and noncooperation with the illegal regime of South Africa. We were disallowed by the Securities and Exchange Commission.

We were allowed a resolution asking for information on relations with workers and relations with the South African Government, and this was defeated. However, AMAX promised a report and this has just been issued. It boasts of wage rises for black workers, a cash increase averaging 42 percent over the past 2 years- a fact due to the great strike by Namibians in 1971-72 more than anything.

AMAX in its just released 1973 annual report states Tsumeb's net profit for the year was more than double that of the previous

year.

The AMAX special report on Tsumeb Corporation Ltd. includes this extraordinarily secure utterance: "The U.S. Government recognizes the de jure authority of the United Nations but deals with South Africa as the de facto administrator."

One of the most persistent arguments used by foreign investors in South Africa and Namibia is that the more the investment, the more apartheid will disappear. I am not an economist or a labor expert, but I want to submit a copy of a paper by two students at the London School of Economics, entitled "The Control of Wages. in South Africa" and published by the Mandate Trust in London. It tackles the above contention, concluding:

The most striking implication of our findings is that foreign firms can do little to bring about any substantial improvements in African wages or employment opportunities as they have to operate within the institutional framework of apartheid.

The authors add:

The system of controls over African labour that has been established in South Africa is unique, although the same objectives underlie the pattern of controls over African labour in Namibia.

It is reported that the United States has made a representation to the South African regime about the incommunicado detention of Mr. Meroro and other SWAPO leaders under terms of the Terrorism Act.

What is the nature of this note? We have heard some today. And how strongly was it put? Would it be considered too bold to demand access to the detained Namibians, and to their compatriots serving prison terms on Robben Island off Cape Town, or would such action be judged to bring about more fearful treatment at the hands of the security police?

Is the United States bound by some precatory approach when dealing with South Africa? Does it not know that of all the states in the world it commands South Africa's attention as that overseas nation South Africa hopes will come to its aid when the chips are down.

Is not the recent visit to the United States by South African Minister of the Interior Cornelius Mulder and his eager courting of prominent government, political, and media leaders and his consultation with Pentagon figures in international security affairs indicative of South Africa's desperate need for reassurance?

The time to reassure the Pretoria regime otherwise is now and the point is with Namibia-an act fully consistent with law and world order.

* See appendix at p. 229.

The Namibian people are working at their destiny. In whatever form the struggle takes-SWAPO armed forces operating against the South Africans in the northern regions; representations by exile leaders at the United Nations and in various countries; the presence of the national convention-standing in contrast to Prime Minister Vorster's handpicked advisory council; the Namibian workers' movement; the SWAPO Youth League-the Namibian people are one in their determination to be rid of South African usurpation and to become a free and unified nation.

I believe that the United States of America, vigorously committed to the same ends, can be crucially effective in their achievement. By so doing, we just might set a new course for southern Africa. Thank you, Mr. Chairman.

Mr. DIGGS. Thank you, Mr. Johnston.

Mr. Hocker, I was particularly interested in your reference to your legally authority. I am particularly interested in finding out from your Agency, on the most comprehensive basis, just what its legal rationale of the implications for our Government is in doing business-our Government and U.S. business-in those areas where your Agency has jurisdiction.

For example, you seem to have some questions about section 77(h) (D). Our interpretation is that it does give the Commission legal authority where material facts are not disclosed and that the Commission can do any number of things under that citation. Mr. HOCKER. I would be happy to do that. Thank you, sir. I am not aware of whether or not you are a lawyer. Mr. HOCKER. I am not an attorney, Mr. Chairman.

Mr. DIGGS. Do you have some legal representatives? We want a comprehensive legal opinion from your Agency as to the rationale that you have manifested here.

Mr. HOCKER. Mr. Chairman, under those circumstances would it be appropriate if I asked the opportunity to submit a written statement?

Mr. DIGGS. All right.

Mr. HOCKER. I would be happy to do that. Thank you, sir. [The written statement referred to follows:]

MEMORANDUM PREPARED BY DIVISION OF CORPORATION FINANCE, SECURITIES AND EXCHANGE COMMISSION

In the hearings before the Subcommittee on April 4, 1974 a request was made, see page 27 of the transcript, for a statement, in writing, with respect to the jurisdiction of the Securities and Exchange Commission with regard to companies doing business in Namibia.

The authority of the Commission in this respect derives from the Securities Act of 1933 and the Securities Exchange Act of 1934 in regard to publicly held companies.

Under the Securities Act securities proposed to be sold to the public by issuers, underwriters and control persons must be registered with the Commission in absence of an exemption from registration. The statute also prohibits fraud in the sale of securities. The principal part of the registration statement is the prospectus which must be delivered to purchasers of the securities. Pursuant to authority granted by the statute, the Commission has promulgated rules, adopted forms and issued guidelines specifying the form and content of prospectuses. Generally, prospectuses are required to set forth all material information needed by an investor to determine whether or not he wishes to buy the security offered. Materiality has been defined by the Commission, in Rule 405 under the Securities Act, as follows:

The term "material," when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters which an average prudent investor ought reasonably to be informed before purchasing the security registered.

A typical form for registration of securities is Form S-1, the general form to be used when no other form is prescribed by the Commission's rules. A copy of the form is attached. It provides for information with respect to the issuer, its business, properties, and management, the securities to be sold and the proposed method of

sale.

The Securities Act provides for sanctions for failure to comply with the provisions thereof. Among these are administrative or stop order proceedings, mentioned at page 27 of the transcript of hearings as Section 77 (h) (D). The Commission may institute injunctive proceedings in the federal courts against violations or threatened violations of the statute. The Commission may refer alleged violations to the Department of Justice.

Under the Securities Exchange Act of 1934, (1) companies whose securities are traded on national securities exchanges and (2) companies whose assets exceed $1 million where a class of equity securities is held by more than 500 persons, with certain exceptions, are required to register with the Commission and file annual and other periodic reports with the Commission. Under authority of this statute the Commission has promulgated rules governing the solicitation of proxies with respect to the securities of such issuers.

Generally, the disclosures required under the Securities Exchange Act are similar to those required under the Securities Act. Enclosed is a copy of Form 10-K, the general form for annual reports.

Where proxies are solicited from holders of securities under the Commission rules, a security holder may, subject to certain limitations, require the management to include in its proxy material an appropriate proposal which he wants to submit to a vote of security holders.

The Securities Exchange Act provides sanctions for failure to comply with the provisions thereof including administrative proceedings before the Commission, injunctive actions and criminal reference.

The Securities Act and the Securities Exchange Act require disclosures of information of interest to investors. The Commission has no authority to pass upon, approve or disapprove securities or activities of issuers such as conducting operations in Namibia. The specific disclosures appropriate to a particular company would depend on the facts and circumstances thereof. We understand that the United States position with respect to investments in Namibia, as announced by the Department of State, is that (1) since May 1970 the United States has officially discouraged investment in Namibia, (2) Import-Export facilities are not available for trade with the territory and (3) further investment in Namibia, made on the basis of rights acquired from the South African government following the termination of the South African mandate in 1966, would not receive U.S. Government protection against claims of a future legitimate government in Namibia. In our opinion, the existence of a material investment or carrying on material operations in a manner not in conformance with the above policy of our government would require specific and prominent disclosure.

Mr. DIGGS. Now precisely, Mr. Hocker, what information does the SEC require in registration statements for securities relating to Namibia in addition to your ordinary requirements?

Mr. HOCKER. Mr. Chairman, I will have some difficulty in responding to that because, as I have indicated, with the one exception of Gemstone Mines Ltd., the SEC has not been faced with a registration statement concerning investment opportunities as such in Namibia.

If such a proposal came before us, the staff would consider it in light of the announced policy of the State Department. We would be in communication with the State Department to avail ourselves of whatever facts they might have which were not immediately available to us, to get the benefit of their comments and suggestions with respect to disclosure of legal issues, and at that point, should the

issuer or the company decline to make appropriate disclosures with respect to the risk and conditions of carrying on business in Namibia, the Commission might resort to an enforcement proceeding.

Enforcement proceedings can take a number of forms, including injunctive actions in the District Courts of the United States.

Mr. DIGGS. So you are suggesting here that you would do this on a case basis?

Mr. HOCKER. That is the way it would be, sir.

Mr. DIGGS. Is that unusual?

Mr. HOCKER. No, sir. As I have mentioned, we have had a very small number of instances of contact with Namibian matters, and we have not created or developed specified procedures for dealing with those.

Mr. DIGGS. Well, schedule A of the Securities Act states, as you know, that the registration statement must include the opinion of counsel as to the legality of the issues of shares or securities.

So, now, does the Commission accept, without any question, counsel's opinion that issues related to Namibia are legal?

Mr. HOCKER. No, sir, it does not.

Let me answer that question in a fashion and then turn from that question to what I believe is even more pertinent to the general problem of disclosing the business carried on or proposed to be carried on, and certainly in our view the doubtful legality or the uncertain legal position of any enterprise would require the most complete explanation. We would certainly consider and there would be disclosed probably the opinion of counsel together with such other comment as might be necessary.

Mr. DIGGS. Let's talk about the prospectus a minute.

How does the Commission discharge its functions to see to it that all appropriate information is set forth both on legality and on material facts in the prospectus?

Mr. HOCKER. Yes, sir. Pursuant to the general authority of the statute and as provided in the statute, the Commission has adopted forms for registration of securities with the Commission. These provide more definite and specific guidance for the description of particular securities offerings than schedule A to the statute itself.

In addition to providing written guidance by way of rules and occasional interpretive releases, the Commission staff reviews registration statements filed with the Commission before such registration statements become effective and before the sale of securities may be completed.

The purpose of this review is to discharge the Commission's responsibility to seek out to the extent that it is possible areas of misrepresentation or failure to disclose which may appear in those documents.

Mr. DIGGS. Suppose there is some question about the legal status. Would the Commission set this forth in the registration statement and the prospectus?

Mr. HOCKER. The existence of the uncertainty and the difference of views with respect to the legal status would be disclosed; yes, sir. Mr. DIGGS. Well, if that is the case, what is the Commission doing to institute this requirement for all securities relating to Namibia in the past, in the present, and in the future?

Mr. HOCKER. I believe I should make some distinction here between registration statements relating to the proposed offering of securities for sale under the Securities Act of 1933 and those annual and other reports filed with the Commission by companies which may be doing business in Namibia pursuant to the Securities Exchange Act of 1934. In the second group of companies we will find AMĂX, which has been mentioned here, and Newmont Mining Co. These companies file reports with the Commission containing substantially similar information to the registration statements under the Securities Act of 1933, and the disclosure requirements are very similar.

It is for this purpose that you recall that I pointed out that there appears to be a difference in American policy toward new investments in Namibia and for the maintenance of existing investments.

With respect to existing investments, those of long standing, those that were created prior to the commencement of the U.N. responsibility, even though, in effect, the Commission approaches these as other investments in foreign countries subject to certain uncertainties, political changes, and absence of control and legal process in the courts of this country.

I might say that it is my understanding that other than the two companies we referred to, there are certain American companies such as Getty Oil Co. which have very small investments in Namibia, where disclosure might not be specifically called for by our regulations. The disclosure requirements of the Commission are all bottomed on a consideration of what is material to a company as a whole.

Mr. DIGGS. Let's talk a minute about the position of our Government which, as you know, is that it will not protect investment in Namibia against any future lawful government.

Do you think that this position ought to be included in the registration statement or the prospectus in order to protect the public? Mr. HOCKER. Certainly, any material investment which would be subject to that policy should be specifically disclosed. It is not entirely clear to me that investments existing prior to the announcements of the Government's position are subject to that policy.

Mr. DIGGS. Well, if you believe that, why doesn't the Commission institute this requirement?

I think it is very significant. I think many people would raise a lot of questions if they knew that our Government has taken this kind of a position.

There would be any number of stockholders who would raise questions about it. I would raise questions about it if I were a stockholder without any knowledge about the basic political factors that may be involved in a situation like that.

Mr. HOCKER. Certainly they have, sir. Specifically in the matter of Getty Oil Co., the shareholders have caused to be set forth in its proxy statement their attitude with respect to the activities of that company in Namibia, urging that the management company terminate their operations there. This is set forth in the proxy statement using the forum and the facilities provided by the Commission's proxy rules. Mr. DIGGS. Well, you have not answered the question. Namely, do you think that the Commission ought to make this a requirement? Would you have any problem with that, or would the Commission have any problem with that?