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Loomis, Philip, Jr., general counsel, Securities and Exchange Com-
mission...

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Additional material submitted for the record by-Continued
Interstate and Foreign Commerce Committee:

Article from Wall Street Journal of June 20, 1968, entitled
"Testing the NASD-Stock Trading Snarls Pose Major
Challenge to Over-Counter Group"-
Correspondence between the SEC and the committee re increased
difficulties the Commission is experiencing in its workload as a
result of increased activity, particularly in registration state-
ments under the 1933 act__.
Correspondence between SEC and the committee re increased
speculative activity on the stock exchanges, particularly the
American Stock Exchange..

Correspondence between Chairman Moss and Wm. McChesney
Martin, Federal Reserve Board, re sources of funds available
to finance cash tender offers and restrictions or regulations
pertaining thereto....

Correspondence between Chairman Moss and Chairman Budge re
treatment of "blocked" or "letter" stock in the portfolios of
mutual funds, the SEC's activity relating to use of inside
information in connection with exempt securities, and status of
proposals on industrial revenue bonds...
Correspondence in 1967 between Chairman Moss and Hon.
Manuel F. Cohen, Chairman, Securities Exchange Commission,
re 1966 Annual Report of the National Association of Securities
Dealers---

Letter dated June 4, 1968, to Chairman Staggers from Ralph S.
Saul, President, American Stock Exchange, re rise in ratio of
trading volume on the American Stock Exchange to that on
the New York Stock Exchange--

Letter dated November 8, 1968, to Chairman Moss from Chair-
man Cohen, transmitting memorandum re cash tender offers..
Material relating to the question of fails, including articles from
the New York Times, and the Wall Street Journal, also mem-
orandum dated February 17, 1969, from the SEC, and pages
416 to 428 of the SEC study of the securities markets filed with
the committee on April 3, 1963.

Paragraph 1003-Objects and purposes, from the certificate of
incorporation of National Association of Securities Dealers,
Inc., filed July 18, 1939___

Section (A) (b) (8), Securities and Exchange Act of 1934.
National Association of Securities Dealers, Inc.:

Correspondence between Chairman Moss and Mr. Walbert re
additional questions on fails, regulation coverage, board of
governors, and complaints regarding members underwritings..
Correspondence between Chairman Moss and Mr. Walbert re
Merrill Lynch underwriting of Douglas Aircraft -
Exhibit 1-Summary of certificate of incorporation bylaws and
rules changes undertaken by the association since the publica-
tion of the "Special Study of Securities Markets" in 1963 and
the "Securities Acts Amendments of 1964" and directly or
indirectly resulting therefrom___

Exhibit 2-Summary of actions taken by the association to allevi-
ate the "fails" problem in the securities industry-
Exhibit 3-Letters to members re: "fails"; special reports and
press releases re: "fails"; and special report and letter to mem-
bers re: speculation...

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Exhibit 4-Tabulation of formal complaints and summary com-
plaint proceedings and disposition, January 1-December 31...
Exhibit 5-Fails statistics (81 reporting firms) -
Exhibit 5A-Graph showing fails statistics..

201

202

202

New York Stock Exchange:

Correspondence between Chairman Moss and Mr. Haack re
proposals by target companies to alter their structure or
bylaws as a defensive measure.

Exhibit A-New York Stock Exchange member firms fails to
deliver, month-end April to January 1969, by type of security-
Exhibit B-List of 27 steps taken by securities industries in
1968 to improve operations__

169

140

142

Additional material submitted for the record by-Continued

New York Stock Exchange-Continued

Letter dated March 3, 1969, to Chairman Moss re the possibility
of organized crime in the securities market...
Letter dated March 12, 1969, to Chairman Moss, comments
regarding certain extracts from colloquy with Hon. Manuel F.
Cohen on March 7 of the hearing..

Page

161

173

Letter dated March 12, 1969, to Chairman Moss re statement on
institutional membership.

172

174

18

Letter dated March 28, 1969, to Chairman Moss re OTC fails___
Securities and Exchange Commission:

Accounting questions in corporate acqusitions__
Correspondence between SEC and Chairman Moss re profit
taking in connection with tender offers and legislation to modify
section 16(b)....

Letter dated March 12, 1969, to Chairman Moss from Chairman
Budge, transmitting information regarding shift from equity
to debt securities__

Letter dated March 20, 1969, to Chairman Moss, from Chairman
Budge, re restrictions imposed by the New York State insur-
ance laws on the percentage of assets which may be invested
in equity securities by insurance companies subject to New
York's jurisdiction___

Letter dated April 4, 1969, to Chairman Moss from Chairman
Budge, re information respecting speculation, fails to deliver,
stock certificates, institutional buying and selling, order sizes,
tender offers, volume of trading, commission revenues, and
present workload..

Letter dated April 24, 1969, to Chairman Moss from Chairman
Budge, re SEC inquiry into hedge fund problem...
Proposed takeover by Northwest Industries, Inc., of the B. F.
Goodrich Co.-Memorandum, with transmittal letter dated
February 27, 1969, to Chairman Moss from Chairman Budge-
Table 1.-Selected stock market statistics___
APPENDIX: Submitted by National Association of Securities Dealers,
Inc., as Exhibit 3-Letters to NASD, Regarding "Fails", special reports
and press releases regarding "Fails", and special report and letter to
NASD, regarding speculation __

ORGANIZATIONS REPRESENTED AT HEARING

American Stock Exchange:

Graham, Frank C., Jr., chairman, Board of Governors.

Kolton, Paul, executive vice president.

Saul, Ralph S., president.

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Walker, James W., Jr., senior vice president in charge of legal and government affairs.

National Association of Securities Dealers, Inc.:

Burgess, Ralph, chief economist.

Derrickson, Lloyd, general counsel and secretary.

Monet, Lee, director, Uniform Practice Committee.

Peters, Richard, special coordinator, fails program.

Sayre, Kenneth H., chairman of the Board of Governors.

Walbert, Richard, president.

Wilson, Frank, associate general counsel.

Wright, Thorpe.

New York Stock Exchange:

Buck, James, government and civic affairs department.
Cunningham, R. John, executive vice president.

Haack, Robert W., president.

Levy, Gustave L., chairman, Board of Governors.

Securities Exchange Commission:

Budge, Hon. Hamer H., Chairman.

Loomis, Philip, Jr., General Counsel.

Smith, Richard, Commissioner.

Wheat, Francis, Commissioner.

SECURITIES MARKETS AGENCIES

TUESDAY, FEBRUARY 25, 1969

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCE AND FINANCE,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The subcommittee met at 10 a.m., pursuant to notice, in room 2123, Rayburn House Office Building, Hon. John E. Moss (chairman of the subcommittee) presiding.

Mr. Moss. The subcommittee will be in order.

This morning the Subcommittee on Commerce and Finance of the House Committee on Interstate and Foreign Commerce is opening a series of hearings on the administration of the laws pertaining to the regulation of the securities markets by the administrative agency and by the self-regulatory agencies involved.

The purpose of these hearings is twofold. The first is that of acquainting the members of the subcommittee with the major problems which face the administrative agencies, the self-regulatory agencies, and the industry.

Eight years ago, in connection with the initiation of a study of the securities markets, the subcommittee conducted hearings; and again 5 or 512 years ago in connection with the report made by the Securities and Exchange Commission of the results of this study, the subcommittee also had a fairly thorough examination of the major problems which then faced the same agencies and the industry.

Since that time there has been a change in the membership of this subcommittee and a change in the heads of the exchanges and of the national association, and accordingly we have in mind that these hearings will give us an opportunity of becoming acquainted with one another as well as with the major matters which face us today.

To a greater or lesser degree it appears that some of the problems today are as acute as those that were present some 8 years ago. At that time certain representatives of the self-regulatory agencies made statements regarding undue speculation then taking place in the securities markets and those agencies took certain steps to dampen this speculation. Then also fails were significant and a disturbing feature of the market. Then also there were certain instances of the use of inside information or position. These problems exist today.

The second purpose of these hearings is that of a review of the operation of the Securities Act Amendments of 1964.

Those amendments were presented by the Commission as recommendations evolving from its study of the securities markets and the rules of the Commission and of the self-regulatory agencies.

At the time of the enactment of that legislation it was stated that most of the recommendations of that study could be carried forward

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