SEC which, from our standpoint, is all of it, the really important thing may be somewhat slighted. This is not in any sense derogatory to the staff. I know in Cleveland we have great respect for not only the competence but the integrity and industry of the Commission. This may also be lapping slightly into the next topic, but we are concerned with the fact that in the registration statement procedure, and last year there were about $17 billion in new financing which was processed by the Commission, all of that went through four assistant directors under Mr. Woodside. There are a lot of problems there, a lot of staff being required. Since the last report, the time lag on registrations for the letter of comment has been increasing, at least in our experience. Again, there are just so many hours in the day, and just so many people on the staff. But I do think that when we look at the SEC in the same light as a number of other commissions, we may run the risk that feeling the sort of thing we have been talking about mostly today is the heart of the thing, and it really isn't, from your standpoint. There are a lot of people that aren't getting in trouble with the SEC, that are submitting proxy statements, registration statements, and the like. I do think this is something that should be considered, perhaps, in the question of staff and staff assignments. Mr. GADSBY. I think Mr. Woodside will cover that to some extent in his discussion, Mr. Chairman. Mr. DEMMLER. Mr. Chairman, I don't want to attempt to make Mr. Gadsby's speech over again for him. I would like to comment in just a little detail on each one of several points. One is the provision in H.R. 4800 which would require Commissioners to write their own opinions and to delegate, so to speak, to individual Commissioners the job of writing the majority opinion, as it is done in a court of record. I think if that were enacted into law, it would create a complete impossibility so far as the SEC is concerned. I don't think that there are enough hours of the day for that to be done. Mr. ROGERS of Texas. That provision does not require him to write. It requires him to be responsible for its preparation. Mr. DEMMLER. In that case, depending on how you interpret that phrase, the whole Commission is responsible for the preparation of the opinion under the present regime of working with the Office of Opinion Writing. I know from experience on the Commission that that Office of Opinion Writing is a very skillful, well trained group which can come to the Commission table while the opinion is being formulated, and can catch the delicate shadings of each one's opinion, each Commissioner's opinion, as he expresses it orally. They are all very good draftsmen. Finally, when the opinion comes near to the point of finality, individual Commissioners will take it home, take a draft home with their homework and interpolate. But the system works and it works very well. It seems to me it would be a near tragedy if that were to be broken up by what seems to be a mere legislative prescription of mechanics. I would also like to say with respect to plan 10 and the allocation of functions to the Chairman, that with the extensive individual workload of the Commissioners involved in sitting around together at these daily meetings, which consume maybe a total of 5 hours each day, there comes to be a necessity for some kind of personal congeniality in order to make life tolerable. The Chairman is certainly not going off on frolics of his own in administrative matters without consulting his fellows. Yet the fact that the Chairman does have the ultimate responsibility for internal administrative matters puts the Commission in form to function. There can be an end to the debate. If everything had to be by kind of an even bank procedure, too much time could be consumed by pulling, hauling, choosing up sides, and that sort of thing. The Chairman of the SEC has never, so far as I know, been a dictator. It is a system which has worked very well to date. I think the same observation about pulling, hauling, and choosing up sides is a thing which justifies divesting of the appointive power in the President, so far as the selection of the Chairman is concerned. I would also like to second what Mr. Gadsby has said about the present sufficiency of the very detailed and precise and well-drawn rules of conduct of the agency with respect to either seeking employment in the outside world while you are still in the Commission, or coming back to practice before the Commission once you have gone outside. The rules are well drawn. I am convinced there is no preference accorded to former members of the Commission. I would think, on the contrary, that maybe you are looked at a little more carefully when you do have a matter before the Commission. I can recall that the day I left one of my fellow Commissioners said, "Remember, Mr. Chairman, there is nothing deader around here than an ex-Chairman." I believe the rules of practice adequately take care of that particular situation. Mr. ROGERS of Texas. Thank you. One statement I wanted to question just a second on was the reference to the provision in H.R. 4800 about the preparation of opinions. Isn't that the procedure presently followed by the Federal Trade Commission? Mr. DEMMLER. I can't answer on the basis of any exact knowledge, but I believe they do pass their opinions around. Mr. GADSBY. Mr. Chairman Mr. ROGERS of Texas. One Commissioner, though, signs it, does he not? That is, in the Federal Trade Commission? Mr. DEMMLER. I am afraid I just don't have enough knowledge to undergo cross-examination on that. Mr. GADSBY. Mr. Chairman, section 17 of H.R. 4800 reads as follows: The Commission shall designate a Commissioner to prepare or to personally direct the preparation, in writing, of a statement of the reasons or basis for the decision of the Commission in each case decided by the Commission. Each such statement shall be signed by the Commissioner who was responsible for its preparation. Commissioners shall be designated to prepare or direct the preparation of such statements so that, insofar as possible— and so on. Speaking for myself, Mr. Chairman, if I were put in that position I would write the opinion. If I am going to be responsible for it, I am going to write it. I don't know just when I would do it, however. Mr. ROGERS of Texas. Do you mean if you were required as an individual member of the Commission to be responsible for an opinion over your signature, you would want to write it yourself? Mr. GADSBY. Yes. Mr. ROGERS of Texas. How would that be a great deal different from the entire Commission taking responsibility for it? In other words, you are severally liable this way, and the other way you are jointly liable. Mr. GADSBY. I can perhaps best point out that with the entire group jointly responsible for the Commission, all of the Commissioners give a certain amount of attention to the record and compare that with the decision which is put before them by the Office of Opinion Writing. If I were going to have to sign the opinion myself, I would not rely upon the Office of Opinion Writing, the hearing examiner, or anyone else. I would go to the record and read it completely myself. Mr. ROGERS of Texas. The joint responsibility leads you to the thought that misery loves company, if anything happens. Mr. GADSBY. That is about it. Mr. ROGERS of Texas. Mr. Springer? Mr. SPRINGER. Mr. Chairman, from reading your statement, I would like to ask you a question. I do not see that there are any recommendations along point 3, to which you are now testifying. Is that correct? Your statement is point 3? Mr. GADSBY. I have no particular recommendations on this point; no, not on legislation. Mr. SPRINGER. No legislation or any other measure with reference to point 3, the role of the Commissioners, their immediate staffs, agency staffs, and the division of responsibilities? Mr. GADSBY. I have confined my remarks pretty largely to an attempt to analyze what would be the effect of H.R. 4800 upon the operations of the Commission. Mr. SPRINGER. That is your principal thought? Mr. GADSBY. Yes. Mr. SPRINGER. Does anyone elso have any comment with reference to legislation that would be required to cover, in your opinion, point 3? That is all, Mr. Chairman. Mr. ROGERS of Texas. Mr. Gadsby, with relation to your assignment of cases to hearing examiners, who does that? Mr. GADSBY. My executive assistant. Mr. ROGERS of Texas. Who is he? He is your legal assistant or your executive assistant? Mr. GADSBY. No; I have an executive assistant, one of whose duties is the handling of the hearing examiner calendars and assignments, and so forth. Mr. ROGERS of Texas. Is he requested to assign certain examiners to certain cases? Mr. GADSBY. We haven't got enough examiners to do that. We assign them when we have one. Mr. ROGERS of Texas. I know, but does he ever get any requests to do that? Mr. GADSBY. No; not that I know of. I never heard of any. Mr. ROGERS of Texas. Does he attempt to assign them because they may be better qualified, in his opinion, as to some particular field of endeavor than others? Mr. GADSBY. No. Mr. ROGERS of Texas. Do any of the examiners attempt to be assigned? Do they request assignments to certain types of cases? Mr. GADSBY. I am not close enough to answer that question. Maybe Mr. Hislop can. Mr. HISLOP. I have never requested any assignment; no, sir. Mr. ROGERS of Texas. Mr. Chairman, how much autonomy does the regional office have, or do the regional offices have? Mr. GADSBY. What do you mean, Mr. Chairman? Mr. ROGERS of Texas. How much authority, actually, do they have with relation to resolving matters that concern violators? Mr. GADSBY. Very substantial authority. There are certain limits, certain well-defined and prescribed limits to their authority. In order to open an active proceeding or to close an active proceeding, they must consult with the divisions. They must report what they are doing to the Washington office. But they do it on their own. They make their own investigation of brokers, conduct their own investigations, bring their own injunctive proceedings, and so forth. It is under the general jurisdiction of the operating departments, but they are pretty largely autonomous in their daily work. You will find on the organizational chart an explanation of the definition of the functions of the regional offices. Mr. ROGERS of Texas. Do they have any particular procedure that they have to go through to get clearance from the Washington office! Mr. GADSBY. No. Very often it is done over the telephone, if they are in a hurry. Mr. ROGERS of Texas. I notice an absence of comments by representatives of industry in these matters. I am wondering if there is any reason for that. Mr. Broderick, do you have any comments to make? Mr. BRODERICK. I would have this comment, Mr. Chairman: I have frankly found it somewhat difficult to follow the breakdowns of the topics for discussion here, and to know just where we are so far as the particular interests of, for instance, members of my association, who are regulated investment companies. I would second the point that Mr. Sheedy made earlier, that we have been putting in a great deal of time here today dealing with matters of hearing procedures and the powers of the hearing examiner, when actually in the day-to-day operations of most registrants other matters are of more primary concern. Members of my association are concerned with the Securities and Exchange Commission in at least two contexts. As in regulated investment companies, they must be registered under the Investment Company Act of 1940, and the shares which they issue must be registered under the Securities Act of 1933. These registrants or the officers, employees, or attorneys representing them are in fairly constant contact with one or another division of the Securities and Exchange Commission. This, of course, is particularly true of open end investment companies whose shares are constantly in registration and who must, therefore, constantly have effective a registration under the Securities Act of 1933. It seems to me that the very important single aspect of Securities and Exchange Commission operation is that it must have a staff which is adequate to do the job prescribed by Congress. I think there is no question that anyone in my branch of the industry would raise or could raise, so far as the dedication to duty of the employees, the staff, and the Commission itself in the Securities and Exchange Commission. I think that so far as qualifications for that job, so far as dedication to that job, it is an outstanding public group. I think the principal problem that the Securities and Exchange Commission faces today is a personnel problem. Mr. Sheedy adverted to the increasing timelag so far as registrations are concerned. Well, I think this is simply a matter of the Commission not having the personnel today to meet a much more active securities market. I think the great thing that is needed is an increase in personnel for the Securities and Exchange Commission. Mr. ROGERS of Texas. What type of personnel, Mr. Broderick? Mr. BRODERICK. Personnel in their Corporation Finance Division, personnel in their Corporation Regulation Division, so that they are in a position currently to continue to process the business that comes before them. Mr. ROGERS of Texas. How much increase do you think would be necessary, percentagewise? Mr. BRODERICK. I don't think I am competent to say, Mr. Chairman. I think I can only comment that the Commission has, to the extent that it has been able to, been available in advance to registrants and prospective registrants. I do recall that at some stage, either last year or early this year, Mr. Woodside, in a talk-I think it was at a conference on securities regulation-pointed out that the volume of activity that the Commission was confronting at the present time made it practically impossible for the staff to pass on matters in advance, or to discuss matters with attorneys, or to discuss with representatives of industry in advance, because the current pressure of matters calling for immediate action was such that there were just no personnel available for advance conferences. I think that in the case of individual registrants and people who propose registration, such advance access has been very valuable in acquainting people with Commission requirements and with possible problems in connection with their particular registrations. I would say that my principal comment on all of the matters discussed so far is that I think the pressing problem in connection with the Securities and Exchange Commission is a personnel problem. Mr. GADSBY. Mr. Chairman, if I may answer your question as to the type of employee, our requests for the 1960 budget call for 22 attorneys, 9 financial analysis, 5 investigators, 7 broker-dealer inspectors, and the balance clerical, making up a total of 65, of which 35 are scheduled in the field offices and 30 in the Washington office. Mr. ROGERS of Texas. Mr. Welch? Mr. WELCH. I would like to support what Mr. Broderick and what Mr. Sheedy said. I was silent this morning on topic 1, because I thought it was pretty well covered. |