Evening star., 1933-10-22
D, c, ACCOUNTANTS
TOLD Of BENEFITS
IN SECURITIES LAW
New Act Helps Both Public
and Issurers, Federal
Trade Expert Says.
INVESTORS HAVE RIGHT
TO ACCURATE FACTS
Bane Sees Opportunity for Great
Service by Leaders in Account
ing Profession.
BY EDWARD c. STONE.

The securities act of 1888. over which
there has been such bitter nation
wide controversy, was not founded upon
the theory that the interests of in
vestors are in conflict with the inter-
eStS OF securities iSsurerS, but recognizes
the fact that their interests are mutual
ly dependent. Baldwin C. Bane chief
Trades Commission, declared before
members OF Washington Chapter. Ma
tionsl Association of Cost Accountants
at their October meeting.
The law will undoubtedly work to the
benefit of those issuers, who. can by
telling their story to the public merit
public confidence. Mr. Bane asserted.
the confidence of investors. he added,
and indirectly it will make the distinc-
ton clearer between those concerns,
that do and these that do not deserve
the continued support of the invest
ing public
The Federal Trade Commission Off
c!als said that the securities act of
1888. is one of the few pieces of per-
manent legislation passed at the last
session of Congress. The States have
for years regulated within their respec-
tive domains the sale of securities. The
more advanced European countries
have had laws regulating the issuance
and sale OF securities. but until the pas
sage OF this act there was no legislation
directly regulating the sale of securities
IN Interstate Commerce
Law Aimed to Aid Investors.
Ine chief purpose Of this law is to
give to purchasers of securities the ma
teria1 facts about an issue they are
asked to buy, Mr.. Bane said. It stands
upon the principle that an investor
whose savings are solicited is entitled to
know Just what he is being asked to do.
1t may be said that it attempts to ac-
compllsh this in three ways:
fTst, by requiring that a registration
statement containing full information
as to all material facts be filed with
the Federal Trade Commission, and by
giving to the commission power by
stop order to prevent the sale OF any
security when the registration state
ment falls to disclose the material facts
and such failure IS know to the COM
mission. The prospectus which the law
requires be given to each prospective
investor must be built upon this regis
tratlon statement.
sanction of the act, by giving to pur-
chasers right to sue those responsible
for the statements upon which they
purchase, if any of such material state
mentS are false. 1t holds those in a
position to know responsible for the
material statements that they make,
md upon which the purchaser buys
and the value of the security depends.
Investor Has His Rights.
This liability can be escaped, Mr.
Zane explains, if those responsible show
that they made reasonable investiga-
ton to determine the truth of such
statements, and that after that reason
able investigation they had reasonable
ground to believe and did believe the
statements to be true. Surely this is
no unfair or unjust requirement, for
to obtain the information, loses his
money by reliance upon these state
nents of those in a position to know
And, thirdly, he said. there is crimi-
EGl liability upon those who knowingly
Pnd willfully perpetrate a fraud upon
the investor.
The act affords to the accounting
profession, both public and private, an
opportunity of rendering a public Serv-
ice of great importance The act dis
tinctly recognizes the importance and
the responsibility of the accounting
profession. The accountant is given an
independent and a professional stand
iDg that, so far as the speaker recalled,
has been recognized in no other piece
of national legislation.
Accurate Statements Vital.
The financial statements which must
be filed with the registration statement
must be certified by an independent &C
countant, and in order to insure the
lldrDfndfDCc OF inc accountant, nc ID
should have discovered by a reasonable
Investigation. II simply means that
the accountant must carefully and dill
GUIDED
The October meeting was held at the
Nayfower Hotel. Another speaker was
Durand w. Springer, secretary OF the
American Society of Certified Public
Accountants, who discussed Federal
Legislation and Opportunities in Ac-
counting"
The president of Washington Chap
tc- presided. A. B. Gunnarson. chief Of
tta Division of Manufactures, United
Stockholders Watch Salaries.
Wall Street was interested in reports
from Washington that President Roose-
yelt had suggested that the deputy ad-
ministrator of the National Recovery
Administration in charge of the mo-
ton picture industry's code scrutinize
the salaries paid to stars and producers
to ascertain whether their pay was ex-
ce;siye. SAYS the New York Times. II
salaries of leading corporation execu-
tives were compared. strange 1nequall-
tics would be disclosed, brokers assert
In many cases officers of companies
which are losing money are receiving
larger salaries than those whose com
panies are showing good profits. De-
Epite the revision Of some contracts
large bonuses are still being paid by
some corporations. The salary situation
Is so chaotic that stockholders could be
pardoned for hoping that the N. r. A
extend its functions to establish maxi
mum salaries for company officials
euppIementing the minimum salary reg
hlations for employees, the Times sug-
Bests.
Revived Bond Demand Needed.
Col Leonard p Ayres of the Cleve-
land Trust Co., in his monthly review
saws 1t Is too early to tell what Is going
to be the outcome of the N. R. A
program, but thinks that revival in
the demand for new corporation bonds
Is the greatest present need.
Recovery from depression has always
been accompanied in this country by
Increased investment n capital goods
2uch ss railroads and rolling stock. the
CONTINUED on Third Pagel -