The Carbon County news. [volume] (Red Lodge, Mont.) 1924-1931, 1931-07-02
STATE RULES AGAINST
LOADING CHARGES BY
INVESTMENT COMPANIES

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dltor and ex-offieio investment
commissioner, an order has beer
issued which limits withdrawal
penalties on installment invest
ment securities being sold in the
state. Six corporations that are
selling in Montana installment
certificates, bonds, and other Sc
curlties creating debtor-eredit-
or relationship on the installment
plan, recently appeared before the
investment commission to iusti-
fy the allegedly extreme with
drawal fees imposed upon those
who cancel payment on contracts.
These corporations have been
selling securities at the rate of
approximately S625 per month,
with the security maturing at per-
lods generally ranging from ten
to eleven years; the interest rate
varies from five to seven percent,
which is included in determining
the maturity value of the secur-
tiles. The contracts carry a pro-
vision that no Withdrawals will
be permissible before time limits
ranging from Is months to three
years. Furthermore, they provide
that, in the event a subscriber
wishes to withdraw and cancel
further payment on his note, that
the withdrawal value of his Sc
c.l'1ty shall be the amount he has
paid in-less a penalty, or fee,
which il called a loading charge"
which the companies have attemp-
ted to justify on the grounds that
it is one of their methods of pro-
curing funds for selling costs and |
general operation. This penalty
varies from 80 to eight per cent
Of the matured security value.
During the present time of
starved prosperity, many wage
earners, who were the principa,
subscribers for installment secur-
tiles, find themselves unemployed
and unable to keep up payments
On their contracts. These people.
wishing to withdraw their money
before the time limit lat least IS
has expired, also find
hat the penalties for withdrawal
Ire something of hardship. The
hearing in regard to these mat
.ers therefore resolved. itself into
'wo issues: +
First, that installment conlpan-
es shall make settlement with
heir subscribers at any time after
he contract has been in effect one
ear, upon serving of proper no
ice.
Second, that the maximum with
travail penalty imposed shall not
Xeeed 81 pei. cent (or $35 per
housand) of the matured value
f the security.
The Commissioner, in his find
ngs from the hearing, decided &
hat a maximum withdrawal pen '
lty of 81 per cen tbs amply suf-
lcient in case of forfeiture of con-
racts, and that Withdrawals
hould be permissible at any time t
fter one year, if the holder has S
lven at least 80 days notice of b
Is intention to withdraw. This L
ecision was issued in the form t
t an order, dated June %, to take
fleet July p, 1881.
The Commissioner also found
nat, according to the state code,
ven companies that were operat-
lg in Montana before passage of
he present Blue Sky law (which c
egulates the operation of COM p
anies selling investment securi- c
es in the state) are bound to cen p
'rm to rulings OF the Investment e
corporations that were cited to a
ppear before the Commissioner 3
ere the Investors Syndicate, the d
lstallment Securities Agency. O
nc, Universal Bond and Mort
age Corporation, international II
warranty Thrift Syndicate, Great r,
,estern Bond and Mortgage Cor Fl
grafton, Decker Mortgage Com e
any, National Thrift Corporation c
America, National Bond Cor W
ration, National Mortgage Bond O
orporatlon of Montana, and the S;
nlted Bond and Finance Corpor- e,
ion.
Two of the companies operating h
Montana have already conform o.
to the recent ruling, and others !,
ave expressed their willingness; q,
ut the Investors Syndicate, Of
Minneapolis, Mimi, has cited the =,
commissioner, Mr.. Porter, into "
'ederal Court over the matter, -.
Id Is attempting to procure a re-
raining order. :,
a