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

pose OF the commission Is 70 restore public
confidence In investments IN public issues
By requiring isSuers 70 make fun and COM
piete revelation OF the facts OF corporate
structure. Mr.. OBrten answered dozens Of
questions In which he revealed that the
commission does not try to interfere Win
the issuers business: ALI that Is required
Is that he shall tell the whole truth about
his properties and what he does with the
money and requires that at least rs percent
Of all money raised shall so into the treas
ury Of the company.
After a company has filed its prospectus
and registration statement It may issue any
other prospectus or advertising matter IN
Guiding newspaper advertising, Il may choose.
the only requirement being that such aoVer-
Using shall be the truth and shall refer 20
the availability Of the formal prospectus
Many persons are Of the opinion that the
only prospectus which may be used IS the
federal form. Mr.. O'Brien stated that the
commission expects the issuer to present his
securities to the public In as attractive
q form as possible, after ne mas maze the
complete disclosure required BY the com
mission.
Companies issuing less than $4,000 in one
year need not notify the commission THOSE
who issue less than 900 need only lie
q prospectus setting forth complete tacts re-
garding the property ownership and cap
italization and capital distribution. Those
who issue more than 100000 must file
complete registration statement together
with q prospectus.
me new forms which will be used ex-
elnsively for mine financing will overcome
the cumbersome requirements OF forms pre-
pared to care for eastern corporations OF
the Wall street variety.
Mr.. oBrien's paper. printed exclusively In
the Journal follows:
commission which Is OF primary interest TO
YOU men Is that which has to do with ad-
minIstration Of the securities act OF 1888 ana
the securities exchange act Of 1884 The red
eral congress, in passing this legislation
sought to prevent the continued practice OF
certain financial methods which had result
ed in disaster to thousands Of investors and
impairment Of the confidence OF the public
in our financial institutions. The skeptlclsm
OF the public extended without discrimina-
ton to almost all enterprises both good ana
bad. It was apparent that an enduring IMAM
ciai recovery could not be achieved unless
the way we're opened to rebuilding public
confidence, and public confidence could not
Be rebuilt unless q source OF reliance otheL
and greater than that which had eliminated
IN snch hitter disappointment were created. /
The acts provided the means TO bring ABOUT
a restoration Of public confidence, ana al
ready they have proved TO be Of immeasut-
able benefit both to persons seeking 10
invest their savings, and to business con-
Germs which deal frankly and fairly with
those whom they invite TO become associates
IN a common venture.
Ask Fun Disclosure
The primary objects sought to be attained
by the acts are fun and fair disclosure Of All
the material facts surrounding the Issuance 1
-
ties and the preventing Of fraudulent, de-
reptive and unfair practices and methods IN +
the sale OF and dealing in securities. Neither
act is prohibitory; any security may be Of
tered for sale to the public II its nature
and character are clearly and accurately
described. The acts assume the ability OF
the average investor to act prudentiy ana
tntelligently II he Is furnished with q rea-
sonabIe amount Of accurate and reliable
information concerning the enterprise IN
which he is asked to participate
Registration
The means Of disclosure to a prospective /
investor OF the material facts relative to
new issue OF securities proposed to be Of
fered for sale to the public, are the regis /
trRtion statement and the prospectus. The
securities act requires that a registration
statement shall be filed with the commission /,
and have become effective before q public
offering Of securities by use Of the mails as
means Of l. S. o. may be made. Various forms
for registration Of securities have been
adopted by the commission, the appropriate
form for a particular registration being de-
terminable either by the nature OF the
transaction or the type OF security involved.
Zach form contains a number Of items which
call for certain specific information, the
same information, with unimportant excep-
lions to be included in the prospectus, but
not necessarily in the same sequence or
order that II appears in answer to the in
dividual items Of the registration statement.
Prospectus
The commission recognizes that the pros
pectus is essentially a sales document. COPY
Of the final prospectus on file with the COM
mission must be delivered to each person to
whom an offer to SELL or sale Of. the seeuri-
ties is made. The act gives the purchaser 3
right Of action for recovery Of damages from
those who have sold him securities without
truthfully disclosing the material facts. In
addition. the act provides that the dstrtbu-
ton and sale OF securities in violation Of the
requirements as to registration and delivery
Of prospectus may be stopped by injunctive
proceedings and may subject the violator
10 criminal prosecution.
Values Not Considered
However the commission is not authorized y
20 pass JUDGMENT on the soundness or inyes-
ment value Of securities, nor does the COM
mission guarantee the truth and accuracy
q the representations in registration state
ment.
Those people concerned in the issuance Of
q security, with the exception OF the issuer, s
arc not guarantors Of the accuracy Of the Z
statements made the information fur
nished in the registration statement; in !
general their responsibility is to exercise
due care that the statements made are ac-
curate, with due regard to the trust and
reliance placed in them by investors. The
degree Of care is that which may reasonably Q
be expected Of persons In their relationship
30 the RESISTANT the degree OF care re- :
CURED being that ordinarily exercised By q
prudent man in supervision and management :
Of his own affairs Anything less would be 9
Should Assure Investors :
To contend that such a standard Is too \
strict amounts TO a denial Of the experience III
with all our law governing relations between
individuals and 1t would be better to forego
seeking information unless definite sanctions !
assuring the truth and accuracy Of the in
formation sought are set up. However the II
sanction Of public faith and confidence in III
The wisdom Of legislation and the intelligence
81 its administration is far more effective
than the threat OF any pain or penalty for
with its terms. It Is the
Meet Of the Securities and Exchange COM
mission. and one which believe Is being
stained. to prove 70 the people Of this coun-
~ that this legislation represents no start
ing departure from accepted American
standards Of fairness and honesty and that
Is administration has been, is being and
m be conducted along lines Of sympathy
nd cooperation.
Is Net s'Wet Nmrse"
The acts DO not make the commission, as Is III
sBfstimes asserted, wet nurse" to the In
ester. he stfn must rely on his own iudg-
lent o. the merits Of q giVeu venture, but
fornszne his oplnion there Is available to
ln b. virtue o. TIA informsti0n contained y