Evening star., 1933-05-24
The Securities Bill.

For ten years or more there has been
a rather persistent effort to obtain leg
islation for the District of Columbia.
comparable to the ''blue sky or fraud
laws of many other jurisdictions, offer
ing the purchaser of securities some
protection against the cat and dog
issues and those of doubtful merit
that have found a happy hunting
ground in Washington. The need for
such legislation has been unusually
pressing here, because the surrounding
States have protective laws. This fact
alone served to make possible the sale
of worthless securities in washington
that could not have been offered to the
investing public in other localities.
There are two kinds of laws regulat-
ing the sale of securities. One OF them,
commonly known as blue sky" law,
aims to require what amounts to tacit
approval of the issues by some regula-
tory agency before they can be sold,
while the other, the fraud law, requires
licensing of statesmen, permits the sale
of any security, but gives the district
attorney authority to obtain an injunc-
ton stopping such sales when evidence
has been obtained casting suspicion on
the issue. In Washington there has
been a division of effort, one group IA
yoring the blue sky type of legislation
while another has wanted the fraud
law. This may have been the principal
reason why legislation failed, although
Congress had authority to enact any
sort of law 1t chose. In the States 1t
has been found that either type Is ef-
fective If 1t is properly enforced. Where
the laws have been shown to be futile
the blame has rested primarily on the
enforcing agency.
The national security law. just agreed
to in conference and sent to the Presi-
dent, contains o provision which has the
effect Of enacting separate law Tor
the District. The security bill as 1t
PASSED the House established Federal
control of issues In interstate commerce,
but the Senate inserted provision ap-
plying specifically to those sold within
the District Of Columbia, which was
contained In the measure agreed to IN
conference. The District is thus doubly
protected against sale Of fraudulent
securities.
The new law now awaiting the Presi-
dents signature is combination OF
some of the features both Of blue sky
and fraud legislation. The regulating
agency Is the Federal Trade Commis-
sion. Before the securities to which the
ect is applicable may be sold, informa-
ton relating to the issue must be reg
istered with the commission, and If
that information appears incomplete or
misleading, the commission may require
its proper amendment before the regis
tration is complete. After registration,
the commission has authority to call on
those offering the securities to produce
evidence refuting the commissions sus-
picions or complaints, or the commits
sion may bring action in the courts to
enJoin further sales OF the securities.
There are stiff penalties provided
against those who violate the provisions
Of the law or the commissions regula-
tions for its enforcement.
1t might be said that passage of the
law at this time constitutes an IRON
ical locking of the stable after the
horse has gone. But the Better Busi-
ness Bureau is authority for the state
ment that the depression has not
halted the sale of worthless and fraud
ulent securities in Washington and
that within the past year or SO thou
sands of dollars have been invested
here In paper that has no real back
ing. Aside from all that, there is dis
tinct advantage in having the laws
safeguards as protection for future in
vestors. The next boom may be only
q couple of corners away.