(Attachment C)

JANUARY 30, 1969.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

AMENDMENT OF RULE 15c3-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934

On September 13, 1968, in Securities Exchange Act Release No. 8405 the Commission published a proposal to amend Rule 15c3-1 under the Securities Exchange Act of 1934. Rule 15c3-1 imposes specified financial responsibility requirements on brokers and dealers. The proposed amendments to the rule would require a broker or dealer in computing his net capital to deduct from net worth 10 per cent of the amount he is to receive for any security he has sold and failed to deliver for 40 days or more, up to 50 days; to deduct from net worth 20 per cent of the amount he is to receive for a security he has sold and failed to deliver for a period from 50 days up to 60 days; and to deduct 30 per cent of the amount to be received for a security sold but not delivered for 60 days or more. The proposed amendments would also withdraw the exemption provided for in subsection (b)(2) of Rule 15c3-1 now available to members of specified national securities exchanges, if the financial responsibility rules of such exchanges fail to require in the computation of net capital deductions from net worth which are at least comparable. The action would be taken under the provisions of the Securities Exchange Act of 1934, particularly Sections 15(c) (3) and 23(a) thereof.

The Commission has expressed great concern over the acute delivery backlogs confronting the securities industry, including the difficulties some broker-dealers are experiencing in carrying out their responsibilities to customers to deliver securities and money promptly. This current condition respecting delays in deliveries of securities to customers by selling broker-dealers is in large part a reflection of the failure of other brokers and dealers to deliver these securities which they owe to the selling broker-dealers. The long length of time in which amounts due are carried in the "failed to deliver" accounts of the various brokerdealers exposes them to undue risk of market fluctuations in the securities as well as to the possibility of financial difficulties of the broker on the other side of the transaction. The New York Stock Exchange, the American Stock Exchange and the Mid-West Stock Exchange, in recognition of these risks, have adopted rules on computing net capital of their members which require similar deductions from net worth of the same percentages as in the proposed amendment.

The Commission has carefully considered all the comments that have been received, and in view of the present serious nature of brokers' and dealers' operational and back-office problems has decided to adopt the amendments in the form stated below. It should be emphasized that the impact of the proposed amendments can be eliminated or lessened by a broker or dealer refraining from selling a security unless he has reasonable assurance that certificates are either in his possession or are obtainable within a reasonable time, or by electing to "buy in" the securities, in situations where another broker-dealer is failing to deliver to him.

The effective date of the amendments that have been adopted will be March 6, 1969. This is to afford brokers and dealers sufficient time to make the necessary preparation to comply with the rule as amended.

STATUTORY BASIS

The Securities and Exchange Commission, acting pursuant to the provisions of the Securities Exchange Act of 1934, and particularly Sections 15(c)(3) and 23 (a) thereof, deeming such action necessary and appropriate in the public interest and for the protection of investors and necessary to provide safeguards with respect to the financial responsibility of brokers and dealers, and also deeming such action necessary for the execution of the functions vested in the Commission by the Act, hereby amends Rule 15c3-1 as stated below, effective March 6, 1969.

TEXT OF THE AMENDMENT

Subsection (c) (2) of Rule 15c3-1 is hereby amended by adding a new subparagraph (I) reading as follows:

(I) deducting 10% of the contract price of each item in the securities failed to deliver account which is outstanding 40 to 49 calendar days; deducting 20% of the contract price of each item in the securities failed to deliver account which is outstanding 50 to 59 calendar days; and deducting 30% of the contract price of each item in the securities failed to deliver account which is outstanding 60 or more calendar days. Subsection (b) (2) of Rule 15c3-1 is hereby amended by adding the following additional language at the end thereof:

This exemption shall not be available to the members of any exchange whose capital rules do not provide that in the computation of net capital there shall be a deduction of not less than 10% of the contract price of each item in the securities failed to deliver account which is outstanding 40 to 49 calendar days; 20% of the contract price of each item in the securities failed to deliver account which is outstanding 50 to 59 calendar days; and 30% of the contract price of each item in the securities failed to deliver account which is outstanding 60 or more calendar days. By the Commission.

ORVAL L. DUBOIS, Secretary.

(Attachment D)

SEPTEMBER 25, 1968.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

NOTICE OF PROPOSAL TO ADOPT RULE 10B-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Notice is hereby given that the Securities and Exchange Commission has under consideration a proposal to adopt Rule 10b-14 under the Securities Exchange Act of 1934 ("the Act"). Proposed Rule 10b-14 would impose upon issuers whose securities are publicly traded the duty to maintain facilities reasonably designed to effectuate the prompt issuance, registration, and registration of transfers of securities, and delivery of certificates. The rule would be adopted under the provisions of the Securities Exchange Act of 1934, and particularly Sections 10(b) and 23(a) thereof.

Section 10 (b) of the Act makes it unlawful for any person, including an issuer, to engage in activities which the Commission defines as manipulative or deceptive, if they occur in connection with the purchase or sale of a security. Section 23(a) of the Act gives the Commission the power to make rules and regulations necessary for the execution of its functions under the Act. When an issuer issues securities purporting to be freely transferable it impliedly represents that they are and will continue to be freely transferable, and this representation is deceptive if, because of the absence or inadequacy of the transfer facilities provided by the issuer, security holders are not in a position to obtain prompt transfers. In addition, the Commission has found that in some cases the withholding of certificates can and may be used as a manipulative device.

In expressing its concern over the acute delivery backlogs confronting the securities industry, the Commission has noted that the problem is not confined to broker-dealers alone, but involves other segments of the securities industry, including transfer agents and others who participate in the initiation, conduct or consummation of transactions in the securities markets (see Securities Exchange Act Release No. 8341, June 20, 1968); and one of the reasons brokerdealers have experienced delay in consummating securities transactions is that some issuers with publicly traded securities have not been maintaining adequate transfer facilities. The inability of purchasers of securities to obtain prompt delivery of certificates not only interferes with the maintenance of fair and orderly markets, it also impedes the Commission in fulfilling its regulatory functions in the maintenance of markets which are free of fraud and manipulation. Accordingly, Rule 10b-14 would make it unlawful for any issuer which has any publicly traded securities to fail to provide personnel and facilities which are reasonably designed to effectuate prompt issuance, transfer and registration of transfers of such securities, and delivery of certificates, in connection with the purchase or sale of any such security by any person.

The Text of Proposed Rule 10b–14 is as Follows:

Rule 10b-14: Transfer Facilities Provided by Issuers.

"It shall be unlawful for an issuer, any class of whose securities are publicly traded by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, to fail to provide personnel and facilities which are reasonably designed to effectuate prompt issuance, transfer, and registration of transfers of such securities, and delivery of certificates, in connection with the purchase or sale of any such securities by any person."

All interested persons may submit their views and comments on the above proposal in writing to the Securities and Exchange Commission, Washington, D.C. 20549 on or before October 25, 1968. All such communications will be considered available for public inspection.

By the Commission.

ORVAL L. DUBOIS, Secretary.

(Attachment E)

JULY 29, 1968.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

IMPORTANT NOTICE TO BROKER-DEALERS

The Securities and Exchange Commission today again expressed its concern regarding problems certain broker-dealers are experiencing in carrying out their responsibilities to customers to deliver securities and money promptly and in maintaining accurate and current records of their transactions.

While the Commission is aware of the many steps being taken by the industry to cope with the delays caused by the large increase in trading volume, it cautions broker-dealers that it is a violation of the anti-fraud provisions of the federal securities laws, and particularly Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, for a dealer, as principal for his own account, to sell a security to a customer, or for a broker to buy a security as agent for a customer, or to induce the purchase of a security by a customer, if the brokerdealer has reason to believe that he will not be able to deliver the security to the customer promptly. This is consistent with the Commission's long standing position taken in Commission decisions and discussed in Securities Exchange Act Release No. 6778, dated April 16, 1962, that a broker-dealer impliedly represents that he will deal fairly with the public and that this representation includes the implied representation that the transaction will be consummated promptly, which includes prompt delivery to the customer.

Thus, for example, it would be inconsistent with applicable requirements for a broker-dealer to sell a security as principal for his own account, or to purchase it as broker for any other person, if the broker-dealer knows, or has reason to believe, that it is difficult to obtain delivery with respect to a particular security because of delays in transfer or because, in order to obtain the security either for his own account or for the customer, it will be necessary to purchase the security from another broker-dealer whose deliveries to him have not been prompt in accordance with traditional customs and usage of the trade.

The Commission also warns broker-dealers that it is a violation of applicable anti-fraud provisions for a broker-dealer to accept or execute any order for the purchase or sale of a security or to induce or attempt to induce such purchase or sale, if he does not have the personnel and facilities to enable him to promptly execute and consummate all of his securities transactions.

Broker-dealers who are unable to consummate all their securities transactions promptly in accordance with traditional customs and usage of the trade, or who are encountering any delays because of back-office problems of any kind, are compounding their difficulties and increasing the likelihood of disciplinary action being taken against them if during any such period they advertise, employ additional salesmen, or take any other action designed to expand the volume of their business. In these cases they should first take the steps necessary to eliminate any backlog which currently exists in the back-office with respect to maintenance of books and records, prompt delivery of securities, prompt payment for securities sold for customers, and also eliminate open or unresolved items such as "DK's", and any other problems which impede their compliance with all applicable securities regulations.

Also, it may be appropriate in many cases, for a broker, before he accepts an order to sell a security for a customer, to make sure either that the security is carried long in the account which the broker maintains for the customer, or to require the customer to deliver the certificate in deliverable form to the broker before the order is executed.

Brokers and dealers should be fully aware that the Commission has taken and will continue to take prompt enforcement action against individual firms and persons where applicable rules are violated.

(Attachment F)

DECEMBER 19, 1968.

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

STOCK TRANSACTIONS OF FINANCIAL INSTITUTIONS, THIRD QUARTER, 1968 Institutional activity in the stock markets continued at an accelerated pace in the third quarter of 1968 according to data released today by the Securities and Exchange Commission. The dollar value of total transactions in common stock by the four principal categories of financial institutions-private noninsured pension plans, mutual funds, life insurance companies and property and casualty insurance firms-totaled $16.8 billion in the third quarter, 3 percent lower than the second quarter of 1968 but 36 percent higher than in the July-September period last year. By way of comparison, the total reported share volume on the New York Stock Exchange declined 20 percent from the preceding period, reflecting the one-day closing of the market initiated on June 12 of this year. During this same period block transactions of 10,000 or more shares totaled 68.7 million shares, down from 74.4 million shares in the second quarter. Block volume, as a percent of the total reported NYSE volume, increased to 10 percent. The attached table provides quarterly data on the purchases and sales of common stock for the aforementioned institutions. Foreigners' transactions in United States issues, while less than the preceding period, were substantially greater than the same period last year.

Third quarter purchases by combined financial institutions were below the record level of the previous quarter. Sales rose to a new peak. Gross purchases totaled $9.3 billion, 7 percent below the previous quarter but exceeding the third quarter of 1967 by nearly 30 percent. Portfolio sales of $7.5 billion increased 3 percent over the preceding period and were sharply higher than in the third quarter last year. Total net purchases of common stock by the group amounted to $1.8 billion, nearly $1 billion below the previous quarter, and bringing the total for the first nine months of 1968 to $6 billion. Mutual funds accounted for over half of the total transactions by the institutional groups covered in this survey. Their total transactions amounted to $9.5 billion, with purchases totaling $4.7 billion and sales $4.8 billion. Private noninsured pension funds purchased $3.4 billion and sold $1.9 billion of common stock in the third quarter. Their net acquisitions of $1.5 billion, the most for any quarter to date, were over 80 percent of the total for the four groups.

Turnover Rates

The combined portfolio turnover1 of common stock for the selected institutions covered in this survey declined slightly from the record activity of the previous quarter and amounted to 25.4 percent at annual rates during the third quarter of 1968. This composite rate compares with 21.3 percent and 16.3 percent for the years 1967 and 1966, respectively. Mutual funds continued their heavy trading with an annual turnover rate of 45 percent during the July-September period. Pension funds and property and casualty insurance firms, with turnover rates considerably lower than mutual funds, showed a lower turnover than in the previous quarter. The annual turnover rate for life insurance companies during the third quarter rose to a record 24.5 percent, up from 21.1 percent in the AprilJune period and nearly twice that of the third quarter a year earlier. The dollar

1 Turnover rates are computed as the lesser of purchases or sales divided by the average of the market value of stockholdings at the beginning and end of the period.

volume turnover rate on the New York Stock Exchange dropped sharply to 20.0 percent from the 27.2 percent of the second quarter of 1968. The comparable NYSE turnover rate during the third quarter last year was 21.4 percent. The following table provides comparisons of turnover rates:

2 Based on the 4 institutions included in this survey.

Based on the dollar volume of sales for the period and the average market value during the quarter.

Trends for the Various Groups

The total dollar value of common stock transactions by mutual funds declined $400 million in the third quarter of 1968. Net sales of $100 million is contrasted to net purchases of nearly $1 billion in the April-June period. The proceeds from the sales of common stock in this quarter, together with approximately $660 million raised from the sale of new fund shares, were invested in other portfolio securities or added to their liquid assets.

Private noninsured pension funds' total transactions remained at the record level of the preceding quarter, and were 38 percent higher than the third quarter last year. Net acquisitions of common stock exceeded $1.5 billion, and the net increase in common stockholdings accounted for 78 percent of the increase in pension fund assets during the third quarter; corporate bonds and preferred stock accounted for 13 percent; and cash and other assets made up the remainder.2

Data on total noninsured private pension fund assets and a breakdown of investments for the third quarter of 1968 are being published in the December SEC Statistical Bulletin.