Evening star., 1934-03-20
STOCK BILL AIMS
TOLDBY RAYBURN
Describes Measure to Reg.
uIate Exchanges as
"ConServative."

by Representative Rayburn, Democrat,
of Texas in an address last night in
the National Radio Forum, arranged
BY The Star, and carried over coast
forecast network of the National
BroadcaSting Co.
Outlining the aims of the Fletcher
Rayburn bill to carry the regulation
into effect the speaker, who is chair
man of the House Interstate Com
merce Committee, said 1T is not sim
ply striking back at the stock brok-
ers for the losses which everybody has
suffered in the last five years.
1t simply looks squarely in the eye
with cold appraisal of objective cap
italistic craftsmanship the fact that
from the viewpoint of the welfare Of
a capitalistic public the stock ex-
change system as hitherto conducted
simply has not worked"
Mr.. Rayburn said his bill is fol
low up" of the securities act, and is
intended Ito protect investors and the
public in general from the evils of
manipulation of prices on stock eX-
changes of unwarranted speculation. "
The text of Mr.. Rayburn's speech
follows:
I shall talk to you tonight about
stock exchange regulation and some OF
the outstanding necessities therefor.
1t will be remembered that President
Roosevelt last Spring recommended to
Congress that legislation be passed for
the regulation of securities sold in
interstate commerce. Out of the ef-
forts to carry out the Presidents views
the securities act of 1888 was enacted
That measure goes far toward putting
the public in an intelligent position to
Judge for itself the value of new securi-
ties offered to it. Under its provisions
any person who desires to issue new
securities to be sold in interstate COM
merce must file a statement revealing
every important fact and circumstance
surrounding the security. From the
Federal Trade Commission any pros
pective buyer can get a copy of that
statement. The securities act was not
passed with the view of limiting but
of accelerating the movement of clean
securities in interstate commerce by
rebuilding investors confidence. 1t
will be remembered that in the 10
years from 1922 to 1882 there were
offered to the American public ap-
proXimately so billions in new Securi-
ties. An estimate was submitted to
congressional committees last year by
an expert from the Department of
Commerce that approximately 25 bill
lions of them we're hardly worth the
paper upon which they were written.
The public which exchanged its hard
earned money for these worthless Sc
ion II hoI IN re
or possibly no information, can be ex-
pected to come back again into the
market fer new securities only under
such assurance as the securities act
gives that the public will at least have
adequate information about these new
securities.
To Protect Investors.
The so-called Fletcher -Rayburn bill
for the regulation of the stock ex-
changes upon which securities are
bought and sold is follow-up. and
interpret it as companion bill to the
securities bill. President Roosevelt
always alive and alert to the best in
terests Of the people and not only
wanting clean government but clean
business. recommends this year the
enactment of legislation for the con-
troll of stock exchanges.
This stock exchange bill is designed
to protect investors and the public in
general from the evils Of manipulation
of prices on stock exchanges, of un-
warranted speculation which diverts
the credit of the country from produc-
tive channels and wipes out the saw
IF he If 20
with which the management of many
corporations whose securities are
traded in on the exchange markets
have concealed the true conditions OF
such corporations. The need for such
legislation has long been felt; the evil
derce brought forth in recent months
as to the extent of these evils makes
the demand for such legislation un-
enswerable. The machinery whereby
the FEDERAL Government will bring
under its control the activities of stock
exchanges models itself largely upon
existing statutes. The Federal Trade
Commission is to be intruSted with the
primary task of administering the Sc
curities exchange act. No exchange
will be allowed to operate by use of
the mails or interstate commerce un-
less it is registered with the commits
sion and complies with the provisions
of this bill and the regulations which
the commission is empowered to pre-
scribe under the bill.
To meet the first evil-that is. the
manipulation OF prices-the bill eX-
pressly outlaws pools to manipulate
the prices of securities up and down
to artificial levels; even pools to
stabilize prices, because of the danger
that they may be used to manipulate
rather than stabilize, have been put
under the careful control of the Fed
eral Trade Commission Other forms
of manipulation are also made un-
lawful and various devices such as
short selling and the activities OF
specialists are controlled by being re-
ouired to comply with the regulations
which the commission may adopt
Professional spectators, such as floor
traders. are barred from the trading
premises Of exchanges.
Bans Dangerous Devices.
Though the bill includes many care
fully drafted prohibitions of practices
which have proved to be undesirable,
the further precautions are taken OF
giving the commission broad powers
to ban other dangerous devices, and
If after fair warning a stock exchange
refuses by its own action to change
rules and practices harmful to the
Investing public and the fair operation
of the exchange then the commission
may itself step in and compel the
making of the change.
The second evil-that is. the over
financing of speculation and the over
temptation of the public to risk its
money in speculation-is curbed by
comparatively high margin require
ments carefully fixed in the statute
to insure a substantial and unques-
tionable reduction both in the amount
of speculative credit available to the
stock market and in the amount of
speculative risk which the individual
investor may be attempted to assume
These margin requirements are, how