Evening star., 1925-01-25
safety Drive Is Year. Old.

rh. r,ox.mAnt to protect investors
from the depredations OF unscrupu
lous vendors OF worthless securities
Ia now almost Is years old hansas
was the pioneer State in passing les
islation known as blue SKY,
statute being put on It's poons -.
1a11 Row a great majority or states
have laws designed TO Keep ou' 'i'e
fraudulent dealer.
CeneraIIv speaking, this is accom-
nIisbed in one of two ways. First
tbere is no effort to establish reguld-
tory machinery. The provisions OF the
criminal law regarding fraud are
made to apply specifically and in more
dAtaiI TO security sales. Under laws
of this type, machinery Is lacklhs to
check the Offering of fraudulent Sc
curities but the means Is proNloeo 10
make punishment swift and sure IN
the case Of sales that oVerstep .he
reontremeuts of the acts. Secondly,
ooadit;oDx are laid down which must
he complied with before persons or
firms NAV offer securities for sale'
breaches are punishable by heaVy
fines and by inability to enforce
sales contract in the courts. Buyers
of securities sold in defiance or reg
ulations may bring action to resciho
their purchases and to recover oah-
ages. Most Of the laws 1ncluoe sec
tions compelling the handlers TO Sc
cure brokerage licenses.
In the main blue-sky laws apply TO
offerings to the general public
through a licensed dealer. ANY pr1-
yate holder of securities may oner
them for sale even by advertisement,
without being subject to the laws. In
most States the wholesale vendlnS OF
securities to bankers or dealers Is not
regulated nor do the laws apply TO new
issues offered to present stocknoioers.
Blue-sky laws permit the resuia'-
ing authorities to exact an unoeItah
ing that the stocks or bonds snail oe
sold at not more than what they con-
slider a fair price. Inc Venuols ~
,promoters may also be required 10
danosit their own stocks in escrow or
trust with the State to be hetd as
security for purchasers until the
earning power of the new concern mas
heen demonstrated. The power OF
examinstion and control by the State
authorities continues after PERMISSION
to sell has been granted and the per-
NIT NAV be revoked at any time for
cause.
opIniens Differ on Means.
while there is great unanimity
of opinion regarding the desirab1llty
of protecting investors, opinions dit
fer somewhat radically as to the best
means of accomplishing this purpose.
1t is realized by those who are In
favor of blue-sky legislation that no
means can be devised to keep out all
worthless securities, but it is urged
that these laws are of genuine BEN
eft to the investor since they weed
out at least the obvious swindles and
the corporations which have no
chance to make good from the outset.
This accomplishment must be granted
the regulatory type of law, but the
question is still left whether this
variety is the most desirable means
Of attaining the purpose sought
The Alexander Hamilton Institute
| after complete research work, finds
| three points in blue-sky legislation
subject to discussion, set forth as fol
| lows:
There is the question. with tn,
| regulatory type of law, whether tn,
| investor is not lulled into a false
security by the knowledge thai
stocks and bonds offered him have
been approved by the State authori-