Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-06-24
DISTRICT WARNED
| TO WAR ON FRAUDS
Better Business Bureau Head
Sees Increasing Need OF
BIue-Sky Law.

Washington has not been the scene
OF spectacular fraudulent stock pro
motion operation In more than a year,
but there ia an increasing need in the
District of Columbia for a blue-sky
law or fraud law OF some character,
Louis Rothschild, director of the Bet
ter Business Bureau, declared today
in his annual report to the board of
trustees of the bureau at a meeting
at the Harrington Hotel.
While Neutrality-suspicious., needing the
warning, Before you invest-investi-
gate" have become more and more
wary Of sales schemes Of uncertain
character, the lack Of a definite blue
sky law here has served as an invi-
tatisn to promoters of questionable
stocks to come here, Mr.. Rothschild
said.
Praises the Merchants.
The director lauded the merchants
Of Washington for the cooperation
which they have extended to the bu-
reau in it's program for truth in adj
vertising, and pointed out that a num-
Der of groups of business firms had
drafted codes of ethics for the conduct
of their business.
In urging the PRONUNCIATION Of a
blue sky law, Mr.. Rothschild said:
There is an increasing need in the
<1i% 20, Lot ctr fK.ot dc
and near frauds. Whether it be a
blue-sky law or a fraud law Is not so
important. There is the need for some
legislation to force promoters to show
their good intent and to prove the
sound financing of their project be-
fore it is offered to the public.
ut would be we'll to realize that to-
day over 40 States have laws regu-
lating the sale of securities, so-called
blue-sky laws. These statutes are
making it more difficult for the Wal
lingford type and the various States
are steadily increasing their rigid en-
forcement and regulation.
Sees Need of Protective Laws.
"It is natural to assume that these
promoters are looking to those few
localities without legal protection for
their future operations. The lack of
legislation in Washington is in itself
an invitation to those swindlers who
are being curbed by efficient State
laws.
Developments in the past year
inoters have come to Washington
only after being curbed in States
where there is legislation. Two of the
telephone brokers. one mine promoter,
one oil stock salesman, one promoter
of an invention have all come here
after being hindered by blue-sky laws
elsewhere. OF the many small pro-
moters of unsavory reputation now
operating in Washington there are
few who could obtain a permit were
there regulatory legislation in force. "
Says Losses Show Decrease.
Despite the fact that Washington
is not protected by a blue-sky law.
however, Mr.. Rothschild said, at is
undoubtedly fact that losses during
the past year have been decreased
materially as compared with previ-
Gus years.
promoters Of the questionable
type of sales schemes have admitted
to the Better Business Bureau that
their business has slumped. At the
same time brokers of sound invest
ment issues are reporting a very IA
vorable response. as was indicated IN
the oversubscription of many of the
public utility issues. This experience
has ratified the theory that the Be
fore you observation-disclosures cam
paign diverts money from the ques-
tionable and fraudulent to the legiti-
mate investment. thus aiding the
business community as we'll as the
investor"
A total of 4,007 financial inquiries
have been answered by the Better
Business Bureau from the public since
the establishment of the financial
department, Mr.. Rothschild reported.
During the past fiscal year 1859 in
uuiries were answered, as compared
with 1913 the previous year. Par.
ticularly notable has been the fact
that today the vast ma jority of in
uuiries have been received before
rather than after the investment, said
the director.
Advertising Methods O.K.'d.
Merchandise advertising in Wash
ington as compared with that in other
large cities is commercially accurate
and truthful" Mr.. Rothschild said.
year have been such as are not con-
ducive to more ethical advertising,
competition has been keener. 1t is,
therefore, extremely gratifying that
i'm the face of this situation the Bet
ter Business Bureau has made tang
lille progress. bringing retail advertis-
ing to an even higher plane, compare
lively free from actual misrepresenta-
tons and not jeopardized by question
able sales"
The volume of merchandise work
handled by the bureau has exceeded
that of any previous year. During
the fiscal year the merchandise section
handled 1871 cases. OF this number
/ ,595 were shopping reports showing
1853 favorable and 832 open to ques-
ton.
OF the grand total Gil cases were
consumer complaints.
The meeting was presided over by
Joshua Evans, chairman Of the board
of trustees.