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B-180711 1 (1974-08-28)

handle is hein.gao/gaobabkvf0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE ouWASHINGTON, D.C. 20548 'cl GENERAL GOVERNMENT DIVISION RELEASED AUG 4 ,'-814 B-180711 The Honorable Bob Dole United States Senate Dear Senator Dole: In your June 26, 1974, letter, you asked us to investigate the proceeding under chapter X of the Bankruptcy Act for the reorgani- zation of the First Home Investment Corporation (FHI), to determine whether there has been unreasonable court delay in settling the case and whether the Securities and Exchange Commission (SEC) has been remiss in its oversight. On July 24, 1974, we briefed your Office on the results of our examination. As requested, this letter summarizes our briefing. Also, in a January 17, 1974, letter, SEC's Director, Division of Enforcement, gave you detailed explanations on many of the particulars of the case. SEC monitors registered investment companies to insure con- pliance with the Investment Company Act of 1940. As part of the monitoring program, SEC inspects investment company records and activities as often as possible on a rotating basis. Late in 1972, SEC's Fort Worth regional office made a routine inspection of FHI and its principal underwriter, Bush and Company, Inc., and found evidence that provisions of various Federal securities laws, in connection with the offer, purchase, and sale of FHI securities, and the management and operation of the company had been violated. In accordance with published SEC policy and with the Commission's specific approval, the Fort Worth regional office told FHI's attorney of the violations. FHI voluntarily suspended sales of its securities and filed for reorganization under chapter X of the Bankruptcy Act, stating it could not meet its current obligations. The court appointed a trustee to assume management operations during the reorganization, which is still in progress. In a separate administrative proceeding brought by SEC, members of the former management of FHI consented to findings of violations of various provisions of the Federal securities laws and accepted sanctions barring them from the securities industry. SEC's role in a chapter X reorganization is to (1) provide the district courts expert advice on the legal and financial problems involved in reorganization and (2) protect the legitimate interests of public investors holding securities of companies being reorganized. SEC has the status of a party in interest with the right to be heard on all matters but no right to initiate an appeal. Court records indicate that SEC has been active as a party in interest and has assisted the court-appointed trustee. 6~&Ld O/.?25

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