The Daily Ardmoreite. [volume] (Ardmore, Okla.) 1893-current, 1917-01-22
UNITED STATES SUPREME COURT
TODAY HELD THE "BLUE SKY"
LAWS CONSTITUTIONAL.
CURB FRAUD SALES
Twenty-Six States Have blue Sky"
Laws to Protect Investors Against
Sale of Worthless Stocks - Lower
Courts Held It Unconstitution.

Washington, Jan. 22-The United
States supreme court today held con-
stitutional the blue sky" laws of
0'io South Dakota and Michigan,
fisto,, designed to curb sales of
frau. ~ SocL, wing they do
not exceed sr.' ID wers, and
do not burden interstate jmmerce in
the sale of stocks and bonds,
Blue Sky laws, enacted first in Kan
sas in 1911 with the purpose of pro-
tecting credulous investors against
sales of worthless stocks and bonds,
have been coupled in some measure in
more than half the states of the union.
Twenty.six states are said to have
laws embracing the fundamental prin-
ciple Of endeavoring, by constitutional
methods, to prevent sales of get
rich-quick' or "fy by night" securities.
Three cases brought before the su.
preme court and argued together in
October, 1916, concerned the consti-
tutionality of the blue sky laws Of
Ohio, South Dakota and Michigan. All
had been held unconstitutional by
lower federal courts, and their en-
forcement by state officials was en-.
Joined while the officials appealed
The original Ohio law of 1913 was
amended February 6, 1914, by the
state legislature to meet alleged de
fects of the South Dakota and Michi.
gan laws. The South Dakota law of
March Is, 1915, and the Michigan
law of April 9, 1915, repeating the old
1919 act, which had been held void,
were substantially patterned after the
model blue sky law drawn by a
committee of the National Associa.
tion of Attorneys General following
its 1914 convention.
Two principal points upon which the
Ohio, South Dakota and Michigan acts
we're declared void and non enforce
able in the lower courts were:
That they unduly burden interstate
commerce, of which Stocks. bonds and
other securities were declared to be
instrumentalities and that the laws
exceed the states police powers OF
local supervision,
The states, however, contended thai
the laws prevent fraud only and, un
like the original Kansas type of blue
sky legislation, do not attempt to pre-
vent unwise investments. Also the!
contended that the laws do not re
strict or burden interstate commerce
of which stocks, bonds and other Sc
curites were declared to be instru
mentalities, and that the laws exceed
the the states police powers Of loca
supervision.
The states, however, contended tha
the laws prevent fraud only and, un
| like the original Kansas type of blut
sky legislation, do not attempt to pre-
vent mwise investments. Also the,
contended that the laws do not restric
or burden interstate commerce. apply
ing only to sales within the states
and In preventing frauds upon thei
citizens are. a normal, wise and pre-
ventative exercise of state police pow
ers.
Generally, the laws provide for eX
aminations of securities, prospectus
and other information by state secur
ity commissions, or other officials; Ii
censing of dealers, and penalties o
$1,000 fines and one years imprison
ment for violations. The Ohio law
however, applies only to sales within
the state of securities on propert!
outside of the state, the South Dakot,
and Michigan laws applying to both
Also, the laws generally exempt Ger
tain securities, including those liste,
on stock and other exchanges, OF ma
tional and state bank trust and build
ing andl oan company securities; rea
estate transactions, including mortga
ges; secured commercial paper, in
Guiding promissory notes; and are salt
not to restrict individual transactions
The Ohio law, also, does not prohibi
mail order sales.