Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1936-11-07

Most OF the honest brokers are afraid 20
even try to sell the issue as they are re-
sponsible under the act. in the event that the
engineer. accountant, officers or directors
knowingly or unknowinEly omitted to state
q material fact In the registration. For the
time being we viii leave out the matter Of
fraud or fraudulent statements, as directors,
accountants, engineers and officers always
have been responsible for such things under
our postal laws, long before We had The act
Of 1888. OF course the 1893 act put a ban on
fraudulent selling interstats By means Of the
telephone. telegraph and newspapers. for
which all honest men are thankful.
In order 70 sell stock, iegittmately, in any
company, be Il primary or proven. It usually
ability for directors Of the company. It Is
usually difficult to set such men for directors,
even though they are convinced that the
venture Is honest and meritorious, Is they get
ties involved under the 1888 act.
Naturally. you ask why should honest d.
rectors. accountants. engineers, Officers ana
brokers Of primary mining or any other
primary company be more afraid OF their
responsibilities than the same individuals ara
In any other company
That question is easily answered
Risk Involved
AS interpret the act. any st0ckhoider may,
within q period OF 10 years. after purchasing
the stock sue any OF the above named In
diViduals for emitting q material TACT; ana
the penalty, II the suer proves his contention.
may amount to fine Of $4,000 and prison
term Of ten years.
No stockholder will probably sue under his
rights above mentioned unless he has lost
money In the venture. The larger companies.
ike Anaconda or Bethlehem Steel. may sell
securities under the new act and their Off
GERS brokers and underwriters need have
no fear OF any comeback in 10 years OF 20
years. These companies are rich and power
full and always make good profits and satisfy
their security holders when times are good
on the other hand, the primary mining
venture may not turn out successfully, even
though It has all the indications Of so DOING
and Is well and honestly managed We all
understand the risks Of primary mining.
The Term Underwater"
Then again, suppose not enough money Is
raised by the broker to finance the primary
deal TO success7 That has been the trouble
in the past with e great many Of such meri-
torious undertakings. I have never heard OF
a primary mining venture being underwritten,
in the common Interpretation Of that word.
I regard the definition Of that word under
writer" In the act OF 1888, as misleading.
Many mining brokers have that same opinion
and are afraid the public viii be misled- In
financial and lay circles T. usually Is under
stood that when q security is underwritten
II Is practically all sold, for the underwater
must himself buy that portion OF the security
which he cannot distribute. IN short, when
John Public reads q registered prospectus
stating that John Broker Is the underwater
OF some si05 900 Of stock OF the Abe Mining
Co.. all Of which amount Is necessary 70 make
the venture q success, John Public, In plural,
each figure that it Is safe for them TO put
in q few hundred dollars to take q chance
on the mino and If the public does not sub
scribe the entire si05,000, John Broker VIII
take and pay for what Is left.
When an issue Of q company like Anaconda
or Bethlehem Steel is underwritten It is
really underwritten and all sold whether
fore. have never heard Of a primary mining
venture being underwritten. A broker usually
takes an option on block Of the stock and
II he does not sell It. the company usually
tries to get another broker to try to sell It
and so on. However, under the act Of 1888,
such an option broker Is named as an under
writer"
Chance for Crooks
Suppose an honestly conducted primary min
ing company with responsible officers experts
and brokers proves unsuccessful, as 1t possible
in such a speculative business as mining. And
supposing the honest stockholders do believe |
they have had an honest run for theTi
money! dishonest, clever stockholder or
dishonest smart lawyer may find material
fact that was completely overlooked by the |
officers or could not be foreseen by them |
when filing their statement with the SEQ
Such persons could easily sue or attempt
blaclnail against the directors. experts and
underwater.
We believe that the act should be so modified
as to lessen the responsibilities Of the d.
rectors. and engineers AS for the so-cRlIed
his responsibility should be great
" lessened or eliminated in the case Of Sc
surities Of q primary mining company. 90
pectus and registration in selling his wares
and In honestly stating mine development
facts as they occur. II he commits fraud we
have plenty Of laws for such cases.
Must Recommend Changes
Possibly some Of the notifications asked
for, In this address, may have to come
through congressional act, but some OF them
may be modified BY the SEC ITSELF although
there seems TO be some doubt as 70 that.
Under section 10 Of the act Of 1888, the SEQ
has the power to make rules and regulations
and we have great hope that clause Is con-
stitutional, as the SEC seems to have been
eminently fair and far seeing so far, in its
rulings. In any event, If there Is a change
to be made by congress in the Law so that
primary mining companies can be financed,