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security the issuer of which has failed to comply with the provisions of this Act or the rules and regulations made thereunder;

(iii) After appropriate notice and opportunity for hearing, make an order suspending for a period not exceeding twelve months or ordering the expulsion altogether from a national securities exchange any member of officer thereof whom it finds has violated any provision of this Act or the rules and regulations thereunder or has effected any transaction for any other person who he has reason to believe is violating in respect of such transaction any provision of this Act or the rules or regulations thereunder.

(c) Upon application of the Commission the district courts of the United States, the United States courts of any Territory, and the Supreme Court of the District of Columbia shall also have jurisdiction to issue writs of mandamus commanding any person to comply with the provisions of this Act or any order of the Commission made in pursuance thereof.

HEARINGS BY COMMISSION

Sec. 21. All hearings shall be public and may be held before the Commission any member or members thereof or an officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.

PUBLIC CHARACTER OF INFORMATION Sec. 22. The information contained in or filed with any application, report, or document shall be made available to the public under such regulations as the Commission may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable charge as the Commission may prescribe.

COURT REVIEW OF ORDERS SEC. 23. (a) Any person aggrieved by an order of the Commission may obtain a review of such order in the Circuit Court of Appeals of the United States, with in any circuit wherein such person resides or has his principal place of business, or in the Court of Appeals of the District of Columbia, by filing in such. court, within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or be set aside in whole or in part. 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. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission. The finding of the Commission as to the facts, if supported by evidence, 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 aditional 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 Commission may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order. The jurisdiction of the court shall be exclusive and its judgment and decree, affirming, modifying, or setting aside, in whole or in part, any order of the Commission, shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in sections 239 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 346 and 347).

(b) The commencement of proceedings under subsection (a) shall not, unless specifically ordered by the court, operate as a stay of the Commission's order.

PENALTIES

Sec. 24. Any person who willfully violates any provision of this Act or any rule or regulation made thereunder, or any person who shall make, or any person including a director, officer, accountant, or agent thereof who willfully is responsible for any statement in any application, report, or document filed with the Commission, which statement is, in the light of the circumstances under which

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it was made, false or misleading in any matter sufficiently important to influence the judgment of an average investor, shall upon conviction be fined not more than $25,000 or imprisoned not more than ten years, or both, except that when such person is an exchange, a fine not exceeding $500,000 may be imposed.

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Sec. 25. (a) The district courts of the United States, the United States courts of any Territory, and the Supreme Court of the District of Columbia shall have jurisdiction of offenses and violations under this Act and of all suits in equity and actions at law brought to enforce any liability or duty created by this Act. Any such criminal proceeding may be brought either in the district wherein the exchange involved is operated, or in the district wherein a transaction violating such provision was consummated, or in the district wherein an act or agreement to act constituting such violation was effected. Any such civil suit or action may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. 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 347). No costs shall be assessed for or against the Commission in any proceeding under this Act brought by or against it in the Supreme Court or such other courts.

(b) In case of contumacy or refusal to obey a subpena issued to any person, any of the said United States courts, within the jurisdiction of which said person guilty of contumacy or refusal to obey is found or resides, upon application by the Commission may issue to such person an order requiring such persons to appear before the Commission, or one of its examiners designated by it, there to produce documentary evidence if so ordered, or there to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by said court as a contempt thereof.

(C) No person shall be excused from attending and testifying or from producing books, papers, contracts, agreements, and other records before the Commission, or in obedience to the subpena of the Commission or any member thereof or any officer designated by it, or in any cause or proceeding instituted by the Commission, on the ground that the testimony or evidence, documentary or otherwise, required of him, may tend to incriminate him or subject him to a penalty or forfeiture; but no individual shall be prosecuted or subject to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence, documentary or otherwise, except that such individual so testifying shall not be exempt from prosecution and punishment for perjury committed in so testifying.

EFFECT OF EXISTING LAW

Sec. 26. (a) The rights and remedies provided by this Act shall be in addition to any and all other rights and remedies that may exist at law or in equity, except that this Act shall supersede such laws of any State as are inconsistent with the provisions or purposes of this Act and such laws of any State as provide for the supervision or regulation of the administration or conduct of business on any exchange which is licensed by the Commission.

(b) Nothing in this Act shall be construed to modify existing law with regard to the binding effect on any member of any exchange of any action taken by the authorities of such exchange to settle disputes between members or with regard to the binding effect of such action on any person who has agreed to be bound thereby or with regard to the binding effect on any member of any disciplinary action taken by the authorities of the exchange as a result of violation of any rule of the exchange, insofar as the action taken is not inconsistent with the provisions of this Act or the rules and regulations of the Commission thereunder.

VALIDITY OF CONTRACTS

Sec. 27. (a) Any condition, stipulation, or provision binding any person to waive compliance with any provision of this Act or of any regulation promulgated pursuant thereto, or of any rule required by such regulation shall be void.

(b) Every contract made in violation of, or the performance of which involves the violation of, any provision of this Act or of any rule or regulation thereunder shall be void as regards any cause of action arising after the effective date of such provision, regardless of whether the contract was made before or after such effective date.

FOREIGN EXCHANGES Sec. 28. It shall be unlawful for any broker or dealer, directly or indirectly, to make use of the mails or of any means or instrumentality of transportation or communication in interstate commerce for the purpose of effecting on an exchange situated in a place not subject to the jurisdiction of the United States any transaction in any security the issuer of which is a resident of, or is organized under the laws of, or has its principal place of business in, a place subject to the jurisdiction of the United States except in accordance with such rules and regulations as the Commission may prescribe.

REGISTRATION FEES

Sec. 29. Every national securities exchange shall pay an annual registration fee for the privilege of doing business as a national securities exchange during the preceding calendar year or any part thereof. Such fee shall be paid to the Commission on or before March 15 of each calendar year. Such fee shall be an amount equal to one five-hundredths of 1 per centum of the aggregate dollar amount of the sales of securities transacted on such national securities exchange during the preceding calendar year.

EMPLOYEES OF FEDERAL TRADE COMMISSION

Sec. 30. For the purposes of this Act and of the Securities Act of 1933, the Federal Trade Commission may select, employ, and fix the compensation of such employees, attorneys, and agents as shall be necessary for the transaction of the business of the Commission with respect to such Acts without regard to the provisions of other laws applicable to the employment and compensation of officers or employees of the United States.

SEPARABILITY OF PROVISIONS

Sec. 31. 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.

EFFECTIVE DATE Sec. 32. This Act shall become effective on October 1, 1934, except that applications for necessary registrations under this Act may be made to the Commission in accordance with its rules and regulations at any time on and after July 1, 1934: Provided, That section 30 shall become effective immediately upon the enactment of this Act.

STATEMENT OF HON. J. M. LANDIS, COMMISSIONER, FEDERAL

TRADE COMMISSION, WASHINGTON, D.C. Commissioner LANDIS. I do not think, Mr. Chairman, that I need to speak upon the need for regulation of the stock exchanges. That need has been presented to the country at large by much evidence that has been gathered in the other branch of Congress. It has been brought home to the Nation at large by the President's recent message.

This movement for stock exchanges regulations is not something new. The movement really beings, as I see it, back in 1909 at the time when the Hughes Committee made its report to Mr. Hughes, who was then Governor of New York.

The movement for Federal regulation begins in 1913, after the Pujo Committee of this House made its very famous report and projected a bill based on that report.

Since then a great number of bills have been introduced into the House. Some of these bills have gone to public hearings, such as was true of H.R. 4 in the Seventy-second Congress, the bill that was commonly known as the LaGuardia bill. The Seventy-first Congress had 2 Senate bills and 6 House bills; the Seventy-second Congress had 6 Senate bills and 11 House bills, and the Seventy-third Congress 2 Senate bills and 8 House bills. You have now, I think, three or four bills that are pending on this particular matter.

No action was taken on any of these bills by any committee, and this I believe is the first time that the President of the United States has expressly urged legislation on this matter.

At the threshhold of this question, there seems to me to lie the question of national power over the exchanges. I think this committee has to meet that and face that before it can go any further. The question is not free from doubt. I myself have had doubts about the constitutionality of some of the legislation that has been proposed in this House. I had grave doubts about the LaGuardia bill that was pending here in the Seventy-second Congress and which in different forms is still pending. I think to see the question of the constitutionality of this legislation, one has to first see the character of stock-market transactions. The stock-market transactions as such are purely intrastate in character. Members on the exchange buy from each other purely on the exchange-I am taking the New York Stock Exchange as an example—on the exchange, right in the building. Deliveries of securities are made in New York; payments are made in New York; members of the exchange are required by the rules to have a New York office. Not only that, issuers whose securities are listed on the exchange must have transfer agents in New York. For their bonds they must have an agency in New York who will meet both principal and interest when it is due.

Furthermore, the price quotations that are sent out are not sent out by the exchange. They are sold by the exchange to the telegraph service which then disseminates them through the country.

So that if you look at these transactions independently you find that they are purely intrastate from a technical standpoint; but that does not solve our problem.

It is a commonplace of constitutional law that although the transactions viewed individually may be intrastate in character they may be so related to interstate commerce that Congress can control those transactions themselves. As an illustration, the Sherman Act can be taken. The transactions that are very often controlled by the Sherman Act are not themselves interstate in character, but they, because of their effects upon interstate commerce, come within the congressional power of control. A good illustration is a case like the Bedford cut stone case, where local stonecutters in New York refused to work on stone that had been quarried in nonunion quarries in Indiana, with the idea of unionizing those quarries. That was held to be a combination in restraint of interstate trade and commerce by the Supreme Court of the United States. Or, to this committee, a familiar case like the Wisconsin rate case, or the Shreveport case, where intrastate commerce is controlled because of its intimate relation to the movement and rates in interstate commerce.

Another illustration, I think, is the power of the Federal Trade Commission under section 5. Advertising as such has not been held

to be interstate commerce.

But the Federal Trade Commission exercises power over advertising because advertising affects sales of goods in interstate commerce.

Consequently, in order to spell out an appropriate power for Congress to deal with stock exchanges, you have to show the intimate relationship of these transactions on the exchange itself, to interstate commerce.

I speak primarily of the interstate-commerce power, because I do not believe that legislation of this type can be based effectively upon any other power than the congressional power over interstate commerce.

The first question I think that one has to ask is this: Is this commerce, in securities, interstate commerce of the type that comes within the control of Congress? I think that if one builds up the appropriate picture of the exchange that there is not much difficulty of answering that question. As an illustration, supposing a person in Louisiana, we will say, sells a thousand shares of steel common. That sale order is transmitted to the exchange, meets a buy order from somebody, we will say, in Massachusetts, and the result of that transaction moving through the exchange is to transfer an interest from Louisiana to Massachusetts. True the interest is in the steel properties, but an interest represented by a security in Louisiana, now becomes represented by a security held in Massachusetts. In other words, the exchange itself, if I may use a graphic description, is a sort of a throat through which the commodity, the security, is moved.

It is true that right in the throat, the transactions or purchases are intrastate in character, but that particular movement on the exchange is essential for the free movement in interstate commerce of these streams of securities. I think if one gets that idea firmly in one's mind, that the difficulty with reference to the constitutional regulation of exchange transactions largely disappear. If one can see this exchange as I see it, as a throat controlling this movement, perhaps burdening interstate commerce because of what happens in that throat, raising prices of securities to artificial levels because of the transactions that take place in that throat, then surely this stream of securities moving in intrastate commerce is something over which Congress has concern and control.

One objection that is immediately raised to any analysis of the situation from that standpoint is this: Securities are not commodities which move in interstate commerce. That is the contention, the contention basing itself upon several decisions of the Supreme Court of the United States. It bases itself very largely upon insurance cases, beginning with Paul v. Virginia (8 Wall. 168), which has continued to be a line of decisions by the Supreme Court of the United States.

Those cases have held that the writing of insurance is not interstate commerce in the sense that it is immune from State control.

These cases, I do not think, can be regarded as determinative of this proposition, because of these reasons:

Firstly, an insurance contract is hard to regard as a commodity in the way that a security is. It is not traded in in the way securities are. It is true it is pledged as any property is pledged, but there is no trade in insurance contracts. There is no stream of these inter

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