Evening star., 1933-09-23
TRUTH HIGH SPOT
IN SECURITIES ACT
Chairman March of Trade
Board Tells How Public
Is Safeguarded.

Undoubtedly the most important
feature of the securities act Of 1888
Is that It places upon those who create
and offer securities for sale In inter-
state commerce or through the mails,
the burden Of representing truthfully
and completely all the material facts
concerning those securities. says Charles
H. March, chairman OF the Federal
Trade Commission, in the current
Magazine of Wall Street. Chairman
March adds:
I'm short, those who offer securities
to investors must state what 1t Is they
are offering, and they must stand back
Of their statements. The persons thus
made liable. including the directors ana
principal of,cers Of the issuer, but not
the issuer itself, may escape the habil-
ity imposed upon them II they can
prove that they made reasonable IN
vestigation Of the facts contained IN
the registration statement or pro-
spectus and had reasonable grounds to
believe that such facts were true.
"Supplementing this major purpose
Of the act is the requirement that for
any new issue of securities that Is to be
sold in interstate commerce or through
the mails q registration statement ana
q prospectus must be filed with the
Federal Trade Commission. Even after
that statement has been filed and has
become effective If the commission nnos
that It Is untrue, incomplete or mac
curate, 1t may issue a stop order
against it and the sale Of the security
thereupon becomes unlawful until the
defects in the statement shall have
been remedied.
Perhaps I may make more clear
what the act provides II state some
Of the things which 1t does not pro-
vide. It does not license any security
securities. It Is not q blue sky law.
It makes unlawful the sale in inter-
state commerce Of any security by
fraud or deceit, or without full dis
closure Of the material facts concerning
it: and 1t makes unlawful the sale OF
any new issue Of securities until those
material facts shall have been filed with
the commission in the registration
statement. 1t seeks to provide for the
investor the facts which he needs in
order to arrive at an intelligent judg-
ment; 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 q Sc
curity registered for sale under the
act. The commissions duty Is not
to pass upon that security. but to see
that the issuer files statement and
a prospectus In which it purports to
set out all and to omit none of the
facts that reveal the risk. Such state
ments are made available for public
inspection at all times. and copies are
furnished to anyone at cost.
Our hope is that the securities act
shall become the means Of bringing
together into a closer bond Of mutual
responsibility the business concerns Of
this country and their investors. In
place of the ancient tradition that the
world of finance must establish its
own standards Of what investors have
a right to know about the business they
own, the act sets Up those standards
Of candid and straightforward dealing
which the long. hard experience Of
financial disaster has shown to be the
only sound one" Chairman March
concludes