Evening star., 1933-04-09
BY DIR. MAX WINKLER.
Special Dispatch to The Star.

BY DR.. MAX WINKLER.
Special Dispatch to The Star.
NEW YORK, April 8.-Commenting 8.
on the provision of the recently pro-
posed securities act, which deals with
foreign issues to be sold in the Amer
ican market. Denys P. Myers, director
, Of research of the World Peace Foun-
dation and member of the advisory
council of the American Council Of
Foreign Bondholders, offers an inter-
| esting review of the whole situation.
Mr. Myers views are presented here
| under:
I'm examining the contents Of the
required statement" Mr.. Myers says,
"the information may be viewed in
contrast with what was furnished in
the past, as presentation Of pertinent
! facts and as to the adequacy of the
facts to be furnished.
"1. In contrast with the past, pro-
vision is made for much fuller infor-
| nation, in kind and to an extent in
degree Both the terms of the loan
| and Of the underwriting agreement are
to be filed. The former were available
in the past but agreements were usu-
ally not open to public scrutiny.
Bonuses, ETC.. paid by the borrowing
kOtCIlAllClb, VI pay ulduc Iuc
privilege of underwriting, If significant
Of the character of the transaction,
were usually unknown to the public,
or became known by indirect means,
under circumstances involving suspi-
cion. Defaults in the past were un-
mentionables. Spreads were scarcely
secret, but, If normal, were not of COM
mon knowledge because of lack of III
terest, and, If abnormal. were fire.
quently the object of some pains at
concealment, especially during the pc
riod Of marketing the security.
Emphasis on Selling.
"The rest of the information re-
quired for the statement always has
been given in prospectuses," Mr.. Myers
continues. 1T has been available in
more extensive and less distorted form,
or at least open to inspection, at the
Offices of underwriting syndicate man.
ayers. The real difficulty with all un-
derwriting in the past has been that
the presentation of the facts to the
buying public has been only as reliable
as the underwriters. The best of them,
unfortunately few in number, have as
sured themselves of the soundneSs of
propositions before taking them on and
have frequently declined to underwrite
issues not of that character Others,
more intent on doing business than
concerned with its character or even
because they did not penetrate to elu-
sive faults in proposal, have been at
hand.
In all cases. proSpectuses broadcast
to the public have been carefully got
up to sell the proposition the syndicate
has underwritten, and 1t is notorious
<t,Ak AN{a - {~t-I -Ixx
calculated to deceive the public, which,
in addition, has a very high score in
deceiving itself as result Of its own ,
ignorance. The fresh information
called for In the bill, coupled with the
stipulations of sections and 9, insure
the availability of much fuller and more
fundamental data than were previously
in ordinary circulation. Reliable under
writer's will, on those bases, make q
virtue of increased frankness.
90. The presentation of pertinent
facts Is in section OBJ to constitute
the contents of the registration state
ment, which is not specifically public
BY section 8. however, information addi-
tional to that specified for inclusion in
public communication Is to be available
from the Federal Trade Commission
and all public communications further
commission may specify If it Is as
sumed that the stipulated information
is itself adequate, it may be accepted
that the rules and regulations of the
commission will insure its proper and
complete submission to the public
solicited to buy. The first step creating
literate investing public is to make
available to it the appropriate material
to read.
"3. Are the facts called for ade-
quate?" Mr.. Myers asks, and goes on
to say "the information stipulated in
section (B) would seem to be ade-
quate for the protection of the public.
If its true substance Is included in the
public communications. But the bill
does not, apparently, deal with the
a security. Section relates to this
period after the security Is marketed.
With respect to foreign public securi-
ties, 1t seems to refer primarily to the
vicissitudes of corporations.
Conditions Of Unsoundness.
Section establishes six conditions
of unsoundness, most of which relate
to the period after initial sale. These
being made apparent, the commission
may revoke the registration of any
security upon examination INTO
the circumstances relating to the
loan or the affairs of the person or
persons negotiating or underwriting the
issue in the United States The picture
described by this language is obscure
1t reaches fraud and falsity, but scarce
ly more 1t does not touch the problem
OF protection respecting foreign public
securities which embraces unwisdom
behind the conception of the issue and
their dilution in security value on ac-
count of changes in the national
po'itico-financial status of the borrower
For practical purposes, under the
Dill 1t may be assumed that foreign
public security on the American mar
ket would be what 1t purported to be,
and that the pledges behind it were
satisfactory to investors at the outset.
In the case of domestic corporations or
others, company management may shift