Evening star., 1939-08-21
Investment Counsel
Association Seeks
High Standards
Committee Is Opposed
To Much Regulation,
However
BY SMITH REAVIS.
Press Financial Writer

Dy SMl1h hkAtlS.
Associated Press Financial Writer.
NEW YORK, Aug. 21.-The saw
!ngs of many thousands of investors
throughout the country are admin
tstered, in a way, by investment
counsel, and the Investment Counsel
Association of America is seeking to
determine standards of qualification
for this service.
These men advise their clients on
the purchase and sale of securities,
some of them even manage their
financial affairs, and others do the
actual buying and selling Of stocks
on powers of attorney.
The profession is a comparatively
young one as the first firm was
founded in 1919. Its real growth
came years later after the boom of
1899. 1t is unregulated by Fed
eral law, except when counsel actu-
ally deal in securities, but has its
professional associations.
The Investment Counsel Associ-
alton early this year appointed a
committee to determine what is
an investment counsel supposed to
do? How can an investor choose
between sound investment counsel
and one who is incompetent or un-
reliable? What are the necessary
qualifications"
Definition Accepted.
The committees answer to the
first question in it's report, Just
made public was an acceptance of
the definition embodied in the as
sociation's code of professional prac-
tice. 1t follows:
TT is the function of the profess
sion of investment counsel to render
to clients on personal basis, COM
petent, unbiased and continuous ad-
vice regarding the sound manage
ment of their investments.
An investment counsel firm
should devote its time exclusively
to the performance of this function
and services incidental thereto; it
should not engage in the business
OF security merchandising, broker
age, banking, the publication of
financial services, or acting as GUS
todian of the securities or funds of
clients: and neither the firm nor
any partner, or any employe, should
directly or indirectly engage in any
activity which may jeopardize the
firms ability to render unbiased in
vestment advice"
On the matter of qualifications
the committee said: THAT an in
vestment counsel should Ae man
of unquestioned integrity is OBJ
vious."
Education Necessary.
He should have a college educa-
ton or its equivalent, the report
added, and should have a compe-
tent knowledge of industrial, eco
nomic and political history, corpo-
rate accounting and Interpretation
Of financial statements, security
analysis, technique of "conserva-
tive management" security under
writing and mechanism of the mar
kets.
In the matter of protecting the
public the committee said:
From the standpoint of public
interest it appears clear that the
major problem is now concerned
with the relatively large number of
individuals and organizations which
are operating on that which the
Securities and Exchange Commis-
sion has described as the fringe
OF the profession.
I'VE have concluded, however,
that at the present formative stage
OF the profession, it would be i'm
practical to expect such regulatory
bodies to do anything more than
obtain an effective registration of
all individuals and organizations
practising as investment counsel and
to initiate prompt investigation and
prosecution of law violators mas
Querading under the title"
The committee reluctantly" held
that until the qualifications and
practices of the profession have be-
come clarified "it would be mad
visable to attempt any kind of in
tensive regulation in the field pro-
vided the recognized leaders in the
profession itself shall choose to use
more aggressive means to advise the
public to better understanding of
the essential requirements.
Exchange Firms Differ.
This is contrary to the opinion of
many stock exchange firms who have
set up extensive departments for the
advice of their customers and who
are subject to the supervision of the
Securities and Exchange Commits
sion and must obey the strict rules
of the exchange, sitter now than in
the old laissez faire days of 1929 and
1880
They point out that their custom
ers' men are required to take ex-
aminations regarding their qualifi-
cations and are very strictly regu-
lated by law. Their opinion is that
If the sale of securities is to be regu-
lated, the men who advise invest
ors should come under the rules.