Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1917-01-22
Supreme Court Holds Sta
tutes of Three States to
Be Constitutional.
DECISION OF LOWER
COURTS REVERSED
Cases Appealed From Ohio, Michigan
and South Dakota Are Decided
Twenty.Six States, Having Similar
That Law Is Not Burden on Inter.
state Commerce. '..


Washington. Jan. 22.-Blue sky laws
Of three states-Ohio, South Dakota
and Michigan-designed to curb the
fraudulent sales Of securities, today
were upheld by the supreme court as
constitutional. 1t was held that the
law was not burden upon interstate
commerce in the sale Of stocks and
bonds.
Blue sky laws enacted first in Kan
sas in 1911 with the purpose Of pro-
tectinS credulous investors against
sales of worthless stocks and bonds,
have been copied 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 endeavorlng, by constitutional
methods to prevent sales Of "get-rich-
quick or 'fy-by- might securities.
Three cases brought before the SUI
preme court and argued together in
October, 1916, concerned the constitu-
tionality Of the blue sky laws Of Ohio,
South Dakota and Michigan. All had
been held unconstitutional by lower
federal courts and their enforcement
by state officials was enjoined while
the officials appealed. The original
Ohio law Of 1913 was amended Feb. 6,
1914, by the state legislature to meet
alleged defects Of the South Dakota
and Michigan laws. The South Dako-
ia law Of March Is, 1915, and the Mich
igan law Of April 3, 1915. repeating the
old 1918 act which had been held void,
were substantially patterned after the
model blue sky law drawn by a COM
mdttee Of the National Association Of
Attorneys General following its 1914
convention.
Questionable Points Of Law.
Two principal points upon which the
Ohio, South Dakota and Michigan acts
were declared void and on-enforce-
able in the lower courts were:
That they undIly burden interstate
commerce, OF which stocss! bonds and
other securities were declared to be in
strumentallties. and that the laws ex-
ceed the states police powers Of local
supervision. y '
The states. however, contended that
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 they
contended that the laws do not restrict
or burden Interstate commerce, amply
ing only to sales within the states, and
in preventing frauds upon their citi-
zens are normal, wise and preventive
exercise of state police powers
Generally. the laws provide for ex-
aminations of securities, PROSPECTUS
and other information by state security
commissions, or other officials; licens-
ing of dealers, and penalties Of $1,000
fines and one years Imprisonment for
violations. The Ohio law. however, ap-
plies only to sales within the state Of
securities on property outside of the
state, the South Dakota and Michigan
laws applying to both. Also. the laws
generally exempt certain securities, in
cluding those listed on stock and other
exchanges, of national and state bank.
trust and building and loan company
securities; real estate transactions. in
cluding mortgages: secured CONNER
and are said not to restrict individual
transactions. The Ohio law, also, does
not prohibit mail order sales.
Twenty-Six States Interested.
The twenty-six states reported to
have blue sky restrictions are Arizona.
Arkansas, California, Connecticut,
Florida, Georgia, Idaho Iowa, Kansas,
Louisiana, Maine. Michigan Missouri.
Montana, Nebraska, North Carolina
North Dakota. Ohio. Oregon, South
Carolina, South Dakota, Tennessee
Texas. Vermont, West Virginia and
Wisconsin.
; In addressing the supreme court. the
National Ass ociation of Attorneys Cen
eral said the legislation was in re-
sponse to the increased flotation Of
fraudulent securities during the last
twenty years. causing loss Of 100000
900 annually. The association asked
the court to uphold the legislation, par
ticularly as meteoric value of stocks
due to the war has given new impetus
to issues. and purchase by the public.
of fraudulent securities.
OF the blue sky laws enacted, the
Kansas act, the West Virginia law of
1914 and the Iowa statute. in addition
to those of Ohio. Michigan and South
Dakota, have been held void by lower
courts Bills for such laws in Indi-
ana anu AOlOIduO, III lV1o, were Ne-
toed: a Washington law was defeated
by popular referendum in 1915. Re-
vised statutes differing materially from
thso mode! statute adopted by Michi-
gan and South Dakota have been, en-
acted in Iowa. Oregon. Wisconsin, West
Virginia, Kansas and North Dakota,
abolishing licensing of security ven
dors. Courts have upheld the Arkan-
sas, Florida, North Carolina and Ore
gon laws.
Decision Rsvsrsss Lower Courts.
The Ohio law as amended in pursu-
ance Of a state constitutional amen sd &
ment Of 1912 was declared unconstitu-
tional by Federal Judges Warrington.
Safer and Hollister, Feb. 10. 1915, sit
ting at Cincinnati, and an Injunction
prohibiting its enforcement was given
agaist Attorney General Turner and
Harry T. Hall, state bank superin-
tendent. in three suits, brought by The
Geigsr-Jones Company, security UNDER