Evening star., 1933-07-09
NEWLAW HELD A|D
TO OLD SECURITIES
Regulations Will Limit Future
Supply of Issues of
Capital.
~ DAVID LAWRENCE.

OF all the reasons given for the mad
scramble these days to possess stocks
instead Of rapidly cheapening dollars,
relatively little attention has been given
70 the machinery set up in Warrington
TO choke OF the future supply Of new
Issues Of capital. The law Of supply
and demand may give the present group
OF noted securities . value based on
The regulations and the provisions Of
the new law governing the sale Of Sc
eurities are 20 drawn that 1t Is doubtful
whether even . negligible fraction Of
the total Of new securities which used
to come out every year will ever be is
sued again unle6s the law should be
amended or repealed, which II q doubt
ful contingency for some time yet.
Yet every month American investors
win be receiving income from their ex-
isttng Investments. And when dividend
payments are resumed. there will be
available for reinvestment many bill
lions Of dollars . year. Where will the
new securities be found? Much money
other countries. But the chances are
that stock issues in the United States
VIII IN large part be Discontinued.
Many Suits Would Result
The reason, Of course, s that the
regulations cannot possibly be COM
piled with by the underwriters, who
would become subject to personal suits
by strike lawyers II q single statement
happened to be erroneous. Assurances
given here that the courts would exer-
else good judgment and exempt any
directors from respdhs ibility II they ex-
-
ing. but Will not prevent law suits.
It may or may not be q good thing
to compel corporations whose securities
mature to 20 to the banks to borrow
against future earnings and thus avoid
public issues. 1t may be that syndi-
Gated bank loans will come into larger
vogue In the future than in the past
but the fact remains that q security
already issued Is In an advantageous
position, for its sale on the stock ex-
changes does not require any new pros
pectus Or registration.
n has been suggested from time to
time that there was an over abundance
Of securities since 1928 and that the in
vestment market could stand feeess
for some time to come. The new securi-
ties law may turn out Inadvertently as
an advantage In that direction for by
cutting down the number Of new issues.
the old securities Of merit will have a
better opportunity to enhance in value.
Indeed, this Is one Of the reasons ascribed
to the recent rise IN high grade bonds
and stocks-the desire to possess securi
ties that are intrinsically sound or have
potentia lities extending over the next
two or three years.
Dissenting Future.
- Il
the other day that he did not under
stand why the stock of his company
should have doubled IN value in the
last few weeks when his statement for
the second quarter Of the year, which
Is to be made public In . few days. will
make a showing much worse than the
frs. quarter. Perhaps the answer lies
in the fact that the people are discount
ing the future OF American business,
and are beginning to realize that reput-
able investment dealers will never take
the chance Of issuing new securities.
and that the public hereafter. If it
wants new securities will have to buy
from the bootleggers just as they used
Of getting poison goods. And the an
alogy holds with reference to secu-
rifles.
Corporations With small capital and
with the type Of executives who have
no fear Of . damaged reputation will
deal In securities Issued by corpora
tions whose directors will be clerks
without any psfsonal financial re-
sources to make strike suits worth
while. Selling will not be done in
writing with prospectuses giving some
information but by word Of mouth.
Happy are the people who own some Of
the old securities issued before the
passage Of the new law-there will be
Z scarcity Of new issues Of merit for
some time to come
(CopyriRht, 1o33)