained from the files of the Interstate Commerce Commission, and they are handed down in the reports of the Interstate Commerce Commission authorizing the issuance of a particular security.

And may I make reference, without stopping to take any time, to a typical decision of the Interstate Commerce Commission? I refer to the reorganization and extension of the Georgia & Florida Railway, 117 I.C.C. Report, 473, picked out of a great mass of reports almost at random, where for 20 pages the Interstate Commerce Commission gives a complete picture of the assets of the railroad, its balance sheet, its income account, and the reasons why those are being issued and what securities lie behind them and their real value, published in the official reports of the Commission, so that anybody referring to it may have a complete picture of just what is involved there.

The only point I make, Mr. Chairman and gentlemen of the committee, is that, as it seems to me, this bill should not subject railroad securities to this provision at all, especially in view of their full regulation by the Interstate Commerce Commission.

I thank you gentlemen for the opportunity to make this statement.

The CHAIRMAN. May I say, whether this bill meets those conditions or not, it would look, from a letter I have received from a prominent banker, that this bill and other things do not seem to be helping railroad securities. It may be that this bill does not bear on the matter of safeguarding them, but this banker says:

We bought a substantial amount of railroad bonds during 1930, all of which · were authorized by the Interstate Commerce Commission. Many of these bonds, today, are selling for about the same price as Peruvians, a little higher than Insulls, about 50 percent of the price of Brazilians, less than Agricultural Bank of Columbias, about the same price as Antioquias, one quarter of the price of Argentines, slightly less than Bogotas, about half the price of Budapests and Buenos Aires, about the same price as Chileans--and practically all the European bonds are selling from 2 to 10 times as much as these railroad securities.

Mr. FLETCHER. It may have been unfortunate for the investment banker, but it was not because of any lack of knowledge as to what was really involved in the transaction, I will say. Senator McAdoo. Do you mean that the Interstate Commerce

tate Commission had full knowledge and had approved those securities?

Mr. FLETCHER. I mean, Senator McAdoo, that before those bonds were issued-and provided, of course, they were issued subsequent to the present regulatory law, and I presume they were from the statement made by the banker, as he says "approved by the Interstate Commerce Commission”-that the Interstate Commerce Commission is bound to have had, under its rules and regulations, full knowledge of just what was being done and just what assets were behind them, and such information and knowledge as this bill could possibly give to anyone.

Now, I thank you very much for hearing me.
The CHAIRMAN. We are obliged to you for

your statement. Senator KEAN. Just one minute before you leave the committee table, Judge Fletcher: You don't think, then, that the Interstate Commerce Commission had pursued their audits properly?

Mr. FLETCHER. Well, Senator Kean, I do not think that the Interstate Commerce Commission

Senator KEAN (continuing). They look over a railroad, do they not?

Mr. FLETCHER. Yes.

Senator KEAN. Under their authority they look at its assets, they look at its earnings, and they say whether they will allow the securities to be issued, do they not?

Mr. FLETCHER. Quite right.

Senator KEAN. And if they allow a railroad security to be issued it is supposed to be a security and not merely a piece of paper.

Mr. FLETCHER. Well, it is supposed to have behind it assets which at the time they were issued justified their issuance; yes, sir. And undoubtedly they did have. But the Commission, of course, could not anticipate the present financial condition of the country. Neither is there, of course, any guaranty that those securities will be held up. It is a statement of fact.

Senator KEAN. In other words, it is a governmental agency supposed to see that people receive security when they invest their money.

Mr. FLETCHER. Yes, sir. It is a governmental agency which is supposed to state the facts as to what assets lie behind the securities. And I respectfully submit that any examination of the Interstate Commerce Commission's rulings will show that they have done that.

The CHAIRMAN. Very well, Judge Fletcher.

INTERSTATE COMMERCE COMMISSION, WASHINGTON INSTRUCTIONS TO CARRIERS IN RELATION TO THE ISSUANCE OF SECURITIES,

ETC., UNDER SECTION 20a OF THE INTERSTATE COMMERCE ACT

(Superseding instructions issued July 22, 1924, and supplements thereto)

ORDER

At a session of the Interstate Commerce Commission, division 4, held at its office in Washington, D.C.,

on the 19th day of February, A.D. 1927]

In the matters of (a) applications under section 20a of the Interstate Commerce

Act for authority to issue securities or to assume obligation or liability with respect to the securities of others, (b) certificates of notification of securities sold, pledged, repledged, or otherwise disposed of required by paragraph (5) of said section, (c) certificates of notification of the issue of notes maturing not more than 2 years after the date thereof required by paragraph (9) of said section, and (d) periodical reports required by paragraph (10) of said section of (1) disposition made of securities authorized by the Commission, and/or (2) notes mati ing not more than 2 years after the date thereof for which under paragraph (9) of said section authorization is not required, and (3) the application of the proceeds of such securities and/or notes Said matters being under consideration:

I. It is ordered, that carriers subject to section 20a of the Interstate Commerce Act,

(1) Seeking approval to nominally issue securities; or proposing

(2) To sell, pledge, repledge, or otherwise dispose of securities nominally or cɔnditionally issued, or assumed; or

(3) To actually issue securities; or

(4) To assume any obligation or liability as lessor, lessee, guarantor, indorser, surety, or otherwise in respect of the securities of any other person, natural or artificial; shall make application to the Commission for authority, and such application shall be filed sufficiently in advance of the date of the proposed issue or assumption to give the Commission reasonable time, not less than 30 days, for the notices and investigations required by law.

II. It is further ordered, that for the purposes of this order

(1) Capital stock is considered to be nominally issued when certificates are signed and sealed and placed with the proper officer of the carrier for sale and delivery.

(2) Funded-debt securities are considered to be nominally issued when certified by trustees and placed with the proper officer of the carrier for sale and delivery.

(3) “Securities”, as that term is defined in said section 20a, are considered to be

(a) Conditionally issued, when pledged or otherwise placed in some special fund of the obligor or issuing carrier.

(b) Actually issued, when they have been sold to a bona fide purchaser for a valuable consideration.

III. It is r ordered, that applications shall show, in the order indicated, the followin

(1) Exact c i porate name of applicant.

(2) The names, titles, and post-office addresses of the applicant's president, secretary, principal attorney, and executive officer by whom the application is signed, verified, and filed on behalf of the applicant.

(3) Under the laws of what government, State, or Territory applicant was organized and received its present charter. If applicant holds charters from, or is incorporated under, the laws of several States, or is authorized to do business in States other than in that by which created, all the pertinent facts should be given.

(4) The name of each State in which the applicant carrier operates or proposes to operate.

(5) The nature of the application and the purposes and uses of the proposed issue and the proceeds thereof, or of the proposed assumption of obligation or liability in respect of the securities of any other person, natural or artificial. (The statement should be condensed, details being required under paragraph IV, beginning at subparagraph (10) thereof.)

(6) The facts relied upon by applicant to show that the proposed issue or assumption

(a) Is for some lawful object within its corporate purposes, and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service, and

(b) Is reasonably necessary and appropriate for such purpose.

(7) At what price or prices, rate or rates, and upon what terms or conditions the securities are proposed to be sold or disposed of.

(8) How and by whom, or through whom, the securities are proposed to be issued, with details of all contracts, underwritings, and other arrangements made or proposed to be made in connection with the issue.

IV. It is further ordered, that there shall be filed with each original application, and with each copy, as a part thereof, the following exhibits:

(1) A copy of the applicant's charter or articles of incorporation, with amendments to date, attested by proper public authority, except that when such copy has been once filed with an application, reference thereto, with subsequent amendments, if any, also attested by proper public authority, will suffice.

(2) A copy of the applicant's bylaws, with amendments to date, authenticated by a proper executive officer of the applicant, except that when such copy has been once filed with an application, reference thereto, with subsequent amendments, if any, authenticated by a proper executive officer of the applicant, will suffice.

(3) Copies of all resolutions of directors authorizing the issue or assumption in respect of which the application is made, authenticated by a proper executive officer of the applicant, and if the charter or bylaws require approval by the stockholders, copies of the resolutions of the stockholders should be furnished.

(4) A copy of resolutions of stockholders or board of directors, or duly authorized committee thereof; authenticated by a proper executive officer of the applicant, designating by name and for that purpose the executive officer by whom the application is signed, verified, and filed on behalf of the applicant.

(5) Opinion of counsel that the issue or assumption in respect of which the application is made meets the requirements of law as set forth in paragraph III (6) hereof, and will be legally authorized and valid if approved by the commission, with specific reference to any specially pertinent provisions of charter or articles of incorporation.

(6) A map of the applicant's existing railroad and a map and profile of the line or lines to be constructed, if any.

(7) Specimens, or forms where specimens are not available, of all securities in respect of which the application is made.

(8) In case of the issue or assumption of bonds or other evidences of indebtedness, a copy of the mortgage or indenture by which secured or proposed to be secured, except that when such copy has been once filed with an application reference thereto with amendments if any, will suffice for subsequent applications.

(9) A verified copy of applicant's general balance sheet as of the latest practicable date.

(10) If the application is with respect to the acquisition of property other than equipment, a statement showing:

(a) The name and post-office address of the owner or vendor of the property to be acquired.

(b) A general description as to character and size of the property and its location, accompanied by a general map and profile or by a general plan, as may be appropriate.

(c) The agreed or estimated purchase price, and the full terms of the contract, if any has been made, for such acquisition.

(d) Such other information or data as may be necessary for a determination of the reasonableness of the agreed or estimated purchase price.

(e) The account or accounts of the Commission's effective classifications of accounts in which the cost of such property would be properly classified.

(11) If the application is with respect to the acquisition of equipment, a statement showing:

(a) The name and post-office address of the owner or vendor of the equipment to be acquired, the name of builder, and the unit prices paid or to be paid; whether the equipment was purchased through competitive bidding; and, if the unit prices shown are not the lowest bids received, the reason for accepting a higher bid. (b) A general description of the equipment showingFor steam locomotives

Service type (passenger, freight, or switch), kind of fuel used, Whyte

symbols, cylinder size (diameter and stroke), whether saturated or superheated, total light weight of engine and tender, and list of any special devices contributing materially to cost, such as stokers, feed

water heaters, etc. For other locomotives

Kind, drive (geared, rod, etc.), number of units coupled, total light

weight (type of current, voltage if electric, and maximum sustained tractive effort), and a list of special devices contributing materially to

cost. For freight-train cars

Service type (box, gondola, stock, flat, etc.), kind of body and under

frame (steel, wood, or composite), capacity length (over end sills),

trucks (kind). For refrigerator car, furnish one complete set of drawings and specifica

tions. If motor equipped, state kind of motor equipment used and builder;

if electric, give also horsepower of motor, type of current, and voltage used; if gasoline or oil driven, give number and size of cylinders

(diameter and stroke). For passenger-train cars

Service type (coach, baggage, postal, etc.), capacity in passengers or For motor equipment of cars

pounds, kind of vestibles, kind of lighting, kind of body and underframe (wood, steel, or composite), kinds of trucks, and a list of special

devices contributing materially to cost. If motor equipped, state kind of motor equipment used and builder; if

electric, give also horsepower of motor, type of current, and voltage used; if gasoline or oil driven, give number and size of cylinders (diameter and stroke).

Kind of motor equipment used, and builder; if electric, give also horse

power of motor, type of current, and voltage used; if gasoline or oil

driven, give number and size of cylinders (diameter and stroke). For floating equipment

Service type (tug, float, ferry, lighter, etc.), builder, displacement ton

nage, length over all, and cargo capacity. For work equipment

Kind (derrick, cinder car, steam shovel, etc.); give builder, size, and

capacity; where applicable, describe units in conformity with the

requirements of the preceding paragraphs. If motor equipped, state kind of motor equipment used, and builder;

if electric, give also horsepower of motor, type of current, and voltage used; if gasoline or oil driven, give number and size of cylinders (dia

meter and stroke).
In addition to the foregoing show:
For equipment purchased secondhand-

Name of builder, date built, and name of former owner.
For equipment to be rebuilt-
Date built, original cost, a bill of material showing

material, the price at which it is to be taken into the rebuilt unit, new material,

and labor used in rebuilding, (12) If the application is with respect to the construction, completion, extension, or improvement of facilities, or additions and betterments thereto (accomplished expenditures or expenditures not yet made), a report in accordance with form A of appendix A hereof, showing quantities and prices (actual or estimated) attested by a competent engineer, also distribution of total cost by the primary accounts of the commission's classification of investment in road and equipment, together with one copy of each A.F.E. (authority for expenditure) or of each completion report, as may be appropriate.

(13) If the application is with respect to the discharge or refunding of existing obligations (including notes maturing not more than two years after the date thereof, issued under paragraph (9) of section 20a of the interstate commerce act), a statement containing a full description, together with terms and conditions (including discounts and commissions, counsel fees, and all other expenses) of sale or other disposition of such existing obligations.

(14) If the application is with respect to the reimbursement of money expended from income or from other moneys in the treasury of the applicant (including proceeds of notes maturing not more than two years after the date thereof, issued under paragraph (9) of section 20a of the act), not yet capitalized, a statement showing:

(a) The period covered by the total disbursement. (b) The purposes of the disbursements.

(c) The amount of disbursements (gross capital charge) and all credits to capital account within the period.

(d) The primary accounts of the commission's accounting classification to which the disbursements or retirements were charged or credited.

If the expenditures were for any of the purposes stated in subparagraph (12) of this paragraph IV, a report in accordance with form A of appendix A hereof, with quantities and prices attested by a competent engineer, together with one copy of each A.F.E. or of each completion report, as may be appropriate.

(15) If the application is with respect to other purposes than those classified in subparagraphs (10) to (14) of this paragraph IV, a statement containing complete details of the purposes of the proposed issue or assumption.

V. It is further ordered, that the application shall be on paper approximately 842 inches by 11 inches. A margin of 142 inches shall be left on the left side for binding. The exhibits may be of any convenient size, but shall be folded to conform to the size of the application.

VI. It is further ordered, that the following procedure shall govern the execution, filing, and disposition of the application:

(1) The original application and supporting statements or exhibits shall be signed on behalf of the applicant by its president, a vice president, auditor, comptroller, or other executive officer having knowledge of the matters therein set forth and duly designated for that purpose by the applicant carrier, shall be made under oath, and shall show, among other things, that the affiant is duly authorized by the applicant to verify and file the application.

169692-33-13

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