income separately, or if the issuer has subsidiary corporations, a consolidated profit and loss statement of the issuer and of its subsidiaries, if any, for the latest available fiscal year and for the two immediately preceding fiscal years, or if in actual business for less than one year, then for the longest practicable period during which the issuer has been in actual business. In case there are any extraordinary items of profit and loss, such as those arising from the sale of capital assets, they shall be enumerated. NOTE. This section should be carefully considered with public accountants. (5) A statement setting forth:

(a) a brief description of the purpose or object of the issue of the proposed security; (b) date and brief description of the proposed security;

(c) a brief description of the security, if any, pledged or to be pledged for the proposed issue. A copy of the instrument or indenture under which the securities are to be issued shall be filed with the Commission when prepared.

(d) price at which it is proposed that the security shall be offered to the public. (e) the price to be paid to the issuer and if any of the securities are to be issued for considerations other than cash, a detailed statement of such considerations.

(f) names of the underwriters of said security, and the amount of all commissions, bonuses and other considerations paid or to be paid by the issuer for or in respect of the issue, sale or offer of said security, including any capital stock or other securities or considerations to be set aside and disposed of in connection with such purchase or underwriting.

(6) If the issuer is a corporation there shall be filed with said statement a certified copy of its articles of incorporation with all existing amendments and of its existing by-laws. If the issuer is a trustee there shall be filed with the statement a copy of all instruments by which the trust is created or declared, and in which it is accepted and acknowledged. If the issuer is a partnership or an unincorporated association or joint-stock company, or any other form of organization whatsoever, there shall be filed with the statement a copy of its articles of partnership or association and all other papers pertaining to its organization. If any of the instruments required by this subsection 6 shall already be on file with the Commission, there need be filed only such amendments or supplemental instruments, if any, as shall be necessary to bring to date the instruments already on file.

(7) It shall be deemed in compliance with this section if a draft or outline of any certificate of incorporation or mortgage shall be filed with the registration statement, provided that within ten days after the execution of said mortgage or the filing of said certificate of incorporation copies thereof in final form shall be filed. Failure to file such papers in final form shall render the issuer liable to a penalty of $for each day's delay in filing, but shall not affect the validity of such registration.

(b) That said statement when relating to a security issued by a foreign government or political subdivision thereof shall contain the following information concerning said security and the issuer thereof:

(1) Name of the borrowing government or subdivision thereof; (2) A brief description of the issue of the proposed security;

(3) Date and terms of the proposed security;

(4) Security, if any, pledged or to be pledged for the proposed issue;

(5) Date and terms of the purchase agreement, including the net amount to be paid to the borrowing government or subdivision thereof for such security, the names of the underwriters of said security; a statement of all bonuses and commissions, except ordinary selling commissions paid to members of any selling syndicate, selling group and salesmen, paid or to be paid by the underwriter, directly or indirectly, in connection therewith; and a statement by the underwriters that they know of none to be paid in connection therewith by the foreign borrowing government, excepting only such as may be expressly stated in the statement;

(6) Budgetary receipts and disbursements of the borrowing government or subdivision thereof for the latest available fiscal period and for the two immediately preceding fiscal periods, and a statement of its funded debt, both external and internal, as furnished by the chief financial officer thereof;

(7) Whether or not the borrower has, within a period of ten years prior to the filing of said statement, defaulted on the principal or interest when due of any other security publicly sold in the United States or other foreign country, and if so, the date, amount and circumstances of said default;

(c) At the time of filing said statement, as hereinbefore prescribed in subsections (a) and (b) of this section, the applicant shall pay to the Commission a fee of one one-hundredth of 1 per centum of the aggregate price at which such securities are to be offered to the public, but in no case shall such fee be less than $50.

(d) The filing with the Commission of a registration statement and the payment to the Commission of the required fee shall constitute formal registration of the

issue of the security concerned. Such filing and payment may be effected by forwarding the registration statement, accompanied by a United States postal money order or a certified bank check, for the required fee, by registered mail, postage prepaid, properly addressed to the Commission at Washington, District of Columbia.

SEC. 6. Strike out section 6, giving authority to the Commission to revoke registration.

SEC. 7. Strike out section 7, which provides for appeals from orders of the Commission revoking registration.

SEC. 8. Amend section 8, having to do with advertisements, into two new sections; that portion having to do with advertisements to be a separate section and to be restricted to circulars announcing, offering or advertising original issuance and distribution; and that portion which relates to information to be made available to the public to a separate section; the two revised sections to read as follows:

"Offering circulars"

"SEC. That it shall be unlawful to carry or transmit, or cause to be carried or transmitted, in interstate commerce, any circular or other written, printed or other graphic communication or document announcing, offering or advertising the original issuance and distribution, directly or indirectly, to the public of any securities subject to the provisions of this act, unless such circular or other written, printed or other graphic communication or document contains the following information concerning the security so offered:

(a) Name of the issuer and of the underwriter, if any, offering the same directly or indirectly to the public; amount of capitalization of the issuer authorized and paid up; location of the principal office of the issuer and, if incorporated, the place of incorporation.

(b) A brief description of the security offered, the amount of the issue, its rights with reference to dividends or fixed returns, and voting power and relative position with reference to other outstanding securities having prior rights. (c) The price at which the security is offered to the public, a brief statement of the purpose of the offering and the price paid to the issuer.

(d) The names of the principal executive officers, directors, trustees or general partners of the issuer.

(e) A summary statement showing the issuer's assets and liabilities as of the date of the balance sheet filed with the registration statement and the earnings of the issuer during each of three consecutive periods, each of twelve calendar months, covered by the profit and loss statement filed with the registration statement.

(f) A statement to the effect that additional information is on file and may be secured from the Commission at Washington, District of Columbia: Provided, That any such circular announcing, offering, or advertising for original sale to the public any securities of a foreign government or political subdivision thereof shall contain such information as the Commission may specify.

Copies of all such circulars and communications and documents shall within five days after distribution thereof be filed with the Commission, together with a reference to the registration of the securities so offered.

Any sale of a security registered under this act not made in connection with an original offering or original distribution of such security to the public shall be exempt from the provisions of this section.

“Information available to public"

"SEC. -. That the information contained in registration statements and circulars and communications and documents filed with the Commission under the provisions of this act shall be made available to the public under such regulations as the Commission may prescribe."

SEC. 9. Amend section 9, which sets forth liability of persons signing registration statements, and the constitutionality of which, as set forth in the bill, is at least doubtful, by limiting the time within which there shall be a presumption of reliance on facts contained in registration statement and the time within which suits may be brought for the relief provided for in the section; striking out the provision giving right of rescision against various parties, since the right of rescision can only lie against vendors, which in many cases would be other members of the public, and providing that no signer of a registration statement shall be held liable for damages under the provisions of the section, in certain cases where such person acted in good faith and had reasonable grounds to believe that the statement was true, following the English Companies Act, as follows:

SEC. -.

That every person purchasing any security, a part of an issue of securities so registered, within six months' after the original public offering of such securities for sale to the public, shall be presumed to have relied upon the representations set forth in the registration statement with respect thereto, unless the contrary is proved, and, in case such registration statement shall be untrue in any material respect, any person shall have the right within one year after the original public offering of such securities for sale to the public to obtain damages for any and all losses sustained by him as a direct consequence of such untrue statements, from any one or more of the signers of such registration statement.

No signer of a registration statement, however, shall be held liable for damages under the provisions of this section on account of any statement contained therein if it is proved that:

(a) As regards any untrue statement purporting to be a statement by a public or chartered accountant, engineer, appraiser, lawyer, or other expert, or contained in what purports to be a copy of or extract from a report, valuation or opinion of any expert, which fairly represents the statement, or was a correct and fair copy of or extract from such report, valuation, or opinion, and that such person had reasonable ground to believe that the person making such statement, report, valuation, or opinion was competent to make it and that it was obtained and accepted in good faith; or

(b) As regards any untrue statement contained in a public official document, such statement was so contained in such document and was accepted in good faith by such person; or

(c) As regards any untrue statement not purporting to be made on authority of an expert or a public official document, such person had reasonable grounds to believe and did, up to the time of the purchase of the securities with respect to which such damages are claimed by the person claiming such damages, believe that the statement was true; or

(d) Upon becoming aware of any untrue statement contained in such registration statement such person had, prior to the purchase by the person claiming such damages of the securities with respect to which such damages are claimed, notified the Commission of such error and given such reasonable public notice, if any, with respect thereto as shall be directed by the Commission.

No signer of a registration statement shall be held liable for damages under the provisions of this section on account of any failure to disclose any information in any registration statement if

(a) he proves that he in good faith exercised due diligence and was not cognizant of the matter not disclosed; or

(b) he proves that the failure to disclose such matter arose from an honest mistake of fact on his part; or

(c) the matter not disclosed was in respect of a matter which, in the opinion of the court dealing with the case was immaterial or was otherwise such as ought, in the opinion of that court, having due regard to all the circumstances of the case, reasonably to be excused.

Any condition, stipulation, or provision, binding any person acquiring any securities required by this act to be registered to waive compliance with any of the provisions of this act shall be void. The rights and remedies herein provided for shall be in addition to any other rights and remedies that may exist at law or in equity.

Any person who becomes liable to make any payment under this section may recover contribution as in cases of contract from any person who, if sued separately would have been liable to make the same payment, unless the person who has become so liable was, and the other person was not, guilty of fraudulent misrepresentation. SEC. 11. Ámend subsection (b) of section 11 to include in exemptions public utilities subject to State regulation, State banks, trust companies, and insurance companies; to strike out unnecessary portion and to strike out provision subjecting securities exempted in such section to the provisions of the section relative to advertising; strike out subsection (f) and insert two new subsections, one subsection to exempt commercial paper and the other to exempt securities of building and loan associations, such subsections to read as follows:

"(b) Any security issued by and representing an interest in or a direct obligation of any common carrier or other public utility subject to regulation or supervision as to the issue of its securities, by a commission, board, or officer of the Government of the United States, or of any State, Territory, or insular possession thereof, or of the District of Columbia; or any such security issued by any National or State bank, or trust company or insurance company, or by any corporation created and controlled by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States.

(-) Negotiable promissory notes or commercial paper maturing within twelve months of the date of issue.

"(-) Securities issued by any building and loan association, under the supervision of a public commission, board, or officer of any State, Territory, or insular possession. of the United States or of the District of Columbia."

SEC. 12. Insert a new subsection to exempt communications, negotations, and contracts relating for formation of syndicates with respect to securities proposed to be offered, which transactions would necessarily have to precede the filing of the statement; amend subsection exempting isolated transactions; insert new subsection exempting certain sales of securities registered under the act; amend subsection (d) to improve reorganization provisions; amend subsection (e) with respect to real-estate mortgages to limit the same to cases where securities are not intended to be offered to the public; amend subsection (f) to include additional exemptions; such subsections to read as follows:

Any and all communications, negotiations, and contracts between the issuer and the underwriter or underwriters and relating to the formation of purchasing, underwriting, or distributing syndicates, with respect to securities proposed to be offered to the public.

- Transactions in which any security is sold, offered for sale, subscription or delivery by the owner or owners thereof, or by his or their representative, for the owner's account, such sale or offer for sale, subscription or delivery not being made in connection with an offering or distribution of such security to the public.

"(d) The distribution by a corporation, actively engaged in the business authorized by its charter, of securities, to its stockholders, or other security holders, or assigns, exclusively, as a stock dividend, or other distribution out of earnings or surplus; or the issuance of additional capital stock of a corporation sold or distributed by it exclusively among its own stockholders or assigns, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale or distribution of such increased capital stock; or the distribution of securities issued under a bona fide reorganization or recapitalization by a corporation or corporations party thereto, or formed pursuant thereto or in connection therewith, to its or their security holders or existing creditors or assigns, made in good faith and not for the purpose of avoiding the provisions of this act, either in exchange for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the securities or claims of such security holders or creditors.

"(e) Bonds or notes secured by mortgage upon real estate or tangible personal property where the entire mortgage together with all of the bonds and notes secured thereby in the original transaction are sold to not more than five purchasers, and not intended to be offered directly or indirectly to the public.

"(f) The issue or delivery of any security in exchange for any other security pursuant to a right of conversion, or the issue and delivery of a security upon the exercise of a warrant or the surrender of a certificate of deposit or receipt. or pursuant to a subscription for such security entitling the holder of the security surrendered to receive in exchange the security issued or delivered; or the issuance of any certificate of deposit or receipt against the deposit or delivery of the security represented thereby, or any similar transaction."

SEC. 14. Strike out section 14 with respect to advertisements in blue-sky States.

SEC. 15. Amend subsection (a) thereof to limit such rules and regulations to those required for properly carrying out the act as follows:

"(a) That the Commission shall have authority from time to time to make, amend, and rescind rules and regulations for the proper carrying out of this act. It shall have authority to prescribe forms upon which all statements to be filed as hereinbefore provided shall be made. Such rules and regulations shall be effective upon promulgation in the manner which the Commission shall prescribe." Combine last paragraph of section 15 which grants investigatory powers to the Commission with section 12 which deals with fraud.

SEC. 16. This section having to do with jurisdiction of courts, should be amended by striking out the words "and under the rules and regulations promulgated by the Commission in respect thereto" appearing in the first paragraph thereof and by striking out the last paragraph thereof.

SEC. 17. This secion having to do with penalties, should be amended by striking out the words "or the rules and regulations promulgated by the Commission pursuant thereto."

Referring to Memorandum Document No. I presented by counsel for Investment Bankers' Association of America, giving tentative suggestions as to proposed amend

ments to S. 875 and H.R. 4314, the said tentative amendsments, if applied to the pending bills would make the text thereof read as follows:

NAME

SEC. 1. That this act shall be known as the "Federal Securities Registration and Fraud Enforcement Act."

DEFINITIONS

SEC. 2. That when used in this act the following terms shall, unless the text otherwise indicates, have the following respective meanings:

(a) "Security" shall include any stock, note, bond, debenture, evidence of indebtedness, certificate of interest or participation in a profit-sharing agreement, or right to subscribe to any of the foregoing, certificate of interest in an oil, gas, or mining lease, collateral trust certificate, voting trust certificate, certificate of deposit, preorganization certificate, preorganization subscription, any certificate of beneficial interest in title to property, profits, or earnings, or any other intrument commonly known as a security; including an interim or temporary bond, debenture, or other security, an instrument evidencing an interest in a security, or a receipt for a security or for a subscription to a security.

(b) "Person" shall include a natural person, a corporation, a partnership, an association, a joint-stock company, a trust, and any unincorporated organization. As used herein the term "trust" shall not include a trust created or appointed under or by virtue of a last will and testament, or by a court of law or equity, or any public charitable trust, or a trust inter vivos for private purposes.

(c) "Sale" or "sell" shall include every disposition, or attempt to dispose, of a security for value. Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing, shall be conclusively presumed to constitute a part of the subject of such purchase and to have been sold for value. "Sale" or "sell" shall also include a contract to sell, an exchange, an option of sale or purchase, a subscription, or an offer to sell, directly or by an agent, or by a circular, letter, advertisement, or otherwise.

(d) "Issuer" shall mean every person who issues, or proposes to issue, any security representing an interest in or a direct obligation of such issuer or of any property owned or held by such issuer, or any such person proposed to be formed: Provided, That with respect to interim or other receipts for securities, certificates of deposit, voting trust certificates, preorganization certificates, preorganization subscriptions, and securities of a similar character, the word "issuer" shall mean the issuer of the underlying securities represented or to be represented thereby. NOTE. Consideration will have to be given to the definition of issuer in the case of a fixed trust.

(e) "Underwriter" or "underwriting syndicate" shall mean when used with respect to any security any person, group, or syndicate which has purchased or underwritten or contracted to purchase or underwrite such security from the issuer for the purpose of offering or selling the same or any part thereof, directly or indirectly, to the public.

NOTE. This definition may need expansion to include associates participating in original public distribution of new issues of securities.

(f) "Commission" shall mean the Federal Trade Commission.

(g) "Mortgage" shall be deemed to include any trust instrument to secure a debt.

(h) "Territory" shall include Alaska, Hawaii, Puerto Rico, the Philippine Islands, the Panama Canal Zone, the Virgin Islands, and the insular possessions of the United States.

(i) "Interstate commerce" shall mean trade or commerce in securities among the several States or between the District of Columbia or any Territory of the United States and any State or other Territory, or any printed, written, or other graphic communication or any spoken communication or intercourse to or in furtherance of the commerce described in this definition.

(j) "Registration statement" shall mean the statement required for registration by section 5 of this act, together with all documents and other information required therein.

ACTS UNLAWFUL PRIOR TO REGISTRATION

SEC. 3. That, until there has been filed with the Commission the registration statement hereinafter referred to in accordance with the terms and conditions