Evening star., 1933-12-24
BATTLE EXPECTED
ON SECUR|T|ESACT
Bankers and Others Seek
Amendments to Loosen
Capital for Industry.
Continued From First Page.)


Continued From First Page.)
adamant in their opposition to weaken
ing or softening the terms Of the law
than Is Senator Duncan U. Fletcher Of
Florida, veteran chairman of the Sen
| ate Banking and Currency Committee,
who handled the measure when it was
before the Senate for passage
III they insist upon opening up the
act Tor amendment, then I shall de-
mand that it be made more stringent" /"
Is his comment
To the charge that the operation Of
the securities act has resulted in pre-
venting a proper flow of capital into
industry, the supporters of the act and
officials of the Federal Trade Commits
sion which has the handling of the
law. make a firm denial.
In the first place they point out that
total of S298, ,274, ,440.30 in securities
have been registered and have become
effective in five months period-from
July to December 6. inclusive. The
number of statements of security issues
| filed with the Trade Commission and
effective within that period was 302.
Because of flaws of one kind or another
in statements, discovered after they had
been handed to the Trade Commission
by officials OF the commission, 63 regis
tration statements were withdrawn.
| totaling $28769. 1875 in securities
| issues. These statements may, how
ever. be revised and reSubmitted later.
During the same period the commission
issued 81 stop orders against security
issues, after reviewing statements filed
with it, covering total of $5,238,75O in
securities. 1t Is argued from this record
that corporations proposing to do a
legitimate business in legitimate way
have no reason to fear the operation
OF the securities act, and that there
has been no real stoppage Of the issue
Of securities.
Depression Is Blamed.
| The real cause Of the failure Of more
money to flow into the issue Of Securi-
ties, they insist, is due to the fact that
! the country has been in a period of
! depression when corporations have
hesitated to float new issues of Securi-
ties, with money difficult to obtain and
investors very shy and retiring
| If there has been any strike" on
/ the part of corporations and bankers
and investment houses, if they are
Withholding issues Of securities because
OF the securities act. then such strike
is entirely unjustified, the Trade Com
mission officials insist.
Nevertheless, other officials Of the
/ Roosevelt administration fear that II
such strike has not already material =
! lied, 1t may do so. And with industry
needing greatly increased capitalization,
| they are casting about to see what can
| be done to change the attitude CT the
/ bankers and business.
One thing is certain. there will be no
| effort to repeal the securities act. There
may be. and probably are, bankers and
! business men who believe that such q
/ course should be followed But If there
are, they realize that the revelations
! before the Senate Investigating Com
mittee, which has been looking into the
f1otation Of securities and the opera
tionS Of the Virgins, the MitchellS and
others hitherto looked upon as financial
giants of the country, are not calcu-
lated to make repeal possibility.
/ Furthermore, when the investing
public thinks back to 1929, when SlO,-
000,000O0O securities were issued. it is
probably just as glad that no such op-
erations are under way today. The pub
lie lost its shirt then, and despite old
P. T. Barnum's famous remark that q
sucker is born every minute. it is not
anxious to repeat the performance.
Fight on Amendments.
So the fight will come over amend
ments to the securities act And first
and foremost among these proposed
amendments is likely to be suggested
change in the liability clause, which will
remove the liability of corporations,
their officers and boards of directors
and the underwriters OF securities for
losses not directly attributable to mis-
statements or the Withholding of ma
aterial facts in the prospectus OF Sc
curity issues, the sales talk
Under the existing law-and herein
1t differs from the British companies
act-liability runs not only for the
losses which may be attributed to mis-
statements or the withholding Of in
formation, but also to losses which may
occur because of any economic changes
that may take place. In other words
If it can be shown that a misstatement
OF fact or withholding of information
occurred in the prospectus of sale OF
securities, and huge drop in the stock
market took place not connected in any
way with the miSStatement or withhold
ing of information, liability would run
for the entire loss.
1t is the contention of the bankers
dilO OlIcIS HIIO OppOSe Tie securities
act as 1t now stands, that this is en-
tirely unfair While this may appear
to be the case. the argument is ad-
vanced by friends of the act that if
this liability is lifted, corporations with
highly paid legal advice may be able
to avoid liability for losses really due
to misstatements and the withholding
of information by seeking to prove that
such losses grew out of economic" con-
dition. And they say that big corpora
tions are much better equipped to fight
such matters through the courts than
are small, or even large, shareholders
who may have suffered losses.
For Reasonable Changes.
| Men who had part in drafting the
securities act say they are not averse
to reasonable amendments, that they
realize that no law Is 100 per cent per-
feet. But they fear that amendments
proposed may contain "jokers"s which
will seriously affect the investor.
Another amendment which is likely
to have support is one to relieve from
liability of the total loss accrued on an
entire issue of securities which may
now. under the law, be laid upon a
sub-underwriter. For example, SUBJ
underwater or contractor may handle
$4,000 worth Of a security issue Of
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