White Bluffs spokesman. [volume] (White Bluffs, Wash.) 1907-1938, 1934-05-17
Federal Blue Sky Law
Protects Small Buyer
By G. F. Cadisch,
Director, School of Administrations,
State College of Washington

Government protection for the in
weston was started by the state OF KAN
sas in 1911 with the passage OF the
original Blue Sky Act. Since then
most of our states have enacted similar
measures. AS was to be expected, the
degree of regulation and control OF Sc
curities varied in each state.
Practically all of these laws were
framed to prohibit the sale OF secur1-
ties within the state until proper reg
istration was made. The amount OF IN
formation required varied widely. The
underlying principle of these laws was
to give publicity to the issues to be
offered and in some cases actually to
approve the issuance of the securities
Despite these state efforts, it was al
ways recognized that no satisfactory
regulation could be had until Federal
legislation was enacted.
AS a part Of the New Deal legis1a-
ton, Congress passed the Securities
Act of 1888. The provisions of this law
are so drastic and far-reaching that
it represents the passing of an old
order in the business of selling secur-
tiles. The old slogan, Let the buyer
beware" has been amended to read,
"Let the buyer beware, but let the
seller beware ALSO"
The new Act does not suspend the
State Securities Commissions and the
existing Blue Sky laws. Rather, it sup
elements existing state laws, which
have not proved sufficiently rigid In
preventing large losses to an unsus-
pecting public AS before, securities
may be offered entirely within the
state, but to those sold in more than
one state, the registration statement
must contain specific information on
thirty-two designated points. This in
formation is most detailed and aims te
give the prospective investor all the
| information needed t o determine
whether the security is a desirable one
to purchase.
In the event the statement filed con-
tains any untrue statement or omit
any material fact, any purchaser un
aware of such situation may tax
legal action for the recovery OF los
against the officers or directors OF tn
company, the professional advisers,
the underwriters. To escape liabillt
such persons must prove that afte
proper investigation they had reason
able grounds for believing the intor
nation was complete and accurate
This liability clause has been crltl
cized by most of the promoters.
The purpose of the Act is not t
prevent the sale Of speculative secu1
ities but rather to prevent the sale
fraudulent securities. In the past on
Better Business Bureaus have bee
active in preventing such sales
The position Of the Federal Trac
Commission in this important leglsls
ton has been officially stated as 10
$ lows:
The public should thoroughly
. understand that the commission is
not authorized to pass in any sense
:, upon the value or soundness OF any
security. Its sole function is to
see that full and accurate infor-
nation as to the security is made
y available to purchasers and the
III public, and that no fraud is prac-
ticed in connection with the sale
| of the security.
Speculative securities may still
(, be offered and the public is as free
= to buy them as ever.
The commissions duty is to see
n that the security is truthfully pre-
sented to prospective purchasers
The fact that a description OF the
security is filed with the commits
sion is in no sense and must not
be regarded as an endorsement OF
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