of the liability or transaction giving rise to the debt, the date of maturity and rate of interest. A schedule on notes and accounts payable to related companies shows the name of the creditor, the nature of the transaction giving rise to the debt, date of issue, rate of interest and due date. A schedule on non-current payables to related companies requires identical information. A schedule entitled long-term debt shows the name of the creditor, the nature of the debt, date of issue, date of maturity and rate of interest. Other schedules submitted with the annual reports of water carriers contain debt information; however, the name of the creditor and other details of the debt are not shown. In addition, special applications also contain information on debt; however, this information is merely totals used in balance sheets and the details of the debts are not given. 5. Enforcement and Effectiveness of Laws, Rules and Regulations See Comptroller General's letter, p. 197. 6. Availability and Cost of Information to the Public The availability and cost of duplicating information on water carriers is the same as for railroads. (See p. 217.) 7. Proposals for New Legislation and Authority Proposals for new legislation are discussed on page 217. Information Received From Freight Forwarders Section 412 of the Interstate Commerce Act, as amended (49 U.S.C. 1012) provides ICC with authority to require annual, periodical, or special reports from freight forwarders and associations; to prescribe the manner and form in which such reports shall be made, and to require answers to all questions upon which ICC may deem information to be necessary. Pursuant to this authority, ICC regulations (49 CFR 1251) state that the following annual reports shall be filed by forwarders subject to regulation under Part IV of the Interstate Commerce Act: (1) Annual Report Form F-a prescribed for Class A The information received on the aforementioned reports and in special applications is discussed below in the same sequence as the information requested in Senator Metcalf's letter of February 9, 1973, except for the evaluation of the enforcement and effectiveness of the rules and regulations which will be covered in the Comptroller General's formal response to Senator Metcalf.1 1. Information on Proprietary (Voting) Ownership Annual Report Form F-a requires the forwarders to provide the name, address, number of votes to which entitled, and the classification of stock, or the forwarders' 10 largest stockholders. If any stockholders held the stock in trust, the particulars of the trust are required to be provided. Annual Report Form F-b requires the forwarders to provide the name, address and number of votes to which entitled, of the forwarders, five largest stockholders. 1 See p. 197. 2. Information on Subsidiaries, Parents or Any Other Company or Firm Having Control Over Subject Corporation Annual Report Form F-a requires forwarders to provide (1) a list of companies under common control with the forwarder; (2) a list of companies and their subsidiaries controlled by the forwarder, either directly or indirectly. For each parent company and subsidiary in the chain the forwarder must state the percentage of voting power owned by the company having immediate control; and (3) a complete list of the companies controlling the forwarder, beginning with the company in the chain that is most remote and showing for each company the percentage of the voting power owned by the immediately controlling company. When any company listed is immediately controlled by or through two or more companies jointly, the respondent is to list all such companies and list the controlled company under each of them. Annual Report Form F-b requires forwarders to disclose any affiliation or connection with any rail, motor, or water carrier, or with any shipper that commonly uses the services of a freight forwarder. Section 410 of the act (49 U.S.C. 1010) states that no person shall engage in service subject to Part IV of the act, unless such person holds a permit, issued by the Commission, authorizing such service. Pursuant to this authority, ICC's regulations (49 CFR 1003.3) require an application for a freight forwarder permit to be filed with ICC. This application must show (1) any interest that the forwarder, including its officers and directors, has in the affairs of any other carrier; (2) any interest which any other carrier, including its officers and directors or any person authorized to control a carrier, has in the affairs of the forwarder; (3) whether the applicant knows of any person that has an interest in the forwarder and who also has an interest in another carrier, and if so, the applicant must describe the interest such person has in the forwarder and in the other carrier; (4) whether the forwarder is engaged principally in the business of manufacturing and selling and/or buying and selling articles and commodities; or controls, is controlled by, or is under the common control with any such person. If so, the forwarder must identify such person or persons 1003.3) require an application for a freight forwarder and disclose the extent such persons use the services of freight forwarders. 3. Information on Officers and Directors Annual Report Form F-a requires the forwarders to provide a list of all directors' names, addresses and the expiration dates of their terms of office. The forwarder must also provide a list of the names and titles of its principal general officers. Annual Report Form F-b requires the forwarder to provide the names and titles of its principal general officers. 4. Information on Long-Term and Short-Term Debt The financial information requested on the annual report forms and application forms used by freight forwarders includes summary balance sheet data on longterm and short-term debt at the beginning and end of the year. However, details such as the name of the creditor are not provided. 5. Enforcement and Effectiveness of Laws, Rules and Regulations See Comptroller General's letter, p. 197. 6. Availability and Cost of Duplicating Information The availability and cost of duplicating information on freight forwarders is the same as for railroads, p. 217. 7. Proposals for New Legislation and Authority Proposals for new legislation were previously discussed under same heading, in first (railroad) part of this report, p. 217. SECURITIES AND EXCHANGE COMMISSION The Securities and Exchange Commission (SEC) was created by the Congress in 1934 to protect the public and investors against malpractices in the securities and financial market. SEC administers the following acts: Securities Act of 1933 (15 U.S.C. 77a.) Securities Exchange Act of 1934 (15 U.S.C. 78a.) Trust Indenture Act of 1939 (15 U.S.C. 77aaa.) Investment Company Act of 1940 (15 U.S.C. 80a-1.) Investment Advisers Act of 1940 (15 U.S.C. 80b-1.) Each of the above acts requires any organization or firm that offers securities to the public to provide such information to SEC as SEC may require, including proprietary ownership; subsidiary, parent, and other control information; officers and directors; and long-term and short-term debt. The information required by SEC under each of the foregoing acts is presented below. Securities Act of 1933 The Securities Act of 1933 (15 U.S.C. 77a) provides that issuers of securities through public offerings in interstate commerce or through the mails, directly or by others on their behalf, are required to file with the SEC registration statements containing financial and other pertinent data concerning the issuer and the securities being offered. The act prescribes the information which must be contained in registration statements and grants SEC the authority to make such rules and regulations and to prescribe the various forms the SEC deems necessary to carry out the provisions of the act. Pursuant to this authority,SEC regulations (17 CFR 239) prescribe the following forms: Form C-3, registration statement for American certificates against foreign issues and for the underlying securities (17 CFR 239.5). Form D-1, registration statement for certificates of deposit (17 CFR 239.6). Form D-1A, registration statement for certificates of Form S-1, registration statement under the Securities Form S-2, registration statement for shares of certain Form S-3, registration statement for shares of mining corporations in the development stage (17 CFR 239.13). Form S-4, registration statement for securities of closed-end management investment companies registered on Form N-8B-1 (17 CFR 239.14). Form S-5, registration statement for securities of open-end management investment companies registered as management investment companies on Form N-8B-1 (17 CFR 239.15). Form S-8, registration statement for securities to be offered to employees pursuant to certain plans (17 CFR 239.16b). Form S-10, registration statement for oil or gas interests or rights (17 CFR 239.17). Form S-11, registration statement for securities of certain real estate companies (17 CFR 239.18). Form S-12, registration statement for American Depositary Receipts issued against outstanding foreign securities (17 CFR 239.19). Form S-13, registration statement for voting trust certificates (17 CFR 239.25). Form N-5, registration statement for a small business investment company under the Securities Act of 1933 and the Investment Company Act of 1940 (17 CFR 239.24). Form 1-A, application for exemption from registration under the act (17 CFR 239.90). Form 1-E, application for exemptions from regis- Schedule A-Contents of Offering Circular, under Schedule B-Contents of Offering Circular, for Non- These forms are the source of most information received pursuant to the Securities Act of 1933 concerning proprietary ownership; subsidiary, parent, and other control; officers and directors; and long-term and short-term debts. The information reviewed on the aforementioned applications and reports is discussed below in the same sequence as the information requested in Senator Metcalf's letter of February 9, 1973, except for the evaluation of the enforcement and effectiveness of the rules and regulations which will be covered in the Comptroller General's formal response to Senator Metcalf.' 1. Information on Proprietary (Voting) Ownership Forms 1-A, and 1-E require the registrants to list the name of each individual who owns, either directly or indirectly, 10 percent or more of any class of securities of the registrant. There are several forms-S-2, S-3, S-8, S-10, S-11 and N-5-which require information on any individual who is the owner of record or beneficial owner of more than 10 percent of any class of securities of the registrant. The information to be submitted includes the name and address of the owner, the class of stock, the amount owned, type of ownership (record or beneficial or both), and percent of each class of stock owned. Form N-5 also requires the registrant to name each individual with beneficial ownership of 5 percent or more of the voting securities and Form D-1 requires the registrant to list the names of each individual associated with the registrant who holds securties of the original issuer. Forms S-1 and S-13 require the registrant to name each individual with beneficial ownership of more than 10 percent of the voting securities of the registrant. 1 See p. 197. Form C-3 requires the registrant to name each person, or class of persons (other than underwriters, sub-underwriters, or dealers) to whom American Certificates have been sold within 6 months, or will be sold for consideration varying from that at which the certificates are offered to the general public. Forms D-1A and S-12 do not require proprietary ownership information. Forms S-2 and S-11 also require the registrant to name each individual who holds options to purchase the securities of the registrants. Forms S-4 and S-5 require the same ownership information as required by Form N-8B-1 under the Investment Company Act of 1940. 2. Information on Subsidiary, Parent, or any Other Company or Firm Having Control Over the Subject Organization Forms 1-A and 1-E require the registrants to list the name of each affiliate and describe the nature of the affiliation. Forms N-5, S-1, and S-11 require a registrant to name its parent company and the percentage of the voting stock which the parent company controls. The registrant must also furnish information as to the nature of any other control which the parent company exerts over the registrant. In addition, Form S-1 requires the registrant to list the subsidiaries over which it exerts control and indicate the percentage of voting securities it owns, and Form N-5 requires the registrant to list the names of those companies in which the registrant controls or has the potential to control, 5 percent or more of the voting securities. Forms C-3 and S-10 require the registrant to name the underwriter of the registrants' securities. Form C-3 also requires the registrant state whether the underwriter is a depositor of the registrant or an affiliate of any depositors of the registrant. Forms S4 and S-5 require the same information on subsidiary, parent, or other company control over the subject organization as required by Form N-8B-1, under the Investment Company Act of 1940. 3. Information on Officers and Directors Forms 1-A and 1-E require the registrant to furnish a complete listing of the names and addresses of all of its executive officers and members of the board of directors. The forms also require the registrant to indicate all the various positions and/or offices each officer has held with the registrant. Forms S-1, S-2, S-3, S-11, and N-5 require the registrant to list the names of each director and executive officer and the principal occupation of each executive officer over the past 5 years. Forms S-1, S-2, S-3, and S-11 also require the aggregate amount and percentage of each class of equity securities of the registrant or any of its parent or subsidiaries owned by officers and directors, but do not require identification of the directors or officers owning the securities. In addition, Form S-1 requires the registrant to list the name of each officer or director whose options to purchase securities of the registrant or of any of its parents or subsidiaries, exceeds $10,000 for each individual, or $30,000 for any group of individuals. Form S-8 requires the registrant to provide the material provisions of all options to purchase securities of the registrant or its subsidiaries held by each director or officer of the registrant, whose aggregate direct remuneration exceeds $30,000. In addition, the aggregate of all options held by officers and directors must be given. Forms S-10, S-12, C-3, D-1, and D-1A only require the name of each director and officer of the company. Form S-13 requires the registrant to name each voting trustee and indicate the percentage of each class of the following securities owned directly or beneficially by each trustee voting trust securities; all securities of issuer not deposited under the voting trust agreement; and all securities of the issuer's parents and subsidiaries. In addition, the registrant is required to supply detailed information as to those instances, such as the election of directors, in which the voting trustees are empowered to vote the deposited securities. If the voting trustees are directors, officers, partners, or trustees of another business, the registrant must supply the name of the trustee, the other business, and the nature of the other business. Forms S-4 and S-5 require the same information on officers and directors as required by Form N-8B-1, under the Investment Company Act of 1940. 4. Information on Long-Term and Short-Term Debt Schedules A and B require information as to whether the royalty interests offered will, at the time of delivery, be subject to any mortgage, deed of trust or any other encumbrance or lien except current taxes not yet delinquent. The nature of the encumbrance or lien, the amount of the obligation, the date of the obligation, how and when the obligation is payable, and whether the obligation is delinquent must be furnished. Many of the registration forms require information on the long-term and short-term debts of the registrants. The information, however, is limited to indicating the type of indebtedness and the aggregate amount of each type. A majority of the forms require the registrant to subinit a balance sheet and other financial statements as exhibits. From these, the SEC is able to extract the information it needs. However, none of the forms require the details of the debts or the creditors. 5. Enforcement and Effectiveness of Laws, Rules, and Regulations See Comptroller General's letter, p. 197. 6. Availability and Cost of Information to the Public All forms and reports described above are available to the public in the SEC's Public Reference Section. Any individual desiring information may personally make copies of such information, at the SEC, at a cost of 10 cents per page. Such individuals may also receive copies of any desired information through an SEC contractor. 7. Proposals of New Legislation or Authority We were informed by an agency official that no legislation which the SEC has proposed or supported concerning information gathering within the last 10 years, has failed to be enacted. Securities Exchange Act of 1934 The Securities Exchange Act of 1934 (15 U.S.C. 78a) requires the filing with the SEC of registration applications, annual and other reports by companies whose securities are listed on national securities exchanges. The act also requires similar registration and reporting by companies whose securities are traded over-the-counter, when such companies have $1,000,000 of assets and 500 or more stockholders. In addition, the act also provides for the registration with and regulation by the SEC of national securities exchanges, brokers and dealers engaged in over-the-counter securities business, and national associations of such brokers and dealers. The act granted SEC the authority to prescribe the form or forms on which such information should be filed as well as to prescribe rules or regulations as necessary for the protection of the investor. Pursuant to this authority the SEC regulations (17 CFR 249) prescribed the following forms to be used for the purposes of this act: Form 1, for application for, or exemption from, registration as a national securities exchange. (17 CFR 249.1). Form 3, initial statement of beneficial ownership of securities. (17 CFR 249.103). Form 4, statement of changes in beneficial ownership of securities. (17 CFR 249.104). Form 10, general form for registration of securities Form 8-K, form for reporting current changes. (17 Form 10-K, general annual report. (17 CFR 249.310). Form 20-K, annual report of foreign private issuers. Form N-1R, annual report of registered management Form N-5R, annual report of small business invest- Form N-30A-2, annual report for unit investment Form N-30A-3, annual report for unincorporated Form U5S, annual report of registered public utility Form X-17A-10, annual report of income and ex- Form X-17A-12(1), notification required to be filed by certain broker-dealer market makers. (17 CFR 249.619.) These forms are the source of most information received pursuant to the Securities Exchange Act of 1934, concerning proprietary ownership, subsidiary, parent and other control information; officers and directors; and long term and short-term debts. The information received in the aforementioned registrations and reports is discussed below in the same sequence as the information requested in Senator Metcalf's letter of February 9, 1973, except for the evaluation of the enforcement and effectiveness of the rules and regulations which will be covered in the Comptroller General's formal response to Senator Metcalf.1 1. Information on Proprietary (Voting) Ownership Form 10-K requires the registrant to name each individual who owns of record or is known by the registrant to own beneficially, more than 10 percent of any class of securities of the registrant. The registrant must also show the name; address; class of stock owned; whether owned of record, beneficially or both; amount owned and the percentage of securities held by each of the individuals. Voting trusts filing annual reports on Form 16K must list the names of each individual who owns, directly or indirectly, more than 10 percent of the voting certificates of the following groups; the voting trust certificates; all securities of the issuer not deposited under the voting trust agreement; and all securities of the issuer's parent and subsidiaries. Forms N-1R, N-5R, N-30A-2, N-30A-3 require the registrants to list the name, address, class of security owned, whether owned of record, beneficially or both, amount owned, and percent of each class owned for each individual who owns, controls, or holds with the power to vote 5 percent or more of the voting securities of the registrant. Forms N-1R and N-5R also require the above information for each individual who owns more than 10 percent of any class of securities of the registrant. Form U5S, used by public utility holding companies, requires the registrant to furnish ownership information on each individual known to the registrant to own benefiregistered holding company in the system. The form also cially 1 percent or more of the voting securities of any requires the registrant to list the names of those individuals beneficially owning 5 percent or more of the total voting securities of any other company in the system. The information required includes the name of the issuer, class of stock owned, name and address of the beneficial owner, number of shares owned, and the percent owned. SEC regulations (17 CFR 249) prescribe the use of other forms, which also provide the SEC with proprietary (voting) ownership. Persons owning beneficially 10 percent of the equity securities of a company must file Form 3 which shows the title of the security, the amount owned directly or indirectly, and the nature of the beneficial ownership. Form 4 is used to report changes in beneficial ownership once the initial Form 3 has been filed. Form 10 requires the name and address; class of security owned; whether owned of record, beneficially or both; amount owned, and percent owned for each individual who owns or is known by the registrant to own beneficially more than 10 percent of any class of voting securities of the registrant. Form BD, requires that the applicant identify each person who owns 1 percent or more of the registrants equity securities, the class of stock owned, and the percent age owned. 2. Information on Subsidiary, Parent and Any Other Company or Firm Having Control Over the Subject Organization Form 10-K requires the registrant to list, or diagram, all of its parent and subsidiary companies and to indicate the percentage of voting securities owned by each of the immediate parent companies. 1 See p. 197. Form 14-K, submitted by committees that have been established to issue certificates of deposits for securities turned in by security holders in bankrupt companies, shows the names of any committee member, committee secretary or counsel for the committee, who owns directly or beneficially, any certificates of deposits or other securities of the original issuer, or parents or subsidiaries of the original issuer, the name of the issuer, title of the issue owned, amount owned of record and amount owned beneficially. Form 10-K requires the registrant to name each voting trustee and each person who owns of record or is known to own beneficially more than 10 percent of the voting trust certificates, and to show for all voting securities of the issuer not deposited under the voting trust agreement, trust certificates, and all securities of the issuer's parents and subsidiaries the name and address of the owner, the issuer's name and class of security owned; whether owned of record, beneficially, or both; amount owned; and the percentage owned. The form also requires disclosure of the voting trustees' activities as directors, officers, employees or partners in any other business or profession. If a voting trustee represents any individual who owns any voting securities of the issuer or its affiliates the details of the affiliation must be disclosed on the form. Form 20-K, submitted by foreign private issuers, requires the registrant to list the names of any individual or government that, directly or indirectly, controls the registrant. A brief description of the control exerted must also be furnished. Form N-1R requires the registrant to list the names and principal business of each company in whose securities the registrant has invested more than 5 percent of its total assets. The registrant must also report the actual percentage of its assets invested in each company. In those instances where the registrant owns, controls, or holds with the power to vote, 5 percent or more of the voting securities of any company, the name of each company and the percentage of securities held must be reported. In addition Form N-1R requires the registrant to supply the same parent and subsidiary information, as required on Form 10-K above. Form N-30A-3 filed by unincorporated management investment companies requires the registrant to furnish the same information concerning the percentage of the registrant's total assets invested in the securities of other companies as required by the annual report Form N-1 R. The registrant must also list the names of those companies in which it owns more than 10 percent of the voting securities and those companies which own, control, or hold with the power to vote, 5 percent or more of the voting securities of the registrant. Form N-30A-2, submitted by investment trusts issuing securities, requires the trustee to list the names of any other investment companies with which the trustee had dealings while administering the trust. The trustee must describe his activities with the other companies and any relationship between such companies and the trust. In addition, the trustee is required to furnish the names of any individuals exerting direct or indirect control over the registrant, with a brief description of the basis of such control. Form N-5R, filed by small business investment companies, requires the name of any company in which the registrant owns 5 percent or more of the voting securities together with the title of the securities held and the percentage owned, controlled or held. Form N-5R also requires the registrant to list the names of those companies in which it owns convertible securities that would consti tute 5 percent or more of the voting securities of the company, if converted. In addition, the registrant must furnish a list of all persons, or companies, directly or indirectly controlling, controlled by, or under common control with the registrant. The percentage of voting securities owned or other basis of such control must also be indicated. Form U5S, used by registered public holding companies, requires the registrant to list the name of the top registered holding company and all subsidiaries in the registrant's system. The percentage of the registrant's voting securities owned by each of these companies must be furnished as well as a list showing the names of the companies within the registrant's system which own securities of other system companies, and the extent of such ownership. Form X-17A-10 used by exchange members, brokers or dealers, requires the registrant to list the names of all subsidiaries which are exchange members or registered broker dealers. Form 1, used by exchanges registering, or requesting exemption from such registration, as a national securities exchange, requires the exchange to furnish information on all of the companies which are affiliated with, or subsidiary to the exchange. The nature of such affiliation, such as security ownership, joint membership, etc., must be explained. Form 10, requires the registrant to list all of its parent and subsidiary companies and indicate the percentage of voting securities owned, or other control exerted, by the immediate parent. Form BD requires the registrant to give the name of any person that exerts any type of control over the registrant, and a description of the agreement or other basis through which control is exercised. Form 8-K requires the registrant to report any changes in control of the registrant including a description of the transaction, the name of the parent, the percentage of control, and the name of any person ceasing to be a parent voting securities owned by the parent or other basis for of the registrant. 3. Information on Officers and Directors Form 10-K requires the registrant to list the names of all officers and directors of the registrant and describe each position and office held by them. In addition, the registrant must furnish information on each officer and director who (1) owns directly or beneficially any security of the registrant or its subsidiaries; (2) holds options, exceeding $10,000 to purchase such securities, and (3) owes debts to the registrant or its subsidiaries in excess of $10,000 or 1 percent of the registrant's total assets, whichever is less. Form 20-K, used by foreign issuers of private securities, requires the name and address of each officer and director. Form N-1R, used by registered management investment companies, requires the name of each director, officer and any member of an advisory board of the registrant and their principal occupations during the past 5 years. The form also requires the registrant to list the names of each of its legal and policy making employees who are connected in any manner with any underwriter, investment adviser or broker of the registrant. Those directors of the registrant or of any advisory board of the registrant who were also directors, officers, or employees of any broker or dealer must be reported together with the name of the director and the firm. |