New-York tribune., 1922-05-07
Bankers No Longer
Fear That Denis on
Bill, Denying Nail to
Fake Promoters, VIII
HWtLegitimdte Issues

$4,000 appropriated. The Attorney General
has appointed Frederick r Rich a. a deputy
in charge Of the enforcement Of this fraud act
His Offices are at II East Forty-fourth Street
The policy of the Attorney Generals Office is,
after making Investigations, TO turn over eyj-
dcnce Of crime TO the local district attorneys,
instead of prosecuting directly. 1nvestigs-
tons have dealt with blue-sky promotions
rather than bucketing. Many Of the complaints
which have been referred to the Attorney Gen
erals Office came from persons who put their
money into speculative schemes and who havs
failed to receive dividends, Mr. Rich said
and investigation OF most of them doe. not
reveal any crime.
Every bucketshop and wildcat stock or
ganization be closed under the powers Of
the Martin act said Mr.. Rich, when he wa:
asked regarding the efficacy Of the law.
Mr. Rich said that twenty 20 thirty major
Investigations had already been made, and
that some cases have already been turned over
to district attorneys for attention.
Bankers, as represented by the Investment
Bankers Association, have temporarily with
drawn their opposition 10 blue-sky legislation.
which they had long stood out against on the
ground that it set up limitations which inter
fered with the operations Of reputable brok-
erg and investment bankers The changed
attitude, toward which little publicity has
been given, originates partly from disappoint-
ment over the results obtained from fraud
acts, which do not create special provision for
their enforcement, whereas the bue-sky laws
do, and partly for reasons OF practical politics.
The Eolstead bill, involving the fraud act
principle, has received little attention in Con-
gress, whereas the blue-sky bill proposed by
Representative Z. E. Denison, Of Illinois was
favorably reported out Of the Interstate Com
merce Commission Committee Of the House of
Representatives. AS a result Of his confer
ence with bankers Of probity. certain rnodif-
cations have been made in the Denson bill.
which now has banking support. Securities
which have been passed upon by state public
service commissions or by the Interstate Com
merce Commission, and securities offered for
sale to banks, are specifically exempted from
the operation of the act, and thus % per cent
Of the stocks reputable bankers deal in are im-
mune from the restrictions imposed by the
law. Furthermore the bluc-sky commissioners
of the various states through their association
agreed to make the Denison bill if passed, thu
standard for uniform state legislation, which
would be proposed as substitutes for the pres
ent laws in thirty-nine states which differ
very widely among themselves. and whiSh, be
cause of this diversity, impose unusual hard
ships on reputable dealers seeking nations
business.
The Denson bill was reported favorably by
unanimous vote of the Interstate and Foreign
Commerce Committee, and the Rules Commit
tee of the House granted a rule giving it a
privileged status in the House, which brought
the proposed law up for consideration. II
vas passed by acclaim.
In response to a request from The Tribune
for statement setting forth why the bill
should be passed. Representative Denson said
Il would say briefly that the biz should be
passed because there does not seem to oe any
other available method for stopping the IN
~crupulous promotions Of get-rich-Quck cor
porations and the increasing imposition o.
fraudulent and worthless securities upon the
American people. There are thirty-nlne states
that have so-called bue-shy laws 20 prevent
the sale of fraudulent and worthless securities
TO their citizens. Most Of these laws are eff
fectve and are being made more 50 from time
TO time by appropriate amendments, as expert
ence and study disclose their defects. But
the pirates of promotion who find that they
cannot qualify their securities under the blue
skv laws Of the different states evading
those laws by use of the United States mails
and other agencies Of interstate commerce.
They get ready to place their worthless stocks
or bonds upon the market and carefully avoid
going into the states where they cannot qualify
them, but food the United States mails with
their lurid literature Offering their securities
for SALE and as a result it has baen officially
estimated that the people Of this country are
being defrauded out Of at least $500,00000)
each year through the sale Of worthless and
fraudulent securities. The states are power
less to prevent this, because their laws vio-
lated from without their borders Their Sc
curities officials have been appealing 10 the
Federal government for assistance.
"The theory Of the bill is that the states
ought to have the right to enact such iegisla-
ton as they think proper to protect their own
citizens from the sale Of fraudulent securities,
and the Federal government ought to CO.
operate with the states for the accomplishment
Of this purpose, at least to the extent of for
bidding the use Of its agencies for violating
the state laws. Therefore, this bill recognizes
the state securities laws; and it forbids the
use Of the United States mails and other
agencies of interstate commerce TO those whc