Evening star., 1933-09-13

ters the cry that 1t IS dangerous and
destructive and will unduly hamper
legitimate enterprise. This, I am hap
only from those whose hold upon the
standards of the past gives way reluc-
tantly before the more candid and more
fortnight standards of the present.
To accomplish this purpose the act
provides that an issuer of securities
shall, before offering them for sale to
| the public, make disclosure Of all the
material and significant facts concern
| ing it. Twenty days before the issue
is to be offered for sale, the issuer must
file with the Federal Trade Commits
sion a registration statement contain
| ing all the material facts in regard to
the issue, such as are necessary to
even an elementary judgment upon the
value Of the security, and copy OF the
prospectus by which the issuer pro-
poses to lay those facts before the pub
| lie. During those 20 days the COM
mission examines the documents for
omissions, inaccuracies or untruths.
Such OF these as it finds the issuer
must correct. Until correction Is made
the commission may delay. by stop
order, the date when the security may
be offered for sale.
Injunction Provided For.
Should the issuer proceed to sell the
security without having filed the re-
quired statement, the Federal Trade
Commission may apply to the courts
for an injunction restraining such SELL
ing, and the Attorney General may seek
to enforce the criminal penalties pro-
vided in the act.
But neither the commission nor the
Attorney General Is empowered by the
law to pass upon the quality or the
investment value of any security
Neither the issuer's right to offer nor
the public's right to buy security
may be limited under this act on ac-
count Of its speculative, unsound or
hazardous character. The securities
act differs In concept and in plan from
the so-called "blue-sky" laws of many
Of the States. While certain OF the
State commissions pass upon the quail
| ity Of a security to determine whether
or not it may be offered for sale with
| in their jurisdiction, the Federal act
as proposed by the President and en-
acted by the Congress, adheres to the
principle which have already stated
|
truth, and all Of it, concerning securi-
ties publicly offered for sale.
| Obviously, then, it was the intention
of Congress that the corrective power
with respect to unsound financial and
investment practices be placed largely
in the hands of the investing public
This, to my mind, is an outstanding
virtue in the Federal act. It has been
most wisely fortified In its provisions
The lack Of power In the commission
to supervise or control the decisions OF
investors is supplemented by q grant
Of relief to investors by suit for re-
covery of money paid for a security
falsely or inadequately described in
! the statements made concerning It
This liability is imposed by the act
upon the issuer or issuing company
upon is directors, principal officers and
underwriters. and upon such experts as
are quoted, with their consent, in the
statements made by the issuer. They
are held responsible, however, only fol-
the use of reasonable diligence. such
as is required of any f1duciary who un-
dertakes to manage the property OF
others in their behalf. Any of them
except the issuer itself may escape this
liability If they can prove that they
| exercised such diligence in determin-