Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1935-12-21

I in the REGISTRATION statement and prospectus,
i the material facts and features Of that en-
/ terprise. Neither does this legislation pro-
hibit the conception and execution Of any
project. It recognizes the diverse tastes and
/ inciinations Of human beings. The public.
not the commission. determines whether It
shall contribute its money to the execution
Of any program
Require Fun Disclosure
| I take Il that the major interest Of this
| group is in the requirements Of the securities
/ methods and policies which the commission
has so far developed to bring about compH-
! ance with It's requirements, and. rather than
/ a general discussion Of registration under the
act. assume that you would prefer q some
. what detailed treatment Of the REGISTRATION
/ Of securities issues Of mining companies.
While the same specific object Is sought to
/ be attained in registering any securities.
namely, full and fair disclosure OF the ma
terial facts the commission recognizes that
the method employed to achieve this object
must vary with the nature Of the business
engaged in by the lssuer. Mining is q business
and Is. OF course, treated as such By the
! Securities and Exchange commission.
In the course OF administration OF the
securities act Of 1888, for q period Of about
two and one-hah years, certain definite
principles to be followed by an issuer In
registering mining securities have been estab-
ushed By the commission. In the process OF
evolution Of these principles, certain meth
DDS which have at least the dignity and
standing Of long and continued usage were
found to involve features which may at
times seem to make difficult the fun and
fair disclosure contemplated BY the act. A
literal statement In description Of certain
/ transactions between the corporation and the
promoter often results in only haftruth
and the purchaser Is not fully informed
either as to the precise nature OF the trans
action or its implications. The commission
has gradually and carefully developed meth
DDS to be used By the RESISTANT TO reveal
to a prospective purchaser the essential char
acter OF certain transactions Again, you will
observe that the effect is revelation, not pro-
hibition The commission does not say you
may not do IT." It only says You may do It
but you must not misrepresent what you do"
Stock Donations
You arc all acquainted with the common
practice Of donating to the corporation
portion OF the stock received by the pro-
moter in consideration OF the transfer Of
assets. The commission declared In an opin-
ion that the inclusion Of shares issued and
concurrently donated back 10 the issuer as
required BY the purchase contract, we're
improperly included In the original cost OF
the property even II the effect OF such
transaction under the applicable state law
was to render such shares fully paid and
worcestershire. The practice Is not prohib
tied; the method OF representation OF the
effect Of the transaction is criticized. If,
upon the execution OF a purchase, the pur-
chaser is OuL-Ol-pOEkEt Ulh eAu AAg may ANh
represent that the article purchased cost him
Another principle established in the same
opinion is that when stock. issued In part
payment for property, is valued at par in
the determining Of the cost Of such property,
such valuation is false and misleading when
all other sales Of the same stock were at
varying prices, all considerably below par
In the same case, the commission ruled that
sprospectIve value does not afford scien-
For ha val of
erty at the time Of its acquisition by the reg
istrant
Financial Statements
Certain well-defined principles In connee-
ton with the preparation Of the financial
statements in a registration statement have
been built up. AS stated before. the issuer
may not include in the figure given as cost
Of its property, the par-value Of stock which
has been donated back to the treasury Prop
erty held under lease and option may not be
represented as an asset OF the value Of the
purchase price specified In the lease and
option agreement. II a portion Of the pur-
chase price has been paid. It would seem
such amount may be carried on the balance
sheet as an asset with an appropriate foot
note to disclose the precise nature OF the
ownership. In promotional enterprises, loot
note TO the balance sheet showing the cost
Of the assets TO the vendor Of the properties
should be included The value OF q lease
capitalized is best shown under 'Intan-
gibles" but under certain circumstances. and,
IL properly labeled, might be acceptable un-
der Fixed Assets"
Capital stock
In connection with capital stock, Il Is re- |
quired that stock issued for cash, services, |
or property be shown separately. Treasury |
stock donated back is best shown as ''unis- |
sued" and deducted from authorized stock.
It will, however. in some cases be acceptable
II shown as treasury stock deducted from
authorized stock. with the results shown as
met stock OUTSTANDING" The source Of any
class Of surplus should be stated on the
face Of the balance sheet.
EnEineer's Report
Many OF you are primarily interested 10 the
role the expert plays in the registration Of
securities. In the presentation of facts sur
rounding the issuance of securities Of a min
Ing company, the expression Of opinion Of a
mining engineer relative to the properties Is
1f primary significance without minimizing
the Importance Of other factors It may be
said that the nature and character Of the
mining property itself are Of fundamental
Importance to the investor. There Is no spe-
cific requirement as to the extent Of the in
formation which must be giveni the degree
Of development Of the particular property
shapes the limits Of the requirement. The
extent Of the information available varies
from property to property.
Liability Of Expert
Section 7 Of the securities act imposes
definite responsibility upon the expert and
provides for liability to a purchaser unless
hat responsibility Is faithfully DISCHARGED
This responsibility is not unduiy burdensome
An engineer or a mining expert who con-
;lusions In accordance with sound and com