Evening star., 1941-01-20
Investment Bankers
Oppose Competitive
Bidding for Issues
Dealers Ask S. {. c.
For Public Hearings
And Time for Study
BY EDWARD c. STONE.

In a statement filed with the
Securities and Exchange Commits
sion and made public today, the
Investment Bankers Association
declared that the commissions pro-
posal to compel competitive bidding
IN the sale of new securities would
be detrimental to-the best interests
OF 1ssuers, of security holders, of
consumers and the investing public" :"
The association asked more time
for study of the plan and for public
hearings before the House Com
nlttee on Interstate and Foreign
Commerce.
The brieg was taken to the COM
mission by j. Clifford Folger of
Folger, Nolan & Co, one of the
associations Washington repre-
sentatives. The position of the as-
sociation was summed up by
Emmett F. Connely, president, as
follows:
Reasons for Opposition.
Compulsory bidding would cause
DAMAGE to investors. arising. among
other things. from the over-prlcing
OF issues ANY increase in price
to the issuer would be at the eX-
pense of decreased yields to the
investor. whose interests the COM
mission is under duty to guard,
THE underwater making the
skimpiest and cheapest inves-
tigation, and contemplating the
cheapest distribution methods could
afford to pay the highest price.
The competition OF the market
by which every issue must be
Judged assures fair prices to the
issuer and to investors.
Compulsory bidding would force
the concentration Of distribution
into the hands of relatively few
underwriters and dealers, to the
detriment of small investors and
dealers.
"Compulsory bidding would not
help the S. E. c. meet its statutory
RESPONSIBILITIES under the Holding
Companv Act. It would still be
necessary for it to examine the
reasonableness Of price and spread
after the bids had been received.
COMPULSORY bidding would con-
fict with the theory of the Secu-
rites Act which requires a thorough
and searching investigation 10 be
made by a responsible underwater"
Other reasons we're also pre-
sented for the associations oppoSl-
ton to the proposals. One dealer
said today that the big underwriting
firms which have been putting out
the leading new issues would con-
tinue to get them under the COM
petitive plan as they are IN a posi-
ton to make the highest bids.
That. in turn, would make prices
higher to the public, he said.
Exchange Offices Open.
Washington Offices OF the New
York Stock Exchange were open as
usual today So were the invest
ment houses.
Speaking of the recent light vol
ume of trading on the big board,
brokers said today that the public
seems to be trading on 'posslblh-
ties" more than on probabilities.
Brokers say there are plenty OF
stocks and bonds that offer good
Yields with safety. Customers IN
many instances appear to disregard
present earnings, as well as the
outlook, brokers say.
In the face of booming indus
trial conditions, the war and tax
prospects continue to dominate the
market.
Debt Reduction Advocated.
Concentration on reduction OF the
debts of the Nations 175,000 local
governmental units, from States
down to the smallest tax district. IS
an essential part of the national de-
fense program, Henry H. Heimann,
executive manager of the National
Association of Credit Men, declares
in his monthly review Of business
received by the washington asso-
citation.
Emphasizing the need Of "a sound
domestic economy to buttresS our
defense program" the credit eX-
ecutive expresses agreement with
the recent pronouncement OF the
Federal Reserve Board and advo-
Gates both application Of defense
taxes and issuance of defense bonds
to hold down the rising consumer
purchasing power that will result
from the defense activity.