GOVERNMENT: 25 Years Agrowing

When the New Deal asked Congress to regulate the nation’s stock exchanges in 1934, Wall Street and leading industrialists fought the bill with such fervor that Texas Democrat Sam Rayburn called their opposition “the most powerful lobby ever organized against any bill which ever came up in Congress.” Last week, as the Securities and Exchange Commission celebrated its 25th anniversary, the SEC was as accepted in Wall Street as the Stock Exchange, got due credit for helping raise the standards of stock trading and corporate financing to the highest in the world. But there were still complaints. They were not against the SEC’s regulations; they were against the agency’s delays in enforcing them.

Underlying the SEC’s new problems is the fantastic growth of the U.S. stock market. From a value of $34 billion when the SEC began, stocks listed on the New York Stock Exchange are now worth nearly $350 billion. In the past seven years alone, the number of shareholders has doubled from 6,000,000 to 12,500,000. New corporate issues, which amounted to only about $400 million in the 1930s, now total more than $16 billion annually.

Boiler Shops. It is the SEC’s delays in approving registrations of new issues that are spurring Wall Street’s biggest complaints. Said Robert L. Winkler, partner of Bernard Winkler & Co.: “By the time the SEC gets around to approving a registration, market conditions have changed and issues often cannot be floated.” In the year ended last June 30, the SEC approved an alltime high of 1,226 securities-registration statements, a 34% increase over the previous year. In many cases the time needed for an O.K. was 28 days after filing, eight days more than the law provides for. In September approval time dragged out to 45 days.

Wall Street’s bull market has also brought other troubles—among them the revival of the oldtime boiler shop.* Most boiler shops are hit-and-run operations that fold up before the SEC can swing into action. But in the past year the commission, largely through its New York regional office under Paul Windels Jr., has cracked down hard. In fiscal 1959, the SEC’s total number of injunctions against brokers and security dealers doubled over the previous year to in, and its number of criminal actions tripled to 45. “We’d do more,” says SEC Chairman Edward N. Gadsby, “but we’re limited in staff and have to concentrate on only the most important cases.”

TV Films. Most Wall Streeters agree that the SEC is understaffed. It has a staff of only 1,000 and a budget of $8,100,000, well down from the peak staff of 1,683 in 1941, when its job was much smaller. But Congress has repeatedly ignored SEC requests for a bigger staff.

Despite the backlog of work, the SEC is still expanding its operations. To educate investors to the dangers of phony promotions, the commission has been sending out posters describing the work of boiler-room operators. Now it is preparing 15-and 30-second shorts for radio and TV, warning about stock-market swindlers. Says SEC’s Windels: “Fraudulent promoters can do their work so fast that the SEC often cannot stop initial damage. But if the public is warned, then these crooks have far less room to work in.”

*So called because the phony stocks are sold from rooms in which so many salesmen are high-pressuring on the phones that the rooms are as noisy as a boiler shop. In a recent boiler-shop action, the SEC halted O.T.C. Enterprises, Inc. from selling shares in a project to fly to the moon Dec. 7 and return Dec. 15, 1959.