Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-01-07


terests.
In a lengthy printed report on the
subject made at the request of counsel
for the insurance and banks subcom-
mittee Of the Senate District Commit
tee, the joint body, headed by Paul v.
Keyser, counsel for the Investment
Bankers Association of American for
the Southeastern Area, asserts there Is
Q need for sNch legislation, pointing out
6hat there ~ no such law now for the
district.
Securities Law Needed.
.arhe mere enforcement of criminal
statutes, it seems, Is inadequate to
effectively control fraudulent promo
ters," the report states. preventive
legislation is important. Its enactment
should not be regarded as substitute
. for the stern enforcement OF our gen.
erai fraud statutes already existing, puC
we are convinced that If Congress
should enact a proper securities law for
the District of Columbia, it would
undoubtedly tend to accomplish much
greater suppression of fraud in secur-
tiles transactions in this District than
is possible to accomplish at the present
time under the general fraud laws.
The report was drafted by Mary T..
Croggon of the Women's Bar Associa-
ton of the District, Thomas p. Little
page of the Bar Association of the Dis
trict. Francis c. Addison, jr., Of the
Bankers Association of the District, AL
fred H Lawson of the Real Estate
Board. Thomas z. Lodge of the Fed
Grafton of Citizens Associations, Louis
Rothschild of the Better Business Bu-
reau and Mr. Keyser Of the Investment
Bankers Association.
Aid to Honest Business.
ssWe are satisfied" the committee
stated, that the great majority OF Sc
curity transactions in this District are
honest and honorable transactions.
Gases in which fraud and improper
dealing occur are comparatively lew,
and the public interest which Such
cases naturally arouse tend to divert
attention from the great number OF
legitimate and honest transactions and
to create an exaggerated idea OF the eX-
tent Of the evils of security frauds.
'sIt is therefore believed that such
aecuritieS' legislation as may be enacted
for this District should proceed from
premise of establishing an effective
means for detecting, terminating and
Furnishing fraud, without at the same
EliltG lLlUO61llk U110uC b04ASAAo 0RCA AADAA
est business It appears to us, as mat
ter Of general principle, most undeSira-
BILE, In order to defeat an occasional
wrongdoer, to impose unnecessary ana
unfair restrictions that would seriously
hamper the business activities of honest
men and would react unfavorably on
the general business of this District"
The committee reported it had made
q study of the two bills introduced last
hxrC TE14npF and
BY Senator Blaine, the latter drafted
for the Senate subcommittee by Oscar
II. Brinkman, counsel for the inveStl-
eating body, and that it favored legisla-
ton of the type suggested by Senator
Capper, with some amendments.
would Bond Dealers.
The type recommended would require
that an dealers and statesmen Of securi-
ties shall be registered and bonded,
registration TO be effected only on
showing Of good character.
These requirements, the committee
declares, should succeed in driving
out of the securities business in the
District the crooked and Intentionally
dishonest operators. Their effect should
be to build up the existence of a body
of honorable men in the business. Such
results will accomplish effective pro-
lection for investors because. in the
opinion of our committee, the best pro-
lection any investor in securities can
lave is to deal only with an honorable
house of established reputation and re-
sponsibility."
The following were cited by the Joint
Committee as the advantages Of this
type Of legislation.
While securities may be sold without
prior officials approval. offerings are
subject to "all-pervading provisions
against fraud" the United States attor-
ney being given broadly inclusive powers
as to fraudulent and dishonest practice"
The United States attorney may ex-
any person appears to be engaged, or
Is about to engage, in any fraudulent
act, may require him TO file statements.
The United States attorney may ex-
anime such person under oath, together
with his books and papers, he may ex-
anime witnesses and compel their at
tendance he may cite for contempt per-
sons who refuse to give testimony or
who refuse TO produce documents or vino
disobey an injunction: he may obtain
an Injunction restraining the sale OF
securities by any one who does not obey
the above requirements; ne may obtain
an Injunction to stop any fraudulent
practices in the sale Of securities, and
he may ask the appointment Of receiv-
er for property obtained by wrongdoers
through fraud.
Would Establish Censorship.
The essential objection to the other
type Of proposed legislation, the COM
mittee reported is that it requires
official approval of securities prior to
their public offering.
Such a practice has many disad-
vanEages," the committee declared: It
contended that such plan involves
the establishment Of censorship with
authority to pass on what securities
local citizens may or may not buy, that
any such censorship authority would
be as liable to be deceived as the pro-
motors Of venture and might at times
sanction bad, and at other times, pre-
vent good ventures.
The committee argued that such a
plan also places the Government in a
false relation to investors and imposes
on the Government a moral reSpon-
sibility for securities permitted to be
sold, that such Government sanction
of the sale Of securities implies Govern
rnert approval Of the value and worth
OF the SecifrftfeR