Quoted on the reverse side hereof is a statement of Commission policy, issued June 14, 1939, with respect to "staff members seeking employment with persons subject to the Commission's jurisdiction." Copies of the statement were distributed at the time to division heads for their information and for the information of such staff members as might consult them as to negotiations with respect to future employment. While the Commission believes that the staff has been generally familiar with its policy as expressed in this statement, a recent staff inquiry has suggested that the actual text should be available to all employees (as are Securities Act releases Nos. 1761 and 1934 dealing with a related subject matter). Accordingly, the Commission has directed that copies of this statement of policy be distributed at this time to all employees. ORVAL L. DuBois, Secretary. JUNE 14, 1939, 10 a. m. The Commission considered the propriety of staff members seeking employment with persons subject to the Commission's jurisdiction, with particular reference to the efforts of members of the staff of the Public Utilities Division to secure employment with registered public utility holding companies or their subsidiaries. The Commission adopted the following declarations of general policy: (1) No staff member shall seek employment with any person who then has pending before the Commission any matter upon which the staff member is or has been engaged. (2) A staff member who has, by submitting his resignation or otherwise, notified his superiors of his intention to leave the service of the Commission may without objection seek employment with a person subject to the Commission's jurisdiction provided that that person has no matter pending before the Commission on which the staff member is or has been engaged, and provided further that the staff member, after opening negotiations for employment, shall not thereafter participate in the consideration of any matter affecting his prospective employer. When in any such case the prospective employer has recurring business before the Commission, the staff member shall keep his superiors currently advised of the progress of his negotiations for employment. (3) A staff member shall not be precluded from seeking employment with a person subject to the jurisdiction of the Commission merely by reason of having participated in the consideration of matters affecting such person, provided the matters thus considered have been disposed of by the Commission and have no bearing on matters which may arise in the future. ORVAL L. DUBOIS, Recording Secretary. [For immediate release Monday, June 27, 1938] WASHINGTON Securities Act of 1933-Release No. 1761. Securities Exchange Act of 1934-Release No. 1759. Holding Company Act-Release No. 1138. The Securities and Exchange Commission today announced the adoption of amended rules of practice, effective July 1, 1938, which will revoke and replace all previously adopted rules of practice as of that date. The Commission announced that the amended rules of practice have been printed and are available to all persons upon request. The amended rules contain the following provisions: Applications to practice are no longer required, and the register of persons admitted to practice has been eliminated. In the case of hearings before a trial examiner or the Commission, only an attorney at law is permitted to represent parties; however, a party may appear in his own behalf and a corporation may be represented by its officers. In other matters, the rules do not prescribe technical qualifications for those practicing before the Commission. All persons who present cases before the Commission, or who prepare material to be filed with the Commission, are regarded as practicing before the Commission, and the Commission may invoke the sanctions of disbarment against any such person in the event of improper conduct. Practice before the Commission has been defined to include the preparation of any statement, opinion or other paper by any attorney, accountant, engineer, or other expert, filed with the Commission in any registration statement, application, or other document with the consent of such attorney, acountant, engineer, or other expert. a The Commission reserves the right to disqualify any person and deny him the privilege of appearing or practicing before it in any way, if such person is found not to possess the requisite qualifications to represent others or to be lacking in character or integrity or to have engaged in unethical or improper professional conduct. Under this rule, persons preparing statements, opinions, and other papers filed with the Commission as set forth above would be subject to disqualification and disbarment to the same extent as those appearing before the Commission in person. The rules further provide that whenever a hearing is ordered by the Commission in any proceeding pursuant to section 8 of the Securities Act of 1933, and items in the registration statement which appear to be incomplete or inaccurate are not specified particularly in the notice of hearing, such items shall be so specified by amendment to the notice prior to the taking of testimony. Requests for such amendments shall be in writing and shall be granted or denied by the trial examiner, and, if granted, the registrant may be given a reasonable time to familiarize himself with such amendments. Exception to any ruling by a trial examiner must be noted during the hearing in order to be urged before the Commission. Witnesses summoned before the Commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States, such fees and mileage to be paid by the party at whose instance the witnesses appear. In a case where confidential treatment of material filed is sought, if a hearing is requested, the Commission, prior to hearing, may require the registrant to furnish in writing additional information in respect of its grounds of objection, and a failure to supply the requested information within 15 days after receipt of the request shall be deemed a waiver of the objections to public disclosure of that portion of the information filed with respect to which the additional information requested relates. Any party to a hearing in any proceeding may submit a request for specific findings, which may be accompanied by a brief in support thereof, and which must be in writing and filed within 5 days after the conclusion of the taking of testimony. All requests for specific findings filed in accordance with the rule are served upon the parties and counsel for the Commission and becomes a part of the record in the cause. Provision is also made in the rules for intervention by interested parties and for consolidation of causes involving common questions of law or fact. With respect to practice before the Commission by former members of the staff of the Commission, or by persons employing the services of former members of the staff, the Commission issued the following statement: "Under the amended rules of practice any former member of the staff of the Commission during the period of his employment and with which matter he has an investigation conducted by the Commission, which was pending before the Commission during the period of his employmet and with which matter he has, by virtue of his employment with the Commission, such familiarity as to be prejudicial to the proper conduct of the case, or in which matter he acted for the Commission in such a way as to make unethical his subsequent connection therewith, and any person employing the services of any such former member of the staff in such matters, without first obtaining the consent of the Commission, may be held to be lacking in proper professional conduct. "An opinion covering this subject will issue shortly." [For release in morning newspapers of Wednesday, April 5, 1939] SECURITIES AND EXCHANGE COMMISSION WASHINGTON Securities Act of 1933-Release No. 1934. Securities Exchange Act of 1934-Release No. 2066 (Corrected). The Securities and Exchange Commission today made public an opinion of its general counsel, Chester T. Lane, concerning the employment of former members of its staff by persons practicing before the Commission. In the opinion the general counsel states that "the Commission intends to deal vigorously" with persons who retain former employees of the Commission in order to obtain their advice on matters with which they had become familiar during their employment. Such conduct, the opinion states, will constitute grounds for disqualifying from practice before the Commission not only the former employee, but also his present employer. The opinion, which relates to rule II (e) (2) of the Commission's ended Rules of Practice effective July 1, 1938, reads (with names exscinded) as follows: "I have your recent letter, in which you inquire whether you may properly make use of the advice and assistance of an attorney formerly employed by this Commission in a matter with which he became familiar while on the Commission's staff. "Before taking up the specific situation described in your letter, I should like to express my general opinion, that any use of the services of a former employee of the Commission in a matter with which he was connected during his employment by the Commission, even though such former employee does not himself appear before the Commission, or take any part in discussions with its staff, would constitute grounds to disqualify from practice before the Commission not only the former employee but also his employer. The Commission is fully conscious of the serious consequences which may be caused by any deviation on the part of former employees from the most rigid standards of professional ethics in matters of this character, and intends to deal vigorously with any such cases that come to its attention. "In your letter you direct my attention to the fact that the Commission recently issued a stop order under section 8 (d) of the Securities Act of 1933, suspending the effectiveness of a registration statement filed under that act by the X. Y. Corporation, for which you are counsel. The company desires to amend the registration statement in accordance with the ston order, and you have requested a conference with members of the Commission's staff for the purpose of discussing the form and substance of these amendments. In preparing for this conference, you desire to make use of the services of Mr. A. B., a former employee of this Commission, and now an associate of your law firm. Mr. A. B. himself will neither be present at the conference nor otherwise 'practice before' the Commission, within the meaning of the Commission's Rules of Practice. "The Commission's files indicate that, when he was employed by the Commission, Mr. A. B. was asisgned to the Registration Division and acted as attorney for the examining group which considered the registration statement of the X. Y. Corporation to which I have referred. "The question presented is the application of rule II (e) of the Commission's amended Rules of Practice effective July 1, 1938, which reads as follows: (e) The Commission may disqualify, and deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to, any person who is found by the Commission after hearing in the matter “*(1) Not to possess the requisite qualifications to represent others; or (2) To be lacking in character or integrity or to have engaged in unethical or improper professional conduct.' "At the time it announced the amended Rules of Practice the Commission made the following statement concerning practice by former employees of the Commission and the present employers of such former employees (Securities Act Release No. 1761): "Under the amended Rules of Practice any former member of the staff of the Commission who shall appear in a representative capacity in any matter, including an investigation conducted by the Commission, which was pending before the Commission, during the period of his employment and with which matter he has, by virtue of his employment with the Commission, such familiarity as to be prejudicial to the proper conduct of the case, or in which matter he acted for the Commission in such a way as to make unethical his subsequent connection therewith, and any person employing the services of any such former member of the staff in such matters, without first obtaining the consent of the Commission, may be held to be lacking in proper professional conduct.' "This statement of policy is based upon the principle enunciated in canons 36 and 37 of the Canons of Professional Ethics of the American Bar Association. **Inasmuch as the registration statement of the X. Y. Corporation was pending before the Commission at the time Mr. A. B. was in the Commission's employ, your availing yourself of his services in this matter without having obtained the consent of the Commission would in my opinion justify the institution of disqualification proceedings, pursuant to rule II (e) (2), against both Mr. A. B. and yourself. "Although you did not expressly request it, I have, in accordance with our practice, considered your letter as an application for consent to make use of Mr. A. B.'s services in this matter and have discussed the circumstances with the Commission. The Commission has instructed me to advise you that, in view of Mr. A. B.'s close connection with the registration statement of the X. Y. Corporation during his service with the Commission in a responsible position, consent to your using his services in this matter must be denied. ORGANIZATIONAL COMMUNICATIONS (The following letter of inquiry was sent to various organizations by the chairman of the special subcommittee :) UNITED STATES SENATE, COMMITTEE ON LABOR AND PUBLIC WELFARE, Washington, D. C. DEAR SIR: As you know a subcommittee of the Senate Committee on Labor and Public Welfare is considering Senate Concurrent Resolution 21, which would establish a Commission on Ethics in the Federal Government. The subcommittee wishes to get a wider and more specific expression of informed opinion than is possible through a short series of hearings alone. To that end we would welcome a statement of your views on the three basic questions below. BASIC QUESTIONS 1. What practices are questionable or clearly improper when measured by the standard of the public interest and welfare? We are interested in this question as it applies not only to Members of the Congress, administrative officials and employees, but also to persons or groups seeking to influence legislative, administrative, or judicial decisions. Although we do not expect a complete coverage of such practices, we would welcome a statement, based on your own observations and experience, that is as specific and comprehensive as possible. 2. How serious is the problem of improper practices as you see it? Is the basic integrity of the governing process seriously challenged by certain particularly dangerous improprieties? Or by the prevalence of many improprieties? 3. What measures do you recommend to prevent or correct improper practices? We are thinking here of possible action by the public and by private and public interest groups as well as action by the Congress and by administrators. If you can give us the benefit of your judgment on these questions in a written statement, it will be most helpful to the subcommittee. We should like to have statements by July 15 if at all possible. Sincerely yours, PAUL H. DOUGLAS. (The following letters and statements were received, most of them in reply to the above letter:) SAVE THE CHILDREN FEDERATION, Senator PAUL DOUGLAS, Senate Office Building, Washington, D. C. DEAR DR. DOUGLAS: I am happy to learn through the press that you and your associates are considering the development of a code of ethics for Government employees. For nearly a quarter of a century professional ethics has been a special hobby of mine, since in 1930 I wrote, as partial fulfillment for my doctor's degree at Teachers College, Columbia University, a dissertation entitled "Instruetion in Professional Ethics." This was published as NEA Research Bulletin, volume 9, No. 1, January 1931, and is now out of print, but it is available in most large libraries. For nearly two decades I also served as staff consultant for the NEA Committee on Professional Ethics, and under separate cover I am sending you copies of our reports 1947-50, which I hope you will find of interest and value, since they carry detailed information regarding the thinking of leaders in our profession about the value of codes of professional ethics. 504 |