South Bend news-times. (South Bend, Ind.) 1913-1938, 1922-07-09
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Suckers, Like Poets, Are Born,
Not Made; BIue-Sky LatU To Aid
Illinois Security Act Has Been Successful in Protecting Those
Who Are Careless in Investing Their Money
Secretary of State Points Out Operation
of Law for People

amended act which has been ac-
cepted i1 principle by many other
states and which is proving az salts
factory as any securities legislation
yet worked out The trouble with
the original law adopted in this
state was that 70 provided for the Is
suance OF a certificate by the secre-
tary OF state TO the corporation
which met the requirements. This
certificate bore the great seal OF
state. In the hands OF an unscrup-
ulous dealer or agent il was very
effective in convincing the unwary
investor that the state Of Illinois
stood back OF the corporation and
that the securities were as good as
a government bond. II was diff
cult also, under the provision Of
thls act 20 bar questionable securi-
ties
Under the present law. adopted In
1919 after II had been carefully
worked out by the Securities depart
ment OF the secretary Of states Of
fee, no certificate is issued. This
was the first law In the country
based on the plan OF classification OF
securities. A large number of other
states now have enacted similar
laws which have been upheld by the
United States supreme court in three
cases involving the acts in Michi-
gan. Ohio and South Dakota.
Securities Classed.
Under the classification plan secu-
rites are divided into four classes.
Glass A includes securities the in
herant qualities of which assure
their sale and disposition without
fraud. These are not subject to the
provisions OF the act. Class B in
cludes conservative securities which,
when disposed OF by persons and IN
the manner provided by law, are not
subject 20 the provisions OF the act.
Glass Q securities are those based
on established income and claS> -
includes securities based on pros
pective income. Before these can
be sold I'm the state the company is
suing them must file with the sec
rotary Of state complete informa-
ton regarding the standing OF the
company and its officers and trus-
tees. its assets. liabilities and in
come.
II is discretionary with the secre-
tary Of state whether or not this
statement may be filed and If he re-
fuses TO file il. the company cannot
sell the securities within the state.
The statements filed by the COM
panies are a matter Of public rec
ord and may be seen by those inter
ested at any time. but they all bear
this wording: This statement Is
prepared by parties interested in the
sale Of securities herein mentioned
Neither the state Of Illinois nor any
officer Of the state assumes any re-
sponsibIlity for any statement here
in, nor recommends any OF the Sc
curities described below"
Chance to Succeed.
It would not be proper to pro-
hibit the sale Of speculative securi-
ties for many. If not all. substantial
business enterprises are more or less
speculative at their inception. All
va can hope TO do IN an official way
IS 10 be sure that the company Of
fering TO sell securities has at least
a reasonable chance to succeed.
In this state-and believe this is
true of many other states-we have
made It a practice TO consider con-
ditions which have a fundamental
bearing upon each case presented.
although some Of them may not be
specifically mentioned in the law.
For instance:
First. The personnel OF the cor
porauon; their records for a period
OF years past as TO improper or un-
wise financing; their moral as well
as financial standing IN the COM
munity in which they reside.
Second. The major portion OF the
money invested by the purchaser OF
these securities must go 70 the fur
therance OF the project and not be