Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-07-31
BY BEN McKELWAY.

While Washington has been making
Fruitless attempts to secure fraud or
''b.u. sky" laws which would make
th2 sale Of questionable securities diff
ficult, the surrounding States have put
such laws on their statute books, with
the result that fake stock promoters,
driven from nearby communities. have
made the District Of Columbia happy
hunting ground. One example was
afforded recently in the setting up OF
4 manufacturing concern in nearby
which sold it's stock in the
District Of Columbia, but which was
prohibited by law from selling it in
So, in the absence Of restrictive leg
those interested in protecting
the public from the purchase of worth
less or fraudulent securities have
sought to emphasize the proper pre-
cautions to take before investing. The
attempts in this direction have been
rather sporadic, always reaching sort
Of a grand climax during such laudable
weeks as Thrift week, and then dying
down again for a year or SO. Every
ono Is more or less familiar with the
slogan Before You Invest-Investi-
gate" But it's wide application has
not been highly successful, because OF
the difficulty in knowing how to In
vestigate and where to investigate.
Better Business Bureau.
The Better Business Bureau. a non
profit making organization maintained
by the city's business interests for
!, h nd % o.
ton, is equipped to answer questions
relating to the standing of companies
offering securities for sale in the Dis
trict and il the knowledge is not IN
the possession of the bureau when in
quiries are made, the information will
be secured upon request. The bureau
il also able to classify the various
types of securities placed on the
market
One might conclude that his banker
affords him ample protection, and gen
orally he does. But many persons do
not have a bank account. Besides, the
banker. by being asked to give ad
vice. Immediately Is placed in the un
happy position of perhaps giving the
wrong advice. The established and
company which deals in Sc
curities is a good source of informa
ton. But one should be sure that ir
asking Twice 10 asks 1t Of officials OF
an established and respected company
The Better Business Bureau, how
ever, gets around the ticklish question
OF giving advice on securities very
nicely. 1t does not attempt to advise
the purchaser as to whether or not he
should buy. 1t simply Classics the
security in question and the prospec
tive purchaser may make his own de
cision. The security may fall within
any one of the five following classes:
First. Investment. A security that
has marketability, that Is safe anc
which offers a sure return.
Second. Business venture. Most Of
tn finance companies are PLACED
under this heading. There is a Ger
tain safety and assured return, bu
often there is no marketability, anC
the purchaser is open to the risk!
usually conveyed by the word wen
ture"
Third Speculation. A security
which lacks most of the Fundamental
points considered In an investment anC
which lacks marketability.
Fourth. Gamble. About a 50-5(
break of winning or losing, with the
oddn running one way or the other.
Fl II. Fraud. Where there is evi
den, of misrepresentation and where
there is nothing to give the security
any value.
Easy to Investigate.
It would, apparently, be a simple
matter to telephone the Better Bust
ness Bureau and determine the elias
sific. ion Of the stock offered for sale
In so ne cases a telephone call mus
be followed by personal visit, but
even the cost of two car tokens should
hardly be taken into consideration
where a much greater amount Is in
volved The Better Business Blu
reau, at any rate, allows the pur
chaser to go into a transaction
with his eyes open and with some
knowledge beforehand Of what he may
expect. If he understands clearly
that the stock offered him is bust
ness venture, and is not an invest
ment in the true sense of the word, he
may decide to look around for some
thing that is considered an invest
ment. If he finds that the stock of
fered ~ fraud, surely he does not
want to touch it, Yet the sale of Sc
curities classified by the Better Bust
ness Bureau as CANDLES and frauds
goes merrily forward in the District
about every day. And this simply be
cause the purchaser does not heed the
advice Before You Invest-Investi
gate"
Those trained in the purchase of Sc
curities can see the earmarks of fraud
q mile away. The promised return on
an investment is one OF the surest in
dications of it's nature. A bond or a
note Is nothing but a loan. A share
of stock differs from a bond in that
the purchaser is not q creditor OF the
company which issues it, but part
ner in the business. But the only
reason bonds, stocks and notes are
sold Is to obtain money. The company
which guarantees the purchaser large
returns on his investment should be
to find out why it can
offer such large returns, and why,
when money can be obtained cheaper,
1t Is willing to pay so much for money
from the investing public. Yet the
offer to an uniformed purchaser of
stock that will surely" yield a divi-
dend of Is per cent means nothing to
him except the picture of rapidly
gained wealth. Gold mine stock. the
sellers often assure their customers,
will yield as high as so and 100 per
cent profit. Such talk around an en-
perienced investment banker will
bring him to tears. and probably
cause him to break out with hives or
heat rash. 1t apparently never &C.
ours to the purchaser that the gentle
men who offer their customers 80. so
and 100 per cent on their money could
secure all of it they wanted under 10
per cent, provided there was a degree
OF certainty in what they promise.
If these large.brained gentlemen in
the business of loaning money cannot
afford the risk involved, can those who
put their savings into buying stock
from unknown statesmen afford it?
On the other hand, the careful gen.
tlemen who loan money are at times
fooled. In addition. they are often un-
able to take the risk of lending their
own, or other peoples money. They
must have adequate security, or else
they must be convinced that there
is the minimum of risk involved.
There are laws in addition which