Arizona republican., 1917-03-15
NEW BLUE SKY" LAW Of ARIZONA
SUSTAINED YAT TORNEY GENERAL
All Mining Companies Are
Held to Come Under Act
of Legislature as Well
as General Corporations

The constitutionality of the Arizona
investment companies law. better
known as the blue Sky Law was up
held in an opinion handed down late
Yesterday afternoon by Assistant At
torney General r. William Kramer.
This opinion has been awaited with
anxiety and interest by practically ev-
cry mining compony in the state.
1t is the opinion of the assistant at
tOrney general that every INNING com
pany selling treasury stock in the state
comes within the purview of, and IS
subject to, the provisions of the Blue
Sky law, which was enacted to pre-
vent sales of get rich quick and fly
by night securities.
The opinion is as follows:
The Arizona Blue Sky law is SINH
lar in its provisions (althcugh less
drastic in its penaities) to the Blue
Sky laws enacted in South Dakota
and in Michigan in 1915, the constitu-
tiOnality of which, together with that
Of the Ohio law, was sustained by the
supreme court Of the United States in
three decisions handed down January
% of this year and lately published.
In these cases, the constitutionallty
of the Blue Sky legislation was at
tackled from every conceivable angle,
but the court decided that such stat
utes do not unlaWfully interfere with
Interstate commerce, that they do not
deprive Investment companies of due
process of law or of the equal protec-
ton Of the law, but that their enact
ment and enforcement is justified I'M
der the Inherent police power of the
state, 10 protect the public against the
imposition of unsubstantial schemes
and the securities based upon them
10 10
fact that an investment company has
been granted a permit to sell its stock
that such permit granted is in any
measure a guarantee by the commits
sion of the claimS~and promises by the
company; indeed, the Arizona statutes
provide that the permit issued by the
commission shall 'recite in bold type
that the corporation commission In no
wise recommends the stock, bonds or
other securities offered for sale by such
investment company -
WITH the sky-rocket gyrations of the
copper market the last three years and
the consequent feverish activity in the
development and flOtatiOn Of new min
ing ventures, the question of state reg
ul2tion and control of the business of
selling the treasury stock OF mining
companies has come to be a paramount
interest to the stock buying public of
Arizona II was principally for that
reason that the Blue Sky law was
passed.
Many States Have Like Law
According to statistics which Assist
ant Attorney General Kramer has at
hand. 26 Other states IN the union have
Blue Sky" laws similar to those of this
state. All such laws embrace the fun
damental principle of endeavoring by
constitutional methods to prevent sales
of unworthy stocks. In many states,
he announces, legislative action has
been taken 10 regulate ana control in
vestmcnt companies in new govern
mental boards, known IS state securi-
ties commissions.
Under the Arizona statutes, however,
power IS Vested in the corporation COM
mission to withhold from such COM
panies permit TO sell stock when it ap-
pears 20 the commission that the pro-
posed plan or contract of the company
is unfair or irequitabla, that the COM
pany is not solvent an@ does not intend
10 Go fair and honest business, or
when, in the judgment Of the commits
sion, the business of the company does
rot prOraise a fair return on the stock
Offered for sale. The statutes provide
penalties for the sale of stock without
permit from the commission for mis-
representations 10 the commission and
for the sale Of stock except through a
duly registered agent.
The Arizona Blue Sky law is a
measure of substantial protection to
both the investing public and the hon
est legitimate investment companies
doing business in the state. it is be-
ieVed. The corporation commission
has a comprehensive and close check
on every investment company doing
business in the state and violations
under the statutes are promptly prose-
c.ted in the courts.
The opinion is most interesting at
this tine inasmuch as the corporation
commission has, within the past month,
suspended permits of several COM
ianies to sell stock in this state.