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entry of such order shall be given by mail, or personally, or by telephone confirmed in writing, or by telegraph, to the issuer or other applicant.

The issuer or other person or entity applying for registration shall on application to the Commission within thirty days from the entry of such order be entitled to a public hearing and appropriate records shall be kept of all hearings and proceedings before the Commission. If the issuer or other person fails to make such application for a hearing within thirty days after the entry of the Commission's order, such order shall become final.

Sec. 7. That any person aggrieved by an order of the Commission revoking the registration of any security may obtain a review of such order in the Court of Appeals for the District of Columbia by filing in the court, within thirty days after the entry of such order, a written petition praying that the order of the Commission be set aside. A copy of such petition shall be forthwith served upon the Commission, and thereupon the Commission shall certify and file in the court a transcript of the record upon which the order complained of was entered. The findings of the Commission as to the facts, if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the hearing before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The jurisdiction of the court shall be exclusive and its judgment and decree shall be final.

The commencement of proceedings in the Circuit Court of Appeals, hy any person dissatisfied with the order of the Commission revoking registration, praying that such order be set aside, shall not, unless specifically ordered by the court, operate as a stay of the Commission's order.

Sec. 8. That it shall be unlawful to carry, transmit, or cause to be carried or transmitted, in interstate commerce, by use of the United States mails or by any means or instruments of transportation or communication, any written, printed, or other graphic communication or document, or by any spoken communication, announcing, offering, or advertising for sale any securities subject to the provisions of this Act, unless such communication or document contains the following information concerning the security so offered:

(a) The name of the issuer and names of the underwriting syndicate, if any, amount of capitalization authorized and paid up, location of principal place of business, and, if incorporated, place of incorporation.

(b) A brief description of the security offered, including the amount of the issue, a description of its rights with reference to dividends or fixed returns and voting power and relative position with reference to other outstanding securities having prior rights which must be specified as well as the amount of capital stock and other securities, commissions, and bonuses.

(c) The price at which it is offered to the public and the net amount to be returned to capital investment, as well as the maximum amount of commission or other form of remuneration to be paid in cash or otherwise, directly or indirectly, for or in connection with the sale or offering for sale of such securities.

(d) The names of the officers, directors, and trustees of the issuer or of the owner of the property constituting the basis of the issue. (e) A statement showing

(1) The issuer's assets and liabilities.

(2) Profits and loss during year just preceding the offering. (f) A statement to the effect that additional information may be secured from the Commission at Washington, D.C.: Provided, That any spoken, written, printed, or other graphic communication or document announcing, offering, or advertising for sale any securities offered by a foreign government or political subdivision thereof shall contain such information as the Commission may specify.

The information referred to in this section, when written, printed, or otherwise graphically expressed, shall be placed in a conspicuous part of all communications, documents, or other literature describing or mentioning the securities offered in type as large as the type used elsewhere in aforesaid literature. Copies of all such written or printed or other graphic communications or documents, as well as transcripts of all radio advertising, referring to the sale of securities subject to the provisions of this section shall, within five days after distribution of such communications to prospective purchasers is begun, be filed with the Commission together with a reference to the original registration of the securities so offered.

A statement containing the information required by this section shall also be delivered to each purchaser with the delivery of the security or securities to which it relates.

That the information required under the provisions of this Act contained in all said statements, copies, prospectuses, advertisement, circular letter and communications, and other documents shall be made available to the public under such regulations as the Commission may prescribe.

Sec. 9. That every person acquiring any securities specified in such statements and offered to the public shall be presumed to rely upon the representations set forth in the said statement. In case any such statement shall be false in any material respect, any persons acquiring any securities to which such statement relates, either from the original issuer or from any other person, shall have the right to rescind the transaction and to obtain the return, either at law or in equity, of any and all consideration given or paid for any such securities upon the surrender thereof, either from any vendor knowing of such falsity or from the persons signing such statement, jointly or severally: Provided, That the amount so recoverable from persons signing the statement shall not exceed the price paid for such securities. Any person acquiring any securities to which such statement relates shall also have the right to obtain damages for any and all losses sustained by such person as a consequence of such falsity, from any one or more of the signers of the statement in which such falsity occurs or from any person who authorized the statement to be made. Any condition, stipulation, or provision binding any person acquiring any of the securities offered to the public to waive compliance with any of the provisions of this Act, or of the rules and regulations, or of any requirement of the Commission herein provided for, or purporting to affect such person with notice of any contract, document, or matter not specifically referred to in the statement filed with respect to such securities as herein provided, shall be void. The rights and remedies herein provided for shall be in addition to any and all other rights and remedies that may exist at law or in equity

Sec. 10. That it shall be unlawful to represent or cause to be represented to any prospective purchaser, either orally or in any written or printed communication, circular, advertisement, or other literature, that registration of securities with the Commission constitutes or is evidence of the Commission's approval or recommendation of such securities.

Sec. 11. That, except as hereinafter otherwise expressly provided, the provisions of this Act shall not apply to any of the following classes of securities:

(a) Any security issued or guaranteed by the United States or any Territory or insular possession thereof, or by the District of Columbia or by any State of the United States or political subdivision or agency thereof.

(b) Any security issued by and representing an interest in or a direct obligation of any common carrier or other public utility subject to regụlation or supervision as to the issue of its securities by a commission, board, or officers of the overnment of the United States; or any such security issued by any national bank; 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: Provided, That nothing in this Act shall relieve any of the organizations mentioned in this subsection from submitting to the respective supervisory units of the Government of the United States, in such manner and form as may be required by the respective units, all information, reports, or other documents that are required under the provision of section 5 of this act, and such additional information, reports, and documents as are now or may hereafter be required by other Acts of Congress or by rules and regulations pursuant thereto of the respective units: And provided further, That all such organizations mentioned in this subsection shall nevertheless be required to comply with the provi. sions of section 8 of this Act.

(c) Any security issued by a corporation organized exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual.

(d) Bonds or notes secured by mortgage upon real estate, improved or about to be improved by a residential structure, when the total encumbrances against any single property so mortgaged, including the mortgage securing the bonds and notes exempted by this paragraph, do not exceed $25,000.

(e) Any security, other than common stock, providing for a fixed return which has been outstanding and in the hands of the public for a period of not less than five years, upon which no default in payment of principal, or failure to pay the return fixed, has occurred for a continuous immediately preceding period of five years, when issued by a person, corporation, or other entity having à total capital stock issued and outstanding not in excess of $100,000.

SEC. 12. That, except as hereinafter otherwise expressly provided, the provisions of this Act shall not apply to any of the following transactions:

(a) Judicial, executor's, administrator's, guardian's, or conservator's sale, or any sale by a receiver or trustee in insolvency or bankruptcy.

(b) Sales by or for the account of a pledge holder or mortgagee selling or offer. ing for sale or delivery in the oridinary course of business and not for the purpose of avoiding the provisions of this Act, to liquidate a bona fide debt, a security pledged in good faith as collateral for such debt.

(c) Isolated transactions in which any security is sold, offered for sale, subscription, or delivery by the owner thereof, or by his representative solely for the owner's account, such sale or offer for sale, subscription, or delivery not being made in the course of repeated and successive transactions of a like character by such owner for the purpose of engaging in the purchase and sale of securities as a business, and such owner or representative not being the underwriter of such security.

(d) The distribution by a corporation, actively engaged in the business authorized by its charter, of securities to its stockholders or other securities holders 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 among its own stockholders exclusively, 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 issuance of securities to the existing security holders or other existing creditors of a corporation in the process of a bona fide reorganization of such corporation 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 or notes secured thereby in the original transaction are sold to not more than five purchasers in an equal number of sales.

(f) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion, entitling the holder of the security surrendered in exchange to make such conversion: Provided, That the security so surrendered has been registered under the law or was, when sold, exempt from the provisions of the law. Upon such conversion the par value of the security surrendered in such exchange, or if of no par value the price at which it was originally offered to the public, shall be deemed the price at which the securities issued and delivered in such exchange are sold.

(g) Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof under the laws of any State, when no expense is incurred, or no commission, compensation, or remuneration is paid or required for or in connection with the subscription, sale, or other disposition of such securities.

SEC. 13. That it shall be unlawful for any person, firm, corporation, or other entity in any interstate sale, promotion, negotiation, advertisement, or distribution of any securities defined by this Act willfully to employ any device, scheme, or artifice to defraud or to obtain money or property by means of any false pretense, representation, or promise, or to engage in any transaction, practice, or course of business relating to the interstate purchase or sale of any securities which operates or would operate as a fraud upon the purchaser. Whenever it shall appear to the Commission, either upon complaint or otherwise, that the provisions of this section (13) have been or are about to be violated, it may, in its discretion, either require or permit such person, firm, corporation, association, or other entity to file with it a statement in writing, under oath, or otherwise, as to all the facts and circumstances concerning the subject matter which it believes to be in the public interest to investigate, and may investigate such facts. Whenever it shall appear to the Commission that the practices investigated constitute a fraud or an attempt to defraud under the provisions of this section (13) it shall transmit such evidence as may be available concerning the transaction or facts complained of to the Attorney General who may in his discretion bring an action either in the district court of the United States, for the district wherein the transmittal of the offer, announcement, advertising, or other communication complained of begins or in the district wherein such offer, announcement, advertising, or other communication is received, to enjoin the continuance of such practices or transactions and/or institute the necessary criminal proceeding under section 17 of this Act. The exemptions contained in sections 11 and 12 of this Act shall not apply to the provisions of this section (13).

Sec. 14. That it shall be unlawful for any person, firm, corporation, association, or any other entity to carry or cause to be carried or transmitted' in interstate commerce, by or with any means or instruments or agency of transportation or communication, any offer to sell or deliver, directly or indirectly, or to accept an offer to buy, through the use or medium of any book, magazine, newspaper, publication, circular, advertisement, or other printed, written, or spoken communication, when such book, magazine, newspaper, publication, circular, advertisement, or any printed, written, or other graphic, or any spoken communication is addressed or otherwise transmitted to any person at any place in any State or Territory of the United States or the District of Columbia, where at that time it is unlawful to sell, offer for sale, tender for sale or delivery, or to solicit subscriptions or orders for such security or securities. The exemptions contained in sections 11 and 12 of this Act shall not apply to the provisions of this section (14).

Sec. 15. (a) That the Commission shall have authority, from time to time, to make, amend, and rescind rules and regulations for the purpose of executing this Act. It shall have authority to prescribe forms upon which all statements to be filed as hereinbefore provided shall be made, and to require such further data or information as it may deem proper in the public interest to be included in the said statements. Such rules and regulations shall be effective upon publication in the manner which the Commission shall prescribe.

(b) For the purpose of all investigations which, in the opinion of the Commission, are necessary and proper for the enforcement of this act, the Commission and officer or officers designated by it are empowered to subpena witnesses, examine them under oath and require the production of any books, papers, or other documents which the Commission deems relevant or material to the inquiry.

Sec. 16. That the District Courts of the United States, the District Courts of Alaska, Hawaii, Puerto Rico, Canal Zone, and the Virgin Islands, and the Supreme Court of the District of Columbia, shall have jurisdiction of offenses and violations under this Act and under the rules and regulations promulgated by the Commission in respect thereto; and of all suits in equity and actions at law brought under this Act. Judgments and decrees so rendered shall be subject to review as provided in sections 128 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 225 and 345).

Any of the said courts hereinbefore named in this section, within the jurisdiction of which an investigation or inquiry of the Commission is carried on may, in case of contumacy, or refusal to obey a subpena issued to any corporation, or other person, issue an order requiring such corporation or other person to appear before the Commission, or to produce documentary evidence, if so ordered, or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof.

Upon application of the Attorney General of the United States, at the request of the Commission, the said courts shall have jurisdiction to issue writs of mandamus commanding any person or corporation to comply with the provisions of this Act or any order of the Commission made in pursuance thereof.

Sec. 17. That whoever shall willfully violate any of the provisions of this Act, or the rules and regulations promulgated by the Commission pursuant thereto, shall upon conviction be fined not more than $5,000, imprisoned not more than five years, or both, and any officer, director, or agent or any corporation who knowingly participates in such violation shall be punished by a like fine and imprisonment, or both.

Sec. 18. That the necessary appropriations for the purpose of carrying out the provisions of this Act are hereby authorized. All moneys derived from the fees imposed by the provisions of this Act shall be paid into the Treasury to the credit of miscellaneous receipts.

Sec. 19. That if any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Act, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

Sec. 20. That this Act shall take effect ninety days after its approval.

The CHAIRMAN. The committee this morning will hear the persons called upon who may be able to attend. I understand that some of the proponents of the measure, those who prepared it or attended to preparing the measure, are this morning before the House Committee on Interstate and Foreign Commerce which is considering a companion measure, and cannot be present here today. They, of course, cannot be in two places at once. I should like, if the committee will decide, for us to go as far as we can today with those who are present, and then continue tomorrow so as to have before us those who are supposed to be fairly posted in regard to the measure.

I might add that an attorney of New York City telephoned me last night stating that he represented, I think, the Investment Bankers Association of America, that he had to be before the House committee this morning and could not be before our committee for that reason, and that he would like to go on tomorrow if we could hear him, or on Monday, just as may be the pleasure of the committee.

I think perhaps we might go on this morning, and continue the hearing tomorrow as I am quite sure we cannot conclude today. That being the situation, what is the pleasure of the committee?

Senator NORBECK. If that is the best we can do let us hear those who are present this morning.

The CHAIRMAN. With that understanding we will go as far as we can today, and continue the hearings tomorrow. Now, there are some persons present who wish to be heard at this time. First we will hear Mr. Arthur R. Tucker, representing the Controllers’ Institute of America.

Mr. Tucker, will you come to the committee table and take a seat opposite the committee reporter, stating your name, business, and address?

STATEMENT OF ARTHUR R. TUCKER, NEW YORK CITY, SEC

RETARY, CONTROLLERS' INSTITUTE OF AMERICA

Mr. TUCKER. Mr. Chairman and gentlemen of the committee: I appear as an executive officer of the Controllers’ Institute of America.

The CHAIRMAN. First give your full name, business, and address.

Mr. TUCKER. My name is Arthur R. Tucker. My address is No. 1 East Forty-second Street, New York City.

Senator NORBECK. And you represent the Controllers' Institute of America?

Mr. TUCKER. Yes, sir. I want to say first of all that I am here to express the approval and endorsement by the Controllers' Institute of America of this measure, and to suggest one slight amendment.

Senator COUZENS. We would first like to know what the Controllers’ Institute of America is.

Mr. TUCKER. The Controllers’ Institute of America is composed of controllers of business concerns and corporations. Its membership is exclusive, being limited to controllers. The controllers who are members of the institute are connected with corporations having upward of $17,000,000,000 of assets, of which they are virtually custodians.

I might add that we are interested in this measure because controllers as a class are the ones most intimately affected by this proposed act. As the principal accounting officers of corporations they

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