Evening star., 1934-04-06
SMALL. EXCHANGES
WILL Be EXCLUDED
UNDER STOCK BILL
Senate Banking Group
Adopts Amendment in First
important Action.
Committee ADJOURNS
SESSION UNTIL MONDAY
Billion in Stock Deals by Cities
Service Revealed by Federal
Trade Counsel.
BY the Associated Press.

BY the Associated Press.
An amendment to the stock market
control bill to permit the Federal
Trade Commission to exclude small
exchanges from regulation was adopted
today by the Senate Banking Com
mittee in its first important action
on the measure.
The committee adjourned until
Monday without acting on the trou-
blesome marginal provision of the bill,
but there were strong indications it
would adopt the recommendation of
the New York Stock Exchange and
Samuel Untermyer, market critic, to
leave this question entirely to the
jurisdiction of the Federal Reserve
Board.
Cities Service Deals Barred.
Previously evidence that Cities Serv-
ice Co. obtained more than a billion
dollars from American investors our
ing the boom days and used most Of
it to maintain the price of its stock
was before the committee.
As it began drastic revision of
the stock market bill in executive
session the committee made public
testimony given it in private by Rob-
ert E. Healy, chief counsel of the
Federal Trade Commission.
Healy said the utility company
drew Sl,l46,5l8,000 from investors
from 1927 to 1880 and used $685.
100000 of it to keep up the price of
the stock
He told vivid story of high
pressure sales campaign conducted by
the company while it maintained the
market price by market operations
The market regulation bill would end
such practices, he said.
The Trade Commission, Healy de-
clared, has uncovered Write-ups of
assets of industrial corporations total
ing more than 1,15O,0O ,O0O The bill,
he further argued, would disclose such
operations.
Bought 73 Per Cent of Stock.
The market operations of the Cities
Service Co., he said, was zone of the
most striking things we have come
across in our utilities investigation.
During the entire selling campaign
OF four years, he added, the company
bought more than 73 per cent of all
the stock sold on the market.
As Healy's testimony was uncovered
the committee closed its doors to vote
on the stock bill section by section.
There was strong indication the
measure was in for serious revision.
Surveys of committee sentiment in
dicated possibility that the admit
tedly drastic marginal restrictions
would be eliminated and complete
jurisdiction over such clauses vested
in the Federal Reserve Board.
Many committee members predicted
sharp revision also of the other most
controversial sections, relating to the
segregation of broker and dealer
activities. The latest draft of the bill
carried proposal to vest the Federal
Trade Commission with broad power
over this problem instead of writing
specific prohibitions into the law.
House Committee Meets.
Senate friends of the measure be-
lieved they might get final vote be-
fore nightfall. Chairman Rayburn of
the House Interstate Commerce Com
mittee also called his group together
today for private consideration of the
market bill
, Healy told the committee the Cities
Service Co. had hundreds and per-
haps thousands of agents and sales
men all over the country distributing
its stock by canvassing homes and
Offices.
At the same time it was buying
immense quantities of the stock on
the New York Curb Market to main
tain the price.
In some months, he said, the COM
pany bought more than 95 per cent
of all the stock transferred on the
curb.
Therefore the law of supply and
demand was not operating naturally
in that stock" he said. "They were
keeping the shares of the market
on the one hand and on the other
hand they were making the demand
for the stock. with the result that the
stock had the appearance of great
activity.
"And one of the very striking things
about the campaign was that the
money the people paid in on those
various contracts was the very money
which was used to make the market
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