Business: Reform & Realism

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David Saperstein, director of SEC's Trading & Exchange Division, is an old-time Pecoraman. Smart, he has hired Wall Streeters steeped in the lore of the tape to watch the ticker day in, day out for signs of manipulation. Whenever his tape readers smell a pool, squads of SEC investigators swarm into action. Technical Adviser Paul Gourrich was trained in Kuhn, Loeb & Co.

Money, Old & New. Most conspicuous result of Chairman Kennedy's prime policy of blending the high spirit of reform with the realism of the market place was his famed new registration form for old-line companies. After consultation with practicing lawyers and accountants, it was promulgated last winter, promptly released a flood of corporate financing that is still rising (TIME, March 13). Commenting on this simplified form, Accounting Review declared: "The SEC has in one month set effective and, on the whole, reasonable standards for the [accounting] profession which years of futile committee work within professional societies have not been able to produce or even begin to produce."

SEC's purpose was to cut down on the mass of irrelevant corporate information which was of no interest to anyone—least of all investors, who can hardly be persuaded to read a four-page prospectus in large type. A statement filed on the old form by Republic Steel weighed more than 50 Ib. On the new form Bethlehem Steel registered a $5,.000,000 bond issue in one volume, weighing 5 Ib.

No one knows better than Chairman Kennedy that even the new form involves the killing of cows for a pint of milk. To obtain a copy of Armour & Co.'s 121-page statement, filed a few weeks ago, an interested investor would have to pay SEC $17.10 in photostatting. Charges—15¢ per page for the first 100 pages, 110¢ per page for the rest.

Nevertheless U. S. Business responded to Chairman Kennedy's helpful hand by bursting forth with the greatest volume of financing since 1931. During the first half of 1935, total registrations amounted to $1,365,000,000, not far short of the figure for the previous 18 months. Even more impressive were the Financial Chronicle's authoritative statistics on securities actually offered to the public. Many registered issues have not yet been sold or are held for future use. Total corporate financing for the first six months footed up to $569,000,000 as against $201,000,000 in the same period of last year. Some $300,000,000 will probably be offered in the next few weeks alone. Pending issues include: $75,000,000 for Consolidated Oil; $70,000,000 for Duquesne Light; $53,000,000 for Edison Electric Illuminating of Boston; $28,000,000 for B. F. Goodrich; $25,000,000 for Commercial Investment Trust, notable because it is a preferred stock issue not bonds. More than four-fifths of all current financing is refunding—swapping expensive money raised in the past for the abnormally cheap money of today. Usually the ratio is the reverse, refunding accounting for only one-fifth of total corporate financing. In 1925, a typical year, U. S. corporations required $4,100,000,000 for development and expansion, $637,000,000 for treasury operations.

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