Highland recorder. (Monterey, Highland County, Va.) 1877-1972, 1920-01-16
TIE BLUE SKY law

Many requests have been made Of
the State Corpehation Commission
for information concerning the pro-
visions of the Securities or blue
Sky" law, and how this law acts as
a protection to the public, it is be-
lieyed that the following brief resume
may prove of general interest.
The Cooperation Act adopted by
the Legislature in 1903 was frankly
incorporate in this state and to in
incorporate in this state and to in
crease the revenues of the State from
this source. In this respect the Act
has met all expectations and the rev.
enues derived from this source are
very large, but an Act predicated up.
on such a theory was naturally lib
eral in its provisions and gave to
corporations large discreation as to
the considerations in return for
which it's stock was ISSUED.
The interests of prospective pur-
chasers Of stock were theoretically
protected by requiring such corper-
ations, before issuing stock to file
with the Commission a statement
showing in detail the considerations
for which, such stockwss proposed
to be issued, which statement is op-
en- to public inspection and is avail
able to any person contemplating the
purchase of stock of a Virginia cor
peration. The projection afforded the
public by this required publicity is,
however, largely theoretical, since
the provision Of the Corporation Act
are unfamiliar to many and since the
provision mentioned affords no pro-
lection in case of stock of corporat-
ions chartered in other states, but
offored for sale in this State.
To meet this condition and to fur
nish to the public larger measure
Of protection in the offer for sale Of
stocks appearing to be either fraudu-
lent or highly speculative in their
character. the Legislature of 1918
passed the act known as the Blue
Sky Law. The purpose Of the act was
defined by the law itself is not to pro-
vent the sale of speculative securit-
les, but to assure the prospective pur-
chasers adequate information and an
honest application of the proceeds of
stock sales. -.
Heretofore and particularly since
the discovery and exploitation of oil
in Texas and Oklahoma, thousands
of the people of this Commonwealth
have been made the innocent victems
of unscrupulous and designing men
who have taken advantage of native
honesty, credulity, and unfamiliarity
with financial matters. to dispose of
worthless stocks and bonds. Through
the activities of persons thus engaged
the savings of years Of labor have
has been exchanged for absolutely
worthless paper and the loss to the
people of the State has undoubtedly
aggregated very large sum.
Analyzing the Act itself we find
certain classes of secur-
tiles made subject to the Act and GER
tain other classes which are exempt
ed from it's provisions. While lit is
not always clear whether proposit-
ion in a given case is subject to the
law, there are certain situations as
to which there is no question. The
most important classes of stock SUBJ
ject to the Act are:
/. Securities of oil and mining
2. Securities in which speculat-
i've element, such as promotion, pat
.ents, formulae, or goodwill largely
figure-in other words, securities bas->
I'd on Intangible" assets.
3. Securities for which extraordin-
Try claims are made in soliciting the
public, and nearly always, ..-
4. Securities personally peddled
lbout by individuals.
We find in section Z of the Act,
certain securities mentioned, which
ire exempted from the provisions
If the Act They are:
l. Securities of the United States;
II auy foreign country; or any State
,r territory; or any taxing subdivis-
on of any State or territory of the
United States or any foreign country.
2. Securities of public service or
Utilities ), corporations or securities
senior there to. CAS- bonds of the
8. Securitits of any national bank,
rust company, or building and loan
association organized Under the laws
If Virginia.
4. Securities not offered for sale to
more than rs persons in the State.
S. Securities of domestic corpor-
ons organized without capital stock
or religious or charitable purposes.
g.. Securities which do not come
within the definition of speculative
securities. S3<
Z. Securities of any corporation
whose authorized capital is not more