Great Falls tribune., 1922-04-22
Washington, D. G., April 19.-The
United States is the only great nation

Washington, D. c., April 19.-The
United States is the only great nation
which maintains no regulation govern
ing the issuance Of what are known
as blue sky securities. Blue sky se-
curities are stocks or bonds or other
negotiable evidences of indebtedness
which are based on no real tangible
value. The term tblue sky" is an old
one. Its origin is this: the seller of
blue sky stock gives to his customer a
holding in nearly, or entirely, worth
less or unattainable value. The buyer
becomes bona fide owner of a share
in the enterprise on which the security
is based, but that basis has no tangible
value. Therefore he is doing practical
" the same thing he would do if he
paid money tor q patch of blue sky.
NO one could dispute his ownership,
but his property would be entirely
vaMeless to him az tangible asset.
The blue sky salesman and promoter
lite through the character of fiction
known as Get Rich. Quick wallingford.
That character represents the typical
blue sky stock salesman. There are
many in real life. A favorite scheme
is to organize and incorporate a de.
velopment company. The corporation
will claim to have land concession,
for instance, in the South Sea Isles.
Glowing prospectuses will be prepared
claiming that millions can be made by
growing cocoanuts on the land. Gulli-
BILE persons will believe the tale and,
having visions Of sudden, fabulous
wealth, will invest hard-earned savings
in the stock. Or company may be
incorporated to exploit a patent or
secret process which may not exist
at all and il it does, has no commercial
value commensurate with che amount
Of stock issued against it. Oil is a
favorite field. Leases will be acquired
and stock sold on the chance of striking
oil. 1t is common saying among in
vestors and brokers that more money
goes into the ground than comes out of
it. This means, that more people pour
money into purely speculative oil COM
panies than receive profits from oil that
comes out Of the wells.
State Laws Inadequate
About half of the states of the
Union have laws regulating the is
suance of stocks. Under their provi-
sions. promoters desiring to sell Sc
curities must have their projects ex-
amined by state commissions. They
may not sell stock unless the commits
sion Of the state in which the product
is launched certifies that actual value
stands back of the stock The weak
ness of this regulation is that it re-
strains fraudulent activities only with
in the home state Of the blue sky en-
terprise. Statesmen can sell in other
states quite freely, the states having
no regulative jurisdiction beyond their
own borders.
In recent years various branches of
the government repeatedly have recon-
mended TO congress the enactmnt of
federal blue sky legislation which would
cover the entire country, fortifying and
the state laws. Bills
have been introduced, but to date no
action has been taken and the United
States remains practically an unre-
hunting ground for the blue
sky Wallingford.
During the war. under the broad
powers Of the government. the capital
issues committee was formed to re-
strain the issue of blue sky stocks
This was necessary in order that the
investment funds Of the nation be CON
served to pay war costs. The commit
tee existed only from May II to De