During the 2-year period ended June 30, 1951, 379 securities were removed from listing and registration on national securities exchanges pursuant to this section. In some instances the same security was removed from more than one exchange so that the total number of removals including duplications, was 452. In the same period, a total of seven securities were removed from listing on exempted exchanges. These delistings were effected under the following categories:

SECURITIES DELISTED BY APPLICATION

The granting of applications filed by exchanges pursuant to rule X-12D2–1 (b) resulted in striking 14 securities from listing and registration; in one instance the same security was stricken from two exchanges so that the total number of removals, including this duplication, was 15. In 11 cases securities were delisted on the ground that the amounts of the issues remaining outstanding had been reduced to inconsequential proportions by reason of exchanges or redemptions. In the three remaining cases the securities were delisted by reason of reacquisition of most of the shares in one case, liquidation in one case, and bankruptcy and termination of transfer facilities in the remaining case.

The granting of applications filed by issuers pursuant to rule X-12D2–1 (b) resulted in the withdrawal of 11 securities from listing and registration. The reasons for these delistings was inactivity on the exchange in seven cases; concentrated ownership in one case; small number of shares outstanding as a result of an exchange offer in one case; liquidation in one case; and in the remaining case the issuer applied to delist from one of two exchanges in the same locality on which its security was traded.

SECURITIES DELISTED BY CERTIFICATION

Pursuant to rule X-12D2-2 (a) securities which have been paid at maturity, redeemed or retired in full, or which have become exchangeable for other securities in substitution therefor, may be removed from listing and registration on a national securities exchange if the exchange files a certification with the Commission to the effect that such retirement has occurred. The removal of the security becomes effective automatically after the interval of time prescribed by the rule. The exchanges filed certifications under this rule effecting the removal of 335 securities. In some instances the same security was removed from more than one exchange, so that the total number of removals, including duplications, was 407. Successor securities to those removed became listed and registered on exchanges in many cases.

In accordance with the provisions of rule X-12D2-1 (d), New York Curb Exchange removed 19 securities from listing and registration when they became listed and registered on. New York Stock Exchange. This rule permits a national securities exchange to remove a security from listing and registration in the event trading therein has been terminated pursuant to a rule of the exchange which requires such termination if the security becomes listed and registered and admitted to trading on another exchange. Removal under this rule is automatic, the exchange being required merely to notify the Commission of the removal.

SECURITIES REMOVED FROM LISTING ON EXEMPTED EXCHANGE

A security may be removed from listing on an exempted exchange by such an exchange filing an appropriate notification setting forth the reasons for the removal. One exempted exchange removed seven securities from listing thereon during the 2-year period, due in two cases to the redemption of the security; in two cases to liquidation of the issuers; in one case to the expiration of a voting trust agreement, and in the remaining two cases the securities became exchangeable for other securities which subsequently became listed on the same exchange. Mr. HELLER. In cases where securities have been withdrawn or stricken from listings, what notice, if any, is required to be given to the security holders and to the public generally?

Mr. LUND. That again depends upon whether the application is made by the issuer of the securities or by the stock exchange. Mr. HELLER. Take each case.

Mr. LUND. In the case of the stock exchange, a stock exchange may,. for a reason of its own, suspend trading in a security.

Mr. HELLER. Because of inactivity in trading?

Mr. LUND. Yes, or because another company has bought the control and there are no securities left. There are many reasons.

If the stock exchange makes the application, then the Commission does not hold a public hearing to determine whether the securities should be removed. If, however, the issuer is asking that its securities be stricken, the Commission often holds hearings to determine the reasons for the request of the issuing company. In that connection the stockholders may be asked to vote and how they feel about it. In all these cases there is notice and opportunity for hearing.

In two of our most prominent cases, although they each occurred some 6 or 7 years ago, the stockholders voted against the taking of the securities off the listed market and the Commission refused to abide by the wishes of the issuing company and left the securities on. The stockholders, in voting, said they wanted the proxies and they wanted the protections that were afforded by the listing privileges.

We have very few such applications any more. I think we have not more than two by issuers in the past year. In one of them we held hearings and in the other I think it is still pending.

Mr. HELLER. Does the Commission take any action when a security becomes absolutely worthless, for example, where a security is wiped out in a chapter X, reorganization?

Mr. LUND. The Commission has an understanding with the stock exchanges, which understanding grew about 1943 or 1944 that oncethe Commission had declared the security worthless, the exchanges would take that security off the trading board. It has been unfortunate for some people, and fortunate for others, but in two of those instances where the securities were removed, they have comeback to be very active traders and now have considerable market value, even though the Commission declared them to be worthless and the courts also.

The Congress has not felt that we have a right to pass on the merits of securities, whether they are good or bad. We have not taken the initiative to remove any securities because no one knows whether a thing which appears to be totally worthless today, will have some value in the future or may not have some kind of value to some people.

Mr. HELLER. Several years ago there was an active market in connection with the Russian Imperial bonds. They were worthless, were they not?

Mr. LUND. The Russian Imperial bonds were in default under the Czarist government. They were repudiated by the Kerensky government and by the Lenin government. On their face they were seemingly of no value whatever. Moreover, there were $75 million of them and there are today $75 million of counterfeit additional Russian bonds. No one knows whether the counterfeits are the legitimate ones or vice versa, because the securities appear to be identical except for a Greek cross on the border. We have interviewed the former Czarist treasurer and he tells us one of the securities is legitimate. We have also gone to Russian experts and they say that the ones some see as legitimate are really spurious. We therefore have

$150 million of Russian Imperial bonds which are being traded and repudiated twice, half of them counterfeit and in default since 1913 or 1914 and people are still buying them.

Mr. HELLER. And people are still buying them.

Mr. LUND. Those securities are traded today on the Curb Exchange and the question comes up: Why should they be traded? A number of years ago Ambassador Davies wrote a book about his mission to Moscow. In that book on one page he said that the Russian external debt was so small that obviously it would pay it off in order to be able to borrow $8, $10, or $20 billion from Uncle Sam for reconstruction purposes.

That little comment in that book on one page caused those bonds, to our knowledge, to go from $20 a bond to $220 a bond in short order. There are thousands of people in the United States today who are fully convinced Russia will pay off those bonds because it is her only external dollar debt. They feel that Russia will do it in an effort to be able to work out some big loan or some arrangement with us. Those securities are traded every day. Many people believe them to be of value.

Let us approach it from another viewpoint. Some people say that if you took them off the exchange they could still be traded in the over-the-counter market. Nothing could stop that. They ask this question: Isn't it better to trade them on an exchange where all the volume and all the prices are made public compared with being traded in the over-the-counter market where there is no publicity?

Mr. HELLER. Thank you, Mr. Lund. At this time we will recess until 9 a. m. tomorrow morning when we hope we can finish up with.

you.

(Whereupon, at 5:20 p. m. the hearing was recessed to reconvene at 9 a. m., Thursday, February 21, 1952.)

STUDY OF THE SECURITIES AND EXCHANGE

COMMISSION

THURSDAY, FEBRUARY 21, 1952

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee met at 9:30 a. m., pursuant to recess, in room 1334 of the New House Office Building, Hon. Louis B. Heller (chairman of the subcommittee) presiding.

Mr. HELLER. The subcommittee will be in order.

TESTIMONY OF ANTHON H. LUND, DIRECTOR OF THE DIVISION OF TRADING AND EXCHANGES, SECURITIES AND EXCHANGE COMMISSION-Resumed

Mr. HELLER. Mr. Lund, under section 16 (a) as I understand, every officer or director of a company with an equity security registered on an exchange, and every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity securities so registered must file certain reports, is that correct? Mr. LUND. That is correct.

Mr. HELLER. Is your Division current on these reports?

Mr. LUND. Those reports are handled by the Corporation Finance Division, and I do not know the status.

Mr. HELLER. You do not have control of examinations in your Division?

Mr. LUND. That is correct.

Mr. HELLER. Do you ever examine them?

Mr. LUND. Oh, yes; we look at them frequently.

Mr. HELLER. On what occasions?

Mr. LUND. Well, for example, we need to know whether insiders, officers, directors or 10 percent holders, are selling securities in order to see that the laws are properly administered in order, for example, to detect whether a distribution is being or has been made without a registration statement.

Mr. HELLER. And in looking only for that, you make an examination?

Mr. LUND. That is formally our procedure.

Mr. HELLER. That is your practice?

Mr. LUND. Yes.

Mr. HELLER. If the only security which is issued is a debt security, and none of the equity issues of the company have been registered, I take it that no report need be filed, is that correct?

23578-52-pt. 1--41