Evening star., 1940-12-04


of the lengthy David Lawrence.
prospectus which in the past has
prevented the fiotation of capital for
small businesses because of the eX-
pense of legal and accountant fees.
The commission still retains a
measure of control over what hap
pens to these securities, for it has
often been found that in the smaller
issues speculative and fraudulent
representations have brought a lot
of losses to investors.
But these cases are probably in
the minority and can be checked by
examining selling literature which
will still have to be filed for refer
ence. In the majority of instances,
however, the legitimate use of secu-
rity selling in small issues of 100000
will be materially assisted now by
the elimination of expensive red
tape.
It should not be inferred that the
s. E. C. is to blame for the presence
of these restrictions, as most of them
are provided for by the original law
lUSSIl. peCduSc SOllSICSo Iioo llOl
yet been asked by the S. E. c. to
amend the law there is a tendency
to focus responsibility on the COM
mission.
Confer on Law Changes.
Conferences, for example, are TAX
ing place between the commission
and the investment bankers looking
toward revision of the existing law
1t has been assumed that specific
recommendations will be made by
the commission after these confer
ences. Possibly one of the things
that will delay the presentation Of
these amendments is the expected
change in the personnel of the COM
mission. Chairman jerome Frank,
a brilliant, hard-Working individual.
is said to be slated to become
Circuit Court of Appeals judge. An
other member. Leon Henderson, who
has become perhaps the principal
economic adviser in the National
Defense Advisory Commission, is be-
lieved to be scheduled to resign from
the s. E. C. so as to devote all his
time to the defense program. He is
one of the New Deal economists on
whom the President relies a great
deal for advice
There is talk, too. that Commits
sioner Eicher may resign to accept
a judgeship. The impression pre-
walls that Summer T. Pike, who was
recently appointed to the S. E. c.,
may become chairman. With
changes in commission personnel
impending, there is naturally cor
responding uncertainty among the
subordinates.
The S. E. C. has such wide dis
cretionary powers under existing
law that its operations are of para
mount Importance to the flow of
capital in America. Judging by the
huge problems that confront the
Nation in financing production for
defense and possibly in financing
foreign orders, the matter OF ac-
celebrating the flow of private capital
or at least of removing any bar
riers-is directly related TO the way
the S. E. c. handles its job. 1t would
be constructive step if the present
commissioners, before leaving Office,
could agree on set of recommended
tions which would guide their sue
ceSSors and members of Congress
in formulating any needed changes
in the present law. Enough expert
ence has been accumulated to indi-
cate the nature of such changes.
Retains Power to Investigate.
Meanwhile, whatever can be done
by changes in regulations will be
welcomed by the business and
financial world. There will be wide
spread approval of what the COM
mission has just done in raising the
exemption from $4,000 to 100000
on issues sold publicly and through
underwriters which do not now re-
quire formal registration prospec-
fuses It will still be necessary to
write a brief letter to the regional
Offices of the S. E. S., making rec
ord of what issues are being offered
for public sale and accompanying it
with copies of sales literature The
commission retains the power at any
time to investigate how these offer
ings were sold and what representa-
tions were made, especially if in
veStorS think there has been fraud.
But in the main small businesses
which want to raise up to S100 900
by selling stock or bonds or other
securities will not have the impedi-
ments of red tape and expense which
have faced them heretofore. And it
Is the small businesses in America
which must be built up if America S
economic system is to remain one of
free competition and if concentra-
ton of power in large economic units
is to be gradually curtailed. The
S. E. G. has made good start and
Congress might well permit the S.
E. C. to exempt from registration
issues up to S50O,0O0 or at least
specify that private sales may be
made of such issues to 100 persons
This would help businesses in small
communities to raise capital, and
that is what is most essential today
to the expansion of the smaller in
dustries.
Reproduction Rishts Reserved)