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time to time important matters that have not reached the adjudication stage would be made public by publishing important opinions, leaving entirely to the staff and the Commission the determination as to which should be published and which are of such a narrow or confidential nature that they should not be published.

Mr. MEEKER. I think that the Commission can do that. It has done it in the past. I don't think it has done as much of it recently as it did in the early days of the Commission when there were many questions coming to it that involved important issues of interpretation. I think the Commission has done it over the last 2 years in some of its principal opinions. It has given its view in contested cases with respect to interpretations which have been disputed insofar as certain exemptions are concerned.

But I think the Commission can do that.

One of the problems we have is in drafting something which at the same time as you keep nonpublic the information supplied to you by the applicant for the interpretation, will, nevertheless, at the conclusion of the draft make sense. It is a factual discussion which is a problem from time to time. But I think that can be done.

Mr. ROGERS of Texas. I am afraid we are getting off to another topic. Of course, I know it has something to do with the first topic. Does any member of the industry care to be heard with relation to Mr. Meeker's statement on topic I?

Mr. FARMER. Mr. Chairman, on topic I, I think the most important thing that Mr. Meeker has suggested is on page 10 of his statement, that there be a black and white absolute prohibition against any type of ex parte communication in a quasi-judicial proceeding.

I would just like to give a little background as to what, from the point of view of an issuer, that would seem to amount to. The Bell System companies have registered under the 1933 act, 143 issues, with aggregate face amount of approximately $15 billion. That is including refunding issues. We have had a lot of contact with the Commission's staff and with the Commission. I mention the Commission's staff first because most of our dealings, almost our entire dealings, are with the Commission staff.

In the registration process, we file a registration statement with the Commission, and in due course we usually receive a letter of comments with respect to our registration material. Sometimes we will take the suggestion without conference. We will often ask for a conference with the SEC staff on their comments. We will go down. Sometimes we feel strongly on the matter, and we might even ask that we go to the Commission to discuss it. That is unusual.

Mr. ROGERS of Texas. Is a transcript made of those proceedings? Mr. FARMER. No; it is not. They are informal, give-and-take conferences. I think the background is important in those conferences. They are against a time schedule of financing which precludes a formal record, a formal hearing.

We have a time schedule to meet. The Commission's staff knows that and the Commission knows that. That, you might say, would indicate that they have an advantage or the whiphand in the proceeding. But I cannot say that I have seen any indication that they have taken advantage of that. I have nothing but admiration for the intelligence, ability, and devotion to duty of the members of the staff in

it

handling those matters. I think probably the procedure is the way should be. They are exercising their administrative functions. I must say I think it works quite well.

Because we register so many securities, the rules of the SEC are very important to us. A change in the rules may occasion considerable expense and a great deal of difficulty for us, maybe much more than the SEC thinks. On the other hand, a simplification of their rules may lift a great burden from us.

When changes of the rules are proposed, we make written comments on them. If we think it is necessary, we say, "May we come down and discuss what that change in the rules will do?" I think that is the way it should be.

I haven't mentioned adjudication proceedings because in our entire experience with the securities laws, no Bell System company, I feel sure, has ever had such a proceeding. So far as the securities laws are concerned, our contacts are, if you like, ex parte. They are informal. They are negotiations, largely at the staff level. As long as the securities laws are based on the disclosure principle and the real issue is whether the company is making proper disclosures, I think that is the way it should work.

I say that because I think from the point of view of the SEC we have a very different problem, perhaps, than confronts other agencies, where the contacts of industry with the agency are of an entirely different nature. I am thinking of the agencies which supervise all of the affairs of companies, the Interstate Commerce Commission, the Federal Communications Commission, to which our company is subject. In these other agencies, day by day, there is a constant overlap of proceedings, investigations, and inquiries, formal and informal. Depreciation practices, accounting rules, rates and services are all subject to the Commission, and the agency has constant contact with numerous people in the regulated industry. There I think the flat prohibition, which may seem reasonable with respect to the SEC, that there should be no contact or discussion on the merits with the staff and so forth, may not be feasible. I think probably everything that is discussed with such an agency on any matter has a bearing, some remote bearing, on virtually everything else before the Commission. I think that an across-the-board prohibition would be difficult to frame. We have a very different problem looked at from the point of the SEC than looked at from the point of view of other agencies. I agree with most of what Mr. Meeker has said. I think that his statement is excellent. I think there can be no doubt that the most important single thing is the integrity, ability, and devotion of the staff. Certainly, the SEC has that. They have codes of ethics which are very advanced and excellent. I hate to talk so long, but those are my views on this.

Mr. ROGERS of Texas. Thank you, Mr. Farmer.

There is one other question that I want to put out for the panel discussion here before we move into the second topic, and that is the question with relation to the status of the SEC, that is, as to whether or not it is an arm of the Congress or a part of the executive branch of the Government.

Do you have any comment on that, Mr. Gadsby?

Mr. GADSBY. That is a question which has been the subject of a very substantial amount of debate. It is true that historically, of course, the Securities and Exchange Commission, and, for that matter, the grandaddy of all commissions, the Interstate Commerce Commission, was a delegation of power by the Congress.

It shows up more clearly, of course, historically, in State regulation, where the regulation of railroads started with committees of the legis lature. It was not until 1846, as I recall it, that somebody got the bright idea that perhaps a third party could do a better job of it. Up until that time, all railroad legislation was in the hands of the legislature itself.

Who we are strictly a part of, the executive branch or of the legislative branch, is an interesting suject of conjecture, but seems to me to make very little difference. The fact of the matter is that in my experience in almost 2 years on the Commission, the executive branch might as well not exist as far as our agency is concerned. They never interfere, never question us, and pay no attention to us.

I might say that the same thing is true to a large extent of the legislative branch. True, we get more inquiries, but the legislators are more close to their constituents than the executive, perhaps, is. It would be natural for that to follow.

But I have never had any occasion to have to decide whether the agency is a part of one branch of the Government or another. It seems to me to be a philosophical distinction without very much substantive meaning.

Mr. ROGERS of Texas. Does anyone else care to comment on that? Mr. ALPER. Mr. Chairman, I would like to make this comment, as you are leaving the topic: It seems to me that approaching this prob lem is made more difficult because we always tend to try to get an answer, a yes or a no. It seems to me that the truth of the matter is that there is inherent in the administrative conflict a compromise or a conflict of basic ideas or philosophies.

This, I think, we have to recognize. This conflict stems from, 1 think, these two opposing or contending forces: On the one hand the creation and development of administrative agencies has recognized several things, that the matters are complex, courts can't handle them, they are not sufficiently expert, they do not have the staff, they don't have the time, but people who are experts, who can employ a staff, who do have contact with the industry, that is what expertise means, and that is one side.

On the other hands, you get a situation where some of these proceedings, the lawyers and courts call them quasi-judicial, and we start clothing these things with the due process concept.

Certainly as counsel I have argued many times on this point. But basically there is a conflict. On the one hand you create the agency because it knows the industry, it has contacts with the industry, understands its problems, and on the other hand when we find abuses, we say, "Well, let's isolate them."

I say that the isolation can destroy the administrative process. I think we have to recognize that we are in an area where you are going to have sin from time to time, like you will have sin in everything else in life. It is not perfect.

Mr. ROGERS of Texas. I am glad to get a definition of that word "expertise."

Mr. DEMMLER. Mr. Chairman, before topic 1 is left, I think maybe we do not quite realize the full impact of the suggestion on page 10 of Mr. Meeker's statement about this complete black and white prohibitory statute, which would make unlawful any communication in the absence of the parties without notice to them, and so forth, on the merits of any matter in which such persons are exercising quasi-judicial functions.

It seems to me that that particular statute uses a mentally lazy word "quasi-judicial." What is a quasi-judicial function? You get to very precise questions.

For example, under the Public Utility Holding Company Act, there is an application with respect to a financing or a declaration with respect to a financing. Ultimately, it goes into a hearing because of some additional facts which the staff thinks or someone thinks ought to be developed in a formal record. That is a formal record.

It looks kind of judicial, and yet actually the record simply amplifies the filing, the declaration which was made as a routine part of the financing. It is just expanding the form. You could argue that that is not judicial. Is it quasi-judicial? I don't know.

The Commission itself has never quite resolved, I believe, whether or not that is rulemaking or whether it is adjudication. If you pass a statute and you use a nice, easy word like quasi-judicial without defining it in its application to a particular agency, you don't know whether the man has committed a crime or whether he hasn't.

It seems to me that there is so much difference among the agencies that the public is pretty well protected by the existing legislative situation; namely, you have your Agency Obstruction of Justice Act, which Mr. Meeker referred to on page 4 and 5 of his statement, which has received a broad interpretation.

You also have rules of the various agencies. I think the rules of conduct and the code of ethics of the Securities and Exchange Commission are precise enough to define the exact context in which things are right or wrong as the case might be. It seems to me that those two things together are all you need except integrity, and you can't legislate that.

Mr. ROGERS of Texas. What you are saying, Mr. Demmler, is this: If a man is a crook, no matter what kind of legislation you pass, if he wants to communicate with somebody, he will do it.

Mr. DEMMLER. Yes, sir; and I do not think that Mr. Meeker's black and white statute would help any. I think it would add to the confusion.

Mr. ROGERS of Texas. I think the difficulty with a black and white statement is this: that you haven't determined the premise from which to start. That is the difference between quasi-judicial and rulemaking proceedings. That is your big difficulty.

If you could ever determine a clear line of demarcation between those two activities, I think you would be in a very excellent position then to get into the black and white.

Mr. DEMMLER. You can do that in individual agency rules, which you could not do in the general statute. I think the rules of conduct of the SEC are quite precise and are adequate.

Mr. ROGERS of Texas. Of course, one of the objections, Mr. Demmler, as I understand it, has been the fact that rulemaking procedures authorized by the agencies have been utilized sometimes to bring about. policies and practices that should not be under the rulemaking power. Hence, the discussion about that in all of the independent agencies. Mr. SPRINGER. Mr. Chairman

Mr. ROGERS of Texas. Mr. Springer?

Mr. SPRINGER. I do not want to get into detail on this because there will be hearing later. But you are the only one thus far of any of the panelists who have discussed very much on H.R. 4800 and H.R. 6774. Could you give me briefly your reasons why you prefer H.R. 6774 over H.R. 4800?

Mr. MEEKER. Well, I think largely because it tends, through specific exceptions in that legislation, to preserve the very type of thing which some of these gentlemen have suggested earlier here, Mr. Springer, that I think is necessary in the administrative process, and that is some of the informal contacts which are not directly related to the decisional process itself.

You will recall that legislation is directed toward agency members or hearing examiners, and as some of these distinguished gentlemen have suggested this morning, I think it is highly desirable that it would be possible to call up the General Counsel and ask what the status of a matter is without being exposed to possible criminal action. Mr. SPRINGER. In other words, you think H.R. 6774 is directed at people who possibly could be influenced and more likely to be influenced?

Mr. MEEKER. That is right. No one man at the SEC, Mr. Springer, in the staff, makes any decision. If I am going to make a decision, there will be four or six or maybe three or four, I don't know how many, around to discuss it with me, and the right to influence a staff member in our daily operation is very remote.

Mr. ROGERS of Texas. Mr. Brownell?

Mr. BROWNELL. May I add a word in answer to Mr. Springer's question?

In the first place, I think most of the individual practitioners here on this panel will agree with what has already been said, that it is not desirable to attempt overall legislation applicable to all of the commissions, because their individual problems are very different.

There is not time to go into the reasons for that, but those of us who have practiced before several of the commissions could, I think, if you wished, in due course, show you that we have good cause for making that statement.

Leaving that aside, and taking H.R. 4800 and H.R. 6774, in my opinion H.R. 4800 goes too far and it would throttle and choke off a great deal of the conference and conversation that goes on between the individual practitioners and members of the Commission staff, which is such an important part of the administrative processes before the SEC.

For example, it contains in its preamble, wording to the effect that there should be only "fair and open presentation of facts and arguments in accordance with established procedures." What is meant by "open"? Does that mean open hearings? Does it mean hearings to which everyone who wants to come in will be invited?

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