[No. 1312] IN THE MATTER OF HUDSON TRADING & INVESTING CORPORATION File No. 812-31. Promulgated May 1, 1941 (Investment Company Act of 1940-Section 6 (c)) EXEMPTIONS. Where the assets of an investment company have been and will continue to be obtained either directly from the New York agency of an European bank or by the use of funds loaned it by the agency, and where there has been no public offering of securities by the company, and where there is no known American interest in said agency or bank, and where the portfolio securities. of the company are generally restricted to the type held by banks, and in the light of other facts; held that the applicant be granted an exemption from all of the provisions of the Act under Section 6 (c) for a period not to exceed 1 year, provided that applicant will not be relieved from the provisions of the Act if the operative facts are changed. APPEARANCES: E. West Parkinson, of the Investment Company Division of the Commission. FINDINGS AND OPINION OF THE COMMISSION An application has been filed by Hudson Trading & Investing Corporation (hereinafter referred to as the "corporation"), under and pursuant to the provisions of Section 6 (c)1 of the Investment Company Act of 1940 for an exemption from all of the provisions of said Act. The corporation, an unregistered closed-end management investment company, was organized on June 8, 1940, as a business corporation, under the laws of the State of New York, with an authorized 1 Section 6 (c) is as follows: The Commission, by rules and regulations upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this title. 9 S. E. C.-I. C.-121 capital stock of $50,000. This stock was originally subscribed for by the New York agency of an European bank, and at the present time is all held in a voting trust for the sole benefit of said agency pursuant to Section 50 of the New York Stock Corporation Law. Substantially all of the assets of the corporation have been, and will continue to be, obtained either directly from the agency or by the use of funds loaned it by the agency. The corporation has not made an offering of its shares to the public nor does it intend to do so in the future. So far as is known to the corporation or the agency, none of the stockholders of said bank is a citizen of or resident of the United States or any of its territories or possessions. The portfolio securities of the corporation are of the type generally held by banks, that is, government, municipal and other public securities, short-term commercial paper and bank acceptances; and it is its announced intention to confine its investments, with insignificant exceptions, to such securities. In view of the peculiar circumstances of this case, we are of the opinion that the public interest and protection of investors and the purposes fairly intended by the policy and provisions of the Act do not at this time require that the corporation be subject to the provisions of the Investment Company Act of 1940. We believe, however, that this conclusion should be reconsidered from time to time in the light of the company's activities and of European developments, and accordingly shall limit the exemption to a period of approximately 1 year. This limitation is, of course, without prejudice to further application for an extended or permanent exemption. Our order herein will not relieve applicant from the operation of the Act if, at any time, the facts recited above are materially changed. An appropriate order will issue. By the Commission: (Chairman Eicher and Commissioners Healy, Henderson and Pike). 9 S. E. C. [No. 1313] IN THE MATTER OF SMITH, FRIZZELLE & CO., INC. 111 Broadway New York, New York File No. 8-1. Promulgated May 1, 1941 (Securities Exchange Act of 1934-Section 15 (b)) BROKER-DEALER REGISTRATION. Revocation Proceedings. Injunction Against Engaging in Conduct or Practice in Connection With Where the registrant is permanently enjoined from engaging in or continuing any conduct or practice in connection with the sale of any security, which injunction was issued on the basis of a complaint charging that the registrant, in the conduct and transaction of its securities business, engaged in various practices to defraud and deceive the public, held that it is in the public interest to revoke registration. APPEARANCES: Arthur G. Klein, of the New York Regional Office of the Commission. FINDINGS AND ORDER OF THE COMMISSION This proceeding was instituted under Section 15 (b) of the Securities Exchange Act of 1934 to determine whether the registrant is permanently enjoined by a decree of the Supreme Court of New York, entered on or about October 22, 1940, from engaging in or continuing any conduct or practice in connection with the sale of any security and, if so, whether it is in the public interest that its registration as an over-the-counter broker and dealer should be suspended or revoked. Pursuant to an order of the Commission dated March 27, 1941, and notice served upon the registrant, the hearing in this matter was held before a trial examiner in New York City on April 11, 1941. The registrant failed to appear at the hearing. 9 S. E. C.- -34-2876 The record shows that by a decree entered October 22, 1940, the Supreme Court of the State of New York in and for the County of New York permanently enjoined the registrant from engaging in the securities business in the State of New York and appointed a permanent receiver to take over the business of the registrant. It further appears that this decree was entered upon a complaint charging that the registrant engaged in the securities business while insolvent and "in so doing has committed and now is committing a fraud on the plaintiffs and the public generally within the meaning and intent and in violation of Article 23-A of the General Business Law of the State of New York" and further, that the registrant "engaged in certain other devices, practices, schemes or artifices and in certain other transactions and courses of business to defraud and deceive the public." Upon the basis of the record before us, we find that it is in the public interest to revoke registration. It is ordered, pursuant to Section 15 (b) of the Securities Exchange Act of 1934, that the registration of Smith, Frizzelle & Co., Inc., be, and it hereby is, revoked. By the Commission: (Chairman Eicher, Commissioners Healy, Henderson and Pike). 9 S. E. C. [No. 1314] IN THE MATTER OF NORTHERN NEW ENGLAND COMPANY and NEW ENGLAND PUBLIC SERVICE COMPANY Respondents File No. 59-15. Promulgated May 2, 1941 (Public Utility Holding Company Act of 1935-Section 11 (b) (2)) SIMPLIFICATION OF HOLDING COMPANY SYSTEMS. Necessary Action for Compliance With Section 11 (b) (2). Where it is found that the corporate structure of a registered holding company unduly and unnecessarily complicates the corporate structure of the holding company system and unfairly and inequitably distributes voting power among the security holders of such system, and where it is found necessary as a step to effectuate the purposes of Section 11 (b) (2) that such holding company change its capitalization to a common stock basis or, at its election, liquidate its affairs and distribute its assets to security holders, held, under the particular circumstances of the case, that an order should be issued requiring such action to be taken, and that questions with respect to the proper method of allocation and distribution of the new common stock should be considered at further hearings. Necessity for Common Stock Capitalization. In view of the instability and fluctuations of respondent's earnings, the thin equities in subsidiaries which constitute its principal assets, and the absence of any facts to justify the issuance of new preferred stock, held, under the circumstances of the case, that the recapitalized company must be reorganized on a common stock basis and could not, consistently with the standards of Section 11 (b) (2), support an issue of preferred stock. Motion to Restrain Voting by Common Stockholders. Where motion is filed in a proceeding under Section 11 (b) (2) to restrain voting by common stockholders of the respondent before full opportunity was presented to all parties to demonstrate the right and extent, if any, of the common stockholders to participate in a reorganization under Section 11, held that the question of the voting rights of the common stockholders should be reserved for consideration in connection with any plans of reorganization that may be proposed. Motion for Order Requiring Divestment of Industrial Properties. Where motion is filed in Section 11 (b) (2) proceeding requesting postponement of order directing recapitalization on common stock basis or liquidation until a 9 S. E. C.-35-2737 |