Mr. LANDIS. Yes. He was not before the Commission; he did not testify before the Commission himself. The counsel brought out the fact that he was in no condition to testify.

Mr. FITZPATRICK. I believe the court acted on his mental condition. Mr. LANDIS. I am told-and I do not know this as a matter of official knowledge-that he has been suffering from a mental disorder, and has been committed under a court order.

Mr. FITZPATRICK. I saw by the newspapers that he was committed, and I think his wife was made the committee. He is in an institution now.

Mr. LANDIS. That is what I understand. That case involves transactions on the Curb Exchange.

The Wright case involves transactions on the Los Angeles Stock Exchange.

The Gagen case does not involve a New York Stock Exchange member but a member of the Boston Stock Exchange.

The Hutton case is one that involves transactions on the floor of the New York Stock Exchange, and the White, Weld case involves transactions on the New York Curb Exchange.

Mr. WIGGLESWORTH. After the trial examiner acts, and before disciplinary action can be taken, there must be further hearings before the commission as a whole?

Mr. LANDIS. Yes. The trial examiner makes his finding of facts. Those findings of faces may be excepted to either by counsel for the Commission or counsel for the respondent and then the argument is before the Commission en banc, upon the basis of the findings.

Mr. WIGGLESWORTH. There is an appeal from the finding of the Commission, if the party desires to appeal, to what court-the circuit court of appeals?

Mr. LANDIS. Yes.

Mr. WIGGLESWORTH. The disciplinary action you refer to can be taken at what time, in reference to a particular case?

Mr. LANDIS. It would be taken, naturally, after our decision. Whether an appellate court would stay that order pending an appeal, I do not know. That is a question I have never gone into.

Mr. WIGGLESWORTH. How long have these four or five cases been pending? The Meehan case started a long while ago, did it not? Mr. LANDIS. The Meehan case started about a year ago. The trial of that case took a great length of time. The transactions that had to be investigated began on May 16 and went through to October 26. To rebuild the record of those transactions in a case of that sort is very difficult; it is a difficult job to repaint that picture.

The record in that case involves over 6,000 pages, with over 700 exhibits.

Of course, that is the first case. Perhaps we will learn to try those cases more expeditiously in the future; I think we are learning.

Of course, the principal thing is the question of intent, as shown in the transactions. Then the question involved with reference to violation is whether the transactions were done with a certain intent. But the evidence on the question of intent may be wholly circumstantial.

Mr. FITZPATRICK. That is very hard to determine.

Mr. LANDIS. Yes.

Mr. WIGGLESWORTH. How long have the other cases been pending?

Mr. LANDIS. The Hutton case is a very recent case.

Mr. WIGGLESWORTH. It has just started?

Mr. LANDIS. It has just started. The Whiteweld case started about April, I think. The Gagen case is a short case. That was over in a short while, except for the final hearing before the Commission. That is one of the simpler cases.

The Wright case is still pending. That case involves the problem of rebuilding transactions not only in New York but also in Los Angeles. There, because of the insistence that we introduce the best evidence, instead of calling, we will say, fifty or a hundred brokers from Los Angeles to testify in New York or here, we had to remove the proceedings to Los Angeles to get the testimony as to trades effected on the Los Angeles Exchange. I do not know when that will be completed.

Mr. WIGGLESWORTH. Do you not think, if the Commission is to be really helpful, the time of action by the Commission at any rate ought to be considerably less than a year?

Mr. LANDIS. I hope that these cases can be tried much more quickly than that. On the other hand, there is nothing really lost by delay under these circumstances. The conduct complained of has ceased. It is not a question of preventive action; it is punitive in character. Mr. FITZPATRICK. Even though you do not find the accused party guilty, it prevents the recurrence of such things?

Mr. LANDIS. Yes.

Mr. FITZPATRICK. And that is a benefit to the general public? Mr. LANDIS. Yes. It is not as if you were trying to stop something going on at the present time. There we do not act in this fashion. This is where the object is one of trying to punish a man for something he has done, and the question is whether or not he has done the act with which he is charged.

Mr. FITZPATRICK. It is a pretty hard thing to prove that?
Mr. LANDIS. Yes.

OVER-THE-COUNTER MARKET REGULATION

Mr. WOODRUM. Suppose you proceed with your statement, Mr. Landis.

Mr. LANDIS. I was going to say, with reference to project 3, reports of officers, directors, and principal stockholders, that there you are dealing with something in line with the policy of trying to build up exchanges, where we are seeking to further the development of overthe-counter organizations which will take over both the adoption of rules of fair trade practice and the handling of grievances by themselves. I hope the thing is successful.

Mr. WIGGLESWORTH. In the testimony last year we talked about that somewhat and it was said that it was practically impossible for the Commission to do a 100-percent job in that field, as appeared to be contemplated by the terms of the act, but that it would be helpful to make an example here and there. How much do you feel you have accomplished in the over-the-counter field since we last talked about it?

Mr. LANDIS. I think we have accomplished a great deal. Registration of the dealers has been effective, in that over 6.000 firms are registered.

Mr. WIGGLESWORTH. How many are in that field? Have you any idea about that?

Mr. LANDIS. No; we do not have any idea. We have not a complete census of brokers and dealers.

Then there are certain brokers who are in the over-the-counter field who are exempt, because of the nature of the securities they handle. We do not know the number. They are primarily the municipal men. But I think we have done a pretty successful job policing the over-the-counter field. We have cleaned up some bad situations. Some of the practices that were being carried on I think have gone. The "sell and switch" artist is not nearly as common as he used to be. We have taken a group of men and put them in a particular vicinity for a time to clean up conditions in that vicinity, and they have been cleaned up. That was true in Boston and in Detroit. There was a rather bad situation in Detroit due to the fact that the commissioner in Ontario was chasing those men out of Ontario and they were coming across to Detroit, and we were chasing them out of Detroit. We put several men there, and they are still there, and have been there for 6 months, cleaning up the Detroit situation, which is happily applauded by all dealers in Detroit. They rid them of this unfair competition of these stockjobbing artists.

Mr. WIGGLESWORTH. Do you feel that there has been any tendency toward securities to move into the over-the-counter class as the result of such control?

Mr. LANDIS. Definitely not. We always feared that, and the exchanges have feared that, and yet there has not been substantial evidence to show that securities have been delisted because they would be subject to such regulation.

In that connection, an interesting incident occurred recently. The Bower Roller Bearing Co., of Detroit, filed application for delisting from the Detroit Stock Exchange because they did not want to reveal certain information that we insisted that they should reveal in their registration statement. It happened that the security was also traded unlisted on the New York Curb. Under the statute it was our duty to take that up with the New York Curb Exchange, and to delist the security if we thought that was in the public interest. But in the course of the proceedings we were asked by the company to delay action temporarily because a meeting of the board of directors had been called for December 23 to reconsider the question of delisting. I do not think that was the result of any pressure on our part, but it is a recognition that the loss of the exchange market is not a desirable thing. The tendency to move to the over-the-counter field has not developed as we thought it might.

Mr. WIGGLESWORTH. I have heard the opinion expressed that some of the over-the-counter dealers were doing more business than the big houses, in proportion.

Mr. LANDIS. I do not think that is so. The complaint is made, and yet if you look at the volume of business on the exchanges, you will see that that volume has increased enormously.

Mr. WIGGLESWORTH. You think everything is being done in the over-the-counter field that can reasonably be done, do you, or is further action contemplated?

Mr. LANDIS. No; I would not say so. Perfection of administration is contemplated in the field.

Mr. WIGGLESWORTH. Do you say perfection is contemplated?

Mr. LANDIS. Yes; the perfection of our administration is contemplated in the field.

Mr. WIGGLESWORTH. It is such a gigantic field that it is impossible to cover it thoroughly?

Mr. LANDIS. Yes; in the way in which one can cover the exchanges. We hope to develop a self-governing body in the over-the-counter field; I think that should be encouraged. We have several other important and time-consuming functions in this Trading and Exchange Division project, but they are very well covered in the justifications which have been made a part of this record.

STATISTICAL, ECONOMIC, ACCOUNTING, AND TECHNICAL-RESEARCH

ACTIVITIES

Mr. WOODRUM. Will you proceed with your statement, Mr. Landis? Mr. LANDIS. The sixth project covers the statistical, economic, accounting, and technical research activities of the Commission. We have an enormous demand upon us for information of all sorts and kinds. Other Government departments, committee of Congress, and individual Members of Congress are constantly requesting information, which they should have, concerning the volume of security issues and the nature of them and data on various companies. Consequently I think that that staff is a pretty reasonable staff for the product that goes out.

EXECUTIVE STAFF AND GENERAL ADMINISTRATIVE ACTIVITIES

The seventh item covers the executive staff and general administrative activity. That is generally the kind of administrative staff to be found in any commission. I think we are economical in our handling of that.

DRAFTING OF RULES, REGULATIONS, AND FORMS

The eighth project refers to the drafting of rules, regulations, and forms under both the 1933 and 1934 acts, and that is a continuous work. They have to take care of the development of new forms, more particularly in connection with new situations.

Mr. WIGGLESWORTH. Are you making any simplification in those forms; are you making any progress along that line?

Mr. LANDIS. I think we are making progress along that line. We are looking hopefully to some further real cooperation of industry on

that.

This group I talked of, the over-the-counter organization, created a special committee about 2 months ago, who have worked over the problem of forms and prospectuses, and they are ready to submit their report, which, I think, will be a good job, because they are trying to do a straight forward expert piece of criticism on it.

LEGAL ACTIVITIES, GENERAL COUNSEL'S OFFICE

Our legal activities, including the General Counsel's office, are under project no. 9. They pervade the entire field of administration. Most of the legal work of the Commission is centered there. There are a few exceptions. Counsel are detailed sometimes to certain other divisions in an advisory capacity, but the investigative work and the interpretive work is done in the General Counsel's office.

INVESTMENT TRUST STUDY

The investment trust study is being carried on now under the requirements of the Holding Company Act. How soon we will finish that is a question. We are trying to survey substantially the field of investment trusts, which is a huge field, and we are endeavoring to see what can be done with reference to it. That is quite a task, and an important task.

Mr. WIGGLESWORTH. Will it be a matter of months or years before it is completed?

Mr. LANDIS. It will be a matter of months; it will not extend over

years.

Mr. WIGGLESWORTH. Are you not making some other special studies?

Mr. LANDIS. We are completing a study on reorganization, which was in the hearing stage about this time last year, and continued in the hearing stage for a few months beyond that. Reports on portions of that study have been submitted to Congress. There are three reports left, one of which is now on the way through the Government Printing Office. The other two are on their way through the Commission.

STUDIES OF HOLDING AND OPERATING COMPANIES

Mr. WIGGLESWORTH. What are you doing under the utility act with reference to the simplification of structure? Are you not making a very thorough study of that?

Mr. LANDIS. Yes. Mr. Gilman, will you tell Mr. Wigglesworth what we are doing on that?

Mr. GILMAN. Of course, that work is not as complete as it should be. We have had during the last year 18 percent of the industry, holding companies and operating companies, registered under the act, which should register under the act, and from those companies we have obtained a great deal of information as to their physical and financial characteristics.

The organization of the men in the utilities division has been set up in groups to analyze that data furnished by those companies, to study it, and in a preliminary way to make the studies contemplated by section 11 and section 30 of the act.

We have been handicapped, since we have only standard information from the companies that are not registered.

You remember the scheme of registration under the Holding Company Act was first of all to have the companies file a notification of registration, which was a very simple matter. Then in 12 months they filed a complete form of registration.