In an earlier portion of this report 85 we discussed necessary amendments to the statute in respect of the provisions concerning the voting status to be allowed to landlords' claims purchased in contemplation, or after the commencement, of the 77B proceedings. We discussed amendments to the law which would make clear the occasions when the amount of such claims, or their voting power, could be limited to the amount paid for them by the claimant. Similarly we discussed clarification of the occasions when a court might limit "to the actual consideration paid therefor" the amount and voting power of the claims filed by committees or other representatives of creditors or stockholders. 86 These turned in large measure on the circumstances of acquisition of such claims. As we pointed out, a controlling consideration in the ultimate determination would be the time when these claims were acquired and the price paid for them. In these connections the trading statement requirement has very direct relevance, since it would perform the indispensable task of providing the court with at least part of the information essential to its consideration of the voting status, and amount of recognition, in terms of dollars to be allowed to these claims. We pointed out that the number and type of claims to which the court could give such special attention were limited by the feasibility of obtaining the information on which such scrutiny would have to depend. This is a difficulty which does not obtain in the case of one additional function to which the court may turn its attention on the basis of the information in the required statementthe denial of compensation to committee members who trade in the securities they represent. Insofar as the purpose of this requirement was to aid in preventing committee members and agents from engaging in trading activities in violation of their fiduciary relationships, it was aimed chiefly at. the larger corporations brought within Section 77B. On the other hand, the proviso permitting waiver by the court was by its terms applicable only to certain larger cases.87 Consequently, extensive use of the power to waive granted by the proviso resulted in largely destroying the effectiveness of the requirement. While it may be difficult to state in a statute the degree of proof required to establish the degree of impracticality necessary to justify a general waiver, no sound reason appears for waiving the requirement in any circumstances with respect to committee members, 85 Supra, at 117 et seq., 339. Supra, at 117-120. That is, under subdivision (e) (1), the judge might waive the requirement only if satisfied that it was impractical to require the statement "by reason of the number of securities outstanding and the extent of the public dealing therein." their families and affiliates. Even apart from the trading statement requirement, it would seem desirable to require a statement covering all committee members and their affiliates though these are not within the class of "those accepting the plan." The necessity of a public statement of such activities should be a strong deterrent against their indulgence in trading and at a minimum it could be used as one element in fixing allowances for compensation of protective committees. This course has been taken in the case of one of the very largest corporations which has thus far been reorganized in 77B, and has been ordered by courts in one or two other cases.88 Statutory sanction has been given this view under Chapter X of the Bankruptcy Act.89 In view of the possible ineffectiveness and futility of the requirement in its possible application to the great mass of acceptors of a plan, the willingness of 77B courts to waive the requirement was perhaps justified so far as non-committee assentors are concerned. In other words, the judge of an equity court might be taking the sound course in refusing to require an extensive showing of "impracticality" in order to move him to excuse parties from performing a useless act. It seems unnecessary, and unwise, to continue the requirement of Section 77B in respect of all individual trading statements. Trading statements should not be required, from every creditor and stockholder, except upon special order of the court where in its opinion the information is relevant to some inquiry it is otherwise pursuing. Chapter X of the Bankruptcy Act eliminates the general trading statement requirement. Instead, it contains a few provisions which call for information from designated persons relating to the acquisition or sale of claims or stock. We have already referred to Section 249 respecting statements of persons seeking compensation or reimbursement. Section 210 provides that an attorney for creditors or stockholders shall not be heard unless he previously files with the court a statement of the persons he represents, the nature and amounts of their holdings, and the time of acquisition of holdings acquired within a year of the filing of the petition under Chapter X Under Section 211 every person or committee, representing more 88 See Part II, Committees and Conflicts of Interest (1937), Appendix D. Section 249 reads as follows: "Any person seeking compensation for services rendered or reimbursement for costs and expenses incurred in a proceeding under this chapter shall file with the court a statement under oath showing the claims against, or stock of, the debtor, if any, in which a beneficial interest, direct or indirect, has been acquired or transferred by him or for his account, after the commencement of such proceeding. No compensation or reimbursement shall be allowed to any committee or attorney, or other person acting in the proceedings in a representative or fiduciary capacity, who at any time after assuming to act in such capacity has purchased or sold such claims or stock, or by whom or for whose account such claims or stock have, without the prior consent or subsequent approval of the judge, been otherwise acquired or transferred." Totals. than twelve creditors or stockholders, and every indenture trustee, IV. STATISTICAL TABULATIONS A. NUMBER OF PROCEEDINGS IN WHICH SECURITY HOLDERS' B. COMMITTEES CORRELATED WITH SIZE OF CORPORATIONS (a) Relation of committees to proceedings 90 Subsection (3). 21 Ibid. 92 Subsection (4). 128 271 399 14 64 78 6 101 107 148 Number of Committees total Number of Committees total Number of Committees total 56 56 2 4 2 1 107 60 107 50 |