Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1917-03-10
Blue Sky Laws.

On Monday the supreme court. with
one dissenting voice, handed down g
decision UphOIdlng as constitutional
the blue sky" law now in force in
2G states. In many cases under these
various laws federal district courts
had held them unconstitutional and
eu50ined their enforcement by state
officials. The decision handed down
dtssOIves these lnlunCtions suspeuding
enforcement, and leaves the way clear
for the states TO proceed TO the pro-
lection of their citizens from fraudu-
lent stock 5obbing. It applied direct
ly TO the laws Of Ohio Michigan and
south Dakota. and indirectly to the
laws in many other states. The Mich
gan and South Dakota statutes were
patterned after the model blue sky
iaW drafted bv the National Associa-
ton Of Attorney Generals.
Generally. the laws provide for ex-
animation Of securities. prosnecfuses
and other Information and advertis-
Ing matter by state security commits
s5aDs, or by state officials. for the IL
oeuslng of lenders. and for penalties
OF $1,000 fine and irnprisOnmeuts for
violations. The Ohio law, however.
applies only to sale within the state
of securities on property outside the
state. The Michigan and South Dakota
laws apply 70 both. In general. GER
tain securities are exempt such as
those listed on stock and other ex-
changes, national and state bank.
trust and building and loan securities.
Other exempt business includes real
estate transactions. including mort
cages: secured commercial paper. in
Guiding pr0mi5sOry notes. and in gen
eral, private transactions
The "blue sky" laws do not atteupf
to prevent uuwise investments. There
.s no desire on the part of the states
having such laws 10 pose as experts
ana 10 advise their citizens. The de-
sire is merely TO protect citizens from
fraudulent schemes, especially Of the
get rich quick variety. The Ohio
aW does not prohibit mail order sales.
bus most OF the blue sky" laws do
Under this provision. il will not only
be impossible for dishonest stock
saiesmen 10 sell stock by personal ap-
peal, but fake mining, Oil automobile /
md other companies making extrava- /
CANT claims in advertisements cannot /
sell By mail without first satisfying /
he state authorities that the customer !
viii not be defrauded.
The statutes were attacked before /
-t@ . aga eA++o +blA & ED4 FORMER ALLCTuGE /
General Nlckershau, who appeared /
or the Investment Bankers Associa- /
ion OF America He argued that Sc
urlties were instrumentIiues of com
cerce and, as such. exempt from state
equation and subject only to nation /
d supervision. Justice McKeuna
anded down the opinion OF the court.
nd justified the burden on honest
lsiDess in these words.
The statutes burden honest bust i
hess, il is true, but burden IT, only
hat under its forms dishonest bust
ess may not be done Expense. nav
hereby be caused. and Inconvenience.
ut TO arrest the power Of the state
such considerations would make IL
npoJenr TO discharge its functions. 1t
2sIs something TO be govern ed 80
Honest business viii be helped to
le extent that money-estinated at
eo.y90,o00 in the last 20 years
hioh formerly was lost through / ,
audulent stock deals VIII now, to a
rye extent, go 10 honest business.