The Waterbury Democrat., 1933-09-19
By CHARLES H. MARCH Chairman, Federal Trade Conn ,,,ission


 mission. rH |. (From Wall Street Magnslnel
 When on the 27th of last May the securities act of 1888 was pass ed by the congress, there was plac- ed in the hands of the federal trade commission the responsibility and the privilege of administering n significant development in the relationship of American business, and industry to the American puba' lie. The immediate origin of this legislation Is to be found, @ course, in the financial lesses in- cured by investors in the collapse of 1929. It is to be found also in tho common belief that to q very large extent those losses were due to the reckless financing which chara acterized the supposed new era in Which we were living prior to the collapse. Beneath these imme- diate reasons for tho legislation. however, Is the more Fundamental fact that we have como to nppre- ciate the grave public responsibility that must be met by those who manage and control American busi- ness for tho economic welfare and livelihood of all of the people of the COuUITys <tItu ttS ahVsHSk NoaoV for the legislation I would add the determination that has arisen among our citizens to take bold, decisive steps towards Q better con- dition of living and toward a pros perity founded upon Q broader knowledge of the facts of our busi- ness and economic structure.
 Administration of the act com menccd on tho 7th of July. Tho weeks that have passed since then have brought to light some misun- derstanding on the part of the pub lie concerning what can and what can not be done under the act.
 Undoubtedly the most important feature of the net Is that 1t places upon those who create and offer securities for sale in interstate com merce or through the malls, the burden of representing truthfully and c.~~.1letely all tho material facts concerning those securities. That Is its chief requirement., and that undoubtedly is It's main pur-
 In short, those who offer securi- ties to investors must state what 1t Is they are offering, and they must stand back of thoir statc- ments. Tho persons thus made Il. able, including the directors md principal officers of the issuer, but not the issuer itself, may escape the liability imposed upon them if they can prove that they made rca- sonabie Investigation of the facts contained In the registration state ment or prospectus and had rea- sonabie grounds to believe that such facts were true.
 Supolemcnting this major Dur- pose of the net is the requirement that for any new issue of securities that Is to be sold in interstate commerce or through the mails a registration statement and Q pros- pectus must be filed with tho fed. eral trado commission. Even alter that statement has been filed and has become effective If the com mission finds that 1t Is untrue, in- complete or inaccurate, it may ts- sue Q stop order against 1t and tho sale of the security thereupon be. comes unlawful until tho defects in the statement shall have been remcdied.
 Perhaps I may make more clear what the act provides if state somo of the things which it docs not provide. It does not license any security, or any issuor of, or any bluo sky law. 1t makes unlawful the sale in interstate commerce of any security by fraud or deceit, or without full disclosure of the ma. terial facts concerning it; and it makes unlawful the salo of any new Issue of securities until those ma terial facts shall have been filed with the commission In the regis. tration statement. It seeks to pro. vide for tho investor tho facts which ho needs In order to arrive at m intelligent Judgments; 1t does not aim to dictate to him what securities he shall buy. There is no limit to the degree of speculative risk that may be involved in a sec. urlty registered for sale under the act. The commissions duty Is not to pass upon that security, but to see that tho lssuer files a statement ind q prospectus in which 1t pur- ports to set out oil and to omit none of the facts that reveal the risk. such statements are made avail able Tor public inspection at all times, and copies are furnished to anyone at cost.
 Tt. that the commission in accepting the registration statement Is not passing upon tho soundness or merit of that security, and Is not making finding that the state-
 ment Is true or complete. The fact that the commission makes no finding as to the truth or suffi- ciency of the registration state- mcnt means that there Is no bar to purchases who subsequently may attempt to prove 1t is untrue or misleading.
 Is 1t not the wiser legal advice that refuses to accept this statute as . gauge of battle between the corporation and Its investors? The justifiable protection to investors which this law provides Is in itself a protection to the corporation that