COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS

JOHN SPARKMAN, Alabama, Chairman WILLIAM PROXMIRE, Wisconsin

JOHN TOWER, Texas HARRISON A. WILLIAMS, JR., New Jersey WALLACE F. BENNETT, Utah THOMAS J. MCINTYRE, New Hampshire EDWARD W. BROOKE, Massachusetts WALTER F. MONDALE, Minnesota

BOB PACKWOOD, Oregon ALAN CRANSTON, California

WILLIAM V. ROTH, JR., Delaware ADLAI E. STEVENSON III, Illinois

BILL BROCK, Tennessee
DAVID H. GAMBRELL, Georgia

ROBERT TAFT, JR., Ohio
DUDLEY L. O'NEAL, Jr., Staj Director and General Counsel

MICHAEL E. BURNS, Minority Counsel
STEPHEN J. PARADISE, Assistant Counsel

SUBCOMMITTEE ON SECURITIES

HARRISON A. WILLIAMS, JR., New Jersey, Chairman WILLIAM PROXMIRE, Wisconsin

EDWARD W. BROOKE, Massachusetts THOMAS J. MCINTYRE, New Hampshire JOHN G. TOWER, Texas WALTER F. MONDALE, Minnesota

WALLACE F. BENNETT, Utah ADLAI E. STEVENSON III, Illinois

BOB PACKWOOD, Oregon DAVID H. GAMBRELL, Georgia

WILLIAM V. ROTH, JR., Delaware

SECURITIES INDUSTRY STUDY

DAVID L. RATNER, Chief Counsel
ALTON B. HARRIS, A88istant Counsel
THOMAS C. NEWKIRK, A88istant Counsel

KENNETH D. STEPHENS, Assistant Counsel
HAMILTON H. WOOD, Jr., Professional Staf Member

CONTENTS

Page

3

S. 3412..

Reports from :

Federal Deposit Insurance Corp---

Treasury Department--

S. 3297-

S. 2551..

Comparative summary of their provisions.

H.R. 14567

H.R. 14826_

53

55

20

39

57

1000

1017

CHRONOLOGICAL LIST OF WITNESSES

64

89

115

137

169

TUESDAY, MAY 9

Charles H. Percy, U.S. Senator from the State of Illinois_

William J. Casey, Chairman, Securities and Exchange Commission; accom-

panied by Commissioners Hugh F. Owens, James J. Needham, A. Sydney

Herlong, and Philip A. Loomis.--

Thomas P. Phelan, president, Pacific Coast Stock Exchange; accompanied

by C. J. Delahunty, president, Pacific Coast Stock Exchange Clearing

Corp.

Robert M. Gardiner, Chairman of the Board of Directors, Securities Indus-

try Association; accompanied by Leon T. Kendall, president, Securities

Industry Association; and Roger E. Birk, vice president and director,

operations division, Merrill Lynch, Pierce, Fenner & Smith, Inc.

Eli Weinberg, partner, Lybrand, Ross Bros. & Montgomery--

WEDNESDAY, MAY 10

Richard B. Howland, president, Stock Clearing Corporation and executive

vice president, New York Stock Exchange, Inc.--

John M. Cookenbach, president, Trust Division, American Bankers Asso-

ciation; accompanied by Frank W. Kaestner, senior vice president, Manu-

facturers Hanover Trust Co., New York; chairman, American Bankers

Association Trust Division Corporate Trust Activities Committee; and

William G. Milburn, vice president, Mellon National Bank and Trust Co.,

Pittsburgh

Walter F. Thomas, vice chairman, Manufacturers Hanover Trust Co. on

behalf of New York Clearing House Association; accompanied by John

F. Lee, executive vice president; New York Clearing House Association,

and David G. Gray, counsel, Manufacturers Hanover Trust Co---

Thomas W. Stanley, president, Stock Transfer Association, Inc., accom-

panied by Clayton M. Nicholson, vice president, Chemical Bank and the

Stock Transfer Association, Inc.; Edward J. McNamara, assistant

secretary and assistant treasurer, Bethlehem Steel Corp. ; Francis T.

Christy, Christy, Frey & Christy; and Robert S. Appel, Christy, Frey &

Christy

Henry Van Dam, president, Corporate Transfer Agents Association, Inc.,

accompanied by Edward J. Brown, vice president and treasurer.

189

277

298

321

350

THURSDAY, MAY 11

David H. Morgan, president, National Clearing Corp., accompanied by

Lloyd J. Derrickson, vice president and general counsel, National Asso-

ciation of Securities Dealers, Inc---

395

John H. Perkins, vice chairman, Continental Illinois National Bank &

Trust Co. of Chicago, and chairman, National Coordinating Group for
Comprehensive Securities Depositories, accompanied by Joseph P.
Coriaci, second vice president, Continental Illinois National Bank & Page

Trust Co. of Chicago, and Hamilton F. Potter, Jr., Sullivan & Cromwell — 406
John M. Meyer, Jr., chairman, Banking and Securities Industry Committee

(BASIC), accompanied by Herman W. Bevis, executive director--- 408
R. John Cunningham, director of financial services, Arthur Young & Co--- 497
Junius W. Peake, partner, Shields & Co-----

509

ALPHABETICAL LIST OF WITNESSES

321

408

137

350

89

321

277

406

497

115

395

137

298

89

189

Appel, Robert S., Christy, Frey & Christy----

Bevis, Herman W., executive director, Banking and Securities Industry

Committee

Birk, Roger E., vice president and director, operations division, Merrill

Lynch, Pierce, Fenner & Smith, Inc---

Brown, Edward J., vice president and treasurer, Corporate Transfer Agents

Association, Inc.-

Casey, William J., Chairman, Securities and Exchange Commission.-

Christy, Francis T., Christy, Frey and Christy-

Cookenbach, John M., president, Trust Division, American Bankers Asso-

ciation

Coriaci, Joseph P., second vice president, Continental Illinois National

Bank and Trust Co. of Chicago---

Cunningham, R. John director of financial services, Arthur Young & Co--

Delahunty, C. J., president, Pacific Coast Stock Exchange Clearing Corp--

Derrickson, Lloyd J., vice president and general counsel, National Associa-

tion of Securities Dealers, Inc.-

Gardiner, Robert M., chairman of the board of directors, Securities Indus-

try Association.-

Gray, David C., counsel, Manufacturers Hanover Trust Co-----

Herlong, A. Sidney, Commissioner, Securities and Exchange Commission..

Howland, Richard B., president, Stock Clearing Corp-.

Kaestner, Frank W., senior vice president, Manufacturers Hanover Trust

Co., New York.-

Kendall, Leon T., president, Securities Industry Association ---

Lee, John F., executive vice president, New York Clearing House Associ-

ation

Loomis, Philip A., Commissioner, Securities and Exchange Commission.-

McNamara, Edward J., assistant secretary and assistant treasurer, Bethle-

hem Steel Corp--

Meyer, John M., Jr., chairman, Banking and Securities Industry Commit-

tee

Milburn, William G., vice president, Mellon National Bank and Trust Co.,

Pittsburgh

Morgan, David H., president, National Clearing Corp-

Needham, James J., Commissioner, Securities and Exchange Commission.-
Nicholson, Clayton M., vice president, Chemical Bank and the Stock Trans-

fer Association, Inc----

Owens, Hugh F., Comissioner, Securities and Exchange Commission----

Peake, Junius W., partner, Shields & Co ---

Percy, Charles H., U.S. Senator from the State of Illinois.-

Perkins, John H., vice chairman, Continental Illinois National Bank and

Trust Co. of Chicago----

Phelan, Thomas P., president, Pacific Coast Stock Exchange-

Potter, Hamilton F., Jr., Sullivan & Crowell --

Stanley, Thomas W., president, Stock Transfer Association, Inc--

Thomas, Walter F., vice chairman, Manufacturers Hanover Trust Co----

Van Dam, Henry, president, Corporate Transfer Agents Association, Inc.-

Weinberg, Eli, partner, Lybrand, Ross Brothers & Montgomery-

277

137

289

89

321

408

277

395

89

9

321

89

509

64

American Bankers Association:

Page

Excerpts from trust letter of February 18, 1972--

817

Resolutions adopted February 7, 1972---

817

Statement of John M. Cookenbach, president, trust division---

277

American Life Convention and Life Insurance Association of America :
Prepared statement_-

888
Proposed amendments---

898

American Society of Corporate Secretaries :

Statement of Robert C. Sonneman, chairman, stock exchange

committee

184

Statement on amendment of uniform commercial code---

187

American Stock Exchange Inc. :

Joint letter with NYSE to member organizations.-

800

Letter from Robert T. Eckenrode, vice president, operations planning

division

810

Letter to Senator Williams from Paul Kolton, president--

931
Transfer agent performance, 1972.-

810
Weekly industry condition report_.

885

American Stock Exchange Clearing Corp., letters to members.-- 586, 599

Banking and Securities dustry Committee:

Exhibits :

Exhibit A-Letter dated February 23, 1972, from permanent edi-

torial board for the Uniform Commercial Code (U.C.C.) as to the

proposed amendment to the U.C.C..

529

Exhibit B-Letter dated February 1, 1972, from Securities Inves-

tor Protection Corporation as to the proposed amendment to

the U.C.C.

530

Exhibit C—Letter dated January 20, 1972, from the Chairman of

the Securities and Exchange Commission as to the proposed

amendments to the U.C.C. and to the estates, powers and trusts

law

531

Exhibit D-Memorandum dated February 7, 1972, from the Trust

Division of the American Bankers Association as to the proposed

amendments to the U.C.C. and estates, powers and trust law-- 531

Exhibit E-Letters and enclosure from Securities Industry As-

sociation dated February 11, 1972, as to the legislative changes

necessary to accomplish the concept of user-owned and operated

depositories

532

Exhibit F—Letter dated February 24, 1972, from American So

ciety of Corporate Secretaries as to the proposed amendment

to the U.C.C.--

532

Exhibit G-Memorandum dated March 16, 1972, from New York

State Bankers Association as to the proposed amendment to the

U.C.C. and estates, powers and trusts law---

534

Exhibit H-Report of Ad Hoc Communications Committee dated

March 17, 1972 “Applicability of Electrical Communications

Within a Depository System”.

535

Exhibit 1-Communication dated March 3, 1972, from American

Stock Exchange Clearing Corporation to clearing members as

the CUSIP

586

Exhibit J-Communication dated March 7, 1972, from NASD to

to CUSIP-

586

Exhibit K-Book dated October 1, 1971, prepared by NYSE Stock

Clearing Corporation for clearing members, associate members

and nonmember banks as to CUSIP..

610

Exhibit 1-Communication dated March 16, 1972, from Midwest

Stock Exchange to its members as to CUSIP-

763

Exhibit M-Communication dated March 30, 1972, from New York

Clearing House as to CUSIP-

776

Exhibit N-December 22, 1971, Final report as to uniform forms

and implementation dates as to their use -

777

Banking and Securities Industry Committee Continued
Exhibits—Continued

Exhibit 0—Communication dated February 1, 1972, from NASD Page
to its members as to uniform forms.--

800 Exhibit P-Joint communication dated January 27, 1972, from

NYSE and AMEX to their members as to uniform forms... 800 Exhibit Q-January 13, 1972, memorandum of New York Clearing House as to uniform forms..

801 Letter from John M. Meyer, Jr., to Senator Williams.

902 Letter to the Federal Reserve Board, from John M. Meyer, Jr---- 523 Letter to Chairman Casey of the Securities and Exchange Commission

904 Letter to Senator Williams from Mr. Meyer and Mr. Bevis.--

940 Mellon National Bank presentation.

912 Memorandum of changes to S. 3412

958 Outline of possible regulation of depository with Federal Reserve Board as "appropriate regulatory agency".

908 Report for 3 months ending March 31, 1972_

523 Report of Ad Hoc Communications Committee.

535 Revision of marked up copy of S. 3412---

458, 968 S. 3412, marked up copy-

431, 968 SEC response to BASIC proposal.

992 Statement of Herman W. Bevis, executive director-

408 Boston Clearing House Association, letter to Senator Williams, from George B. Rockwell, president-

520 Boston Clearing House Banks, position paper.

517 Boston Stock Exchange Clearing Corporation, statement of position on S. 2551 and S. 3412---

520 California Legislature, draft of proposed bill..

826 Chicago Daily News, reprint of article_

834 Comptroller of the Currency, letter from William P. Camp with views on S. 2551, S. 3297, and S. 3412.

177 Corporate Transfer Agents Association : Roster of membership--

370 Statement of Henry Van Dam, president

350 CUSIP: Introduction

613 CCS Documents : Deposit Ticket_

616 Withdrawal of Nominee Stock (COD).

617 Transfer Control Form (W/T TCF)

618 Miscellaneous Deliver Order (MDO)

620 CCS Documents : “Special” Deposit Ticket-

623 "Special” Withdrawal of Nominee Stock (COD).

624 "Special" Transfer Control Form (W/T TCF)

625 "Special" Miscellaneous Deliver Order (MDO)

626 Pledge of Collateral..

627 Release of Collateral..

629 CCS Documents : CM Daily Activity Statement...

633 CM Daily Activity Summary Card_-.

634 CM Activity Difference Form.

636 Short Position List_

639 Deliver to CM Form

640 CCS dividend and proxy reports.

642 Compared clearance input documents to SCC

648 Compared clearance output documents from SCC----

650 Compared clearance/settlement output documents from SCC

662 Bond clearance input documents to SCC-

674 Bond clearance output documents from SCC

684 Delivery tickets-

691 Transfer instruction forms.

727 Dividend claim letters..

762 Illustrations

777 Timetable

779 Index

764 Order form.-

781