Evening star., 1955-05-08

Escrow Plan for
Small Offerings
BY DONALD B. HADLEY

The Securities and Exchange
Commission is considering a plan
to place funds from small stock
offerings In escrow until enough
stock has been sold to assure the
offering company will get some
of the proceeds.
With a third to a half of all
proceeds from some stock offer
lngs going to underwriters and
promoters rather than to the
issuing company. SEC officials
say underwriters may sell enough
stock to pay the fees and bonuses,
but leave little if any for the
issuing company. AS result the
company cannot do what it has
promised TO do with the addi-
tional funds.
Under the escrow plan. already
in operation in Ontario. funds
must be deposited at bank and
cannot be released until a GER
tain portion of the offering has
been sold.
The SEC also may ask Con-
gress for power to require more
complete information under Reg
ulation A to protect prospective
stockholders. Under this regula-
ton. issues up to 100000 have
been exempted from full
disclosure requirements.
Facts Often Ignored
However, it has become ap-
parent that disclosure of facts
still does not protect the in
vestor, who often buys securi-
ties without looking for the facts.
The situation has become par
ticularly bad in the last two
years as uranium promotions.
with popular appeal, have mush-
roomed over the Nation.
SEC officials yesterday pointed
to two recent registrations. both
of which illustrate the need for
vigilance. In both cases, under
writer's are going to get a hogs
share of the proceeds, leaving
surprisingly small amounts for
actual development Of the COM
panies. Neither is exempted un-
der Regulation A.
In one case, is million shares
are to be offered at 40 cents a
share. If the public puts up the
$500 900. only $380.000 actually
will go to the company for use
in developing the rosy future the
salesman will talk about.
The underwater will get a Is
per cent commission amounting
to $150,000, plus $4,000 for ex-
penses, An additional $4,000
cash will go for technical explo-
ration, leaving $380,000 for de-
velopment of the company.
Shares Also Given
Furthermore, the stockholders
must share ownership of the re-
suits of this investment with
$630,000 of additional common
shares passed out as follows:
$4,000 for underwriters, $50 900
for LAWYERS and $4,000 for ex-
ploration.
In another case, is million
shares are to be sold at 81 a
share. The public will be ex-
pected to put up SIS million, Of
which the company will receive
$1!020,000, less $4,000 of un-
paid claims.
The underwater will receive a
selling commission of $375,000,
$4,000 for expenses and $500, 900
of stock. a total of $750.O00.
Counsel is to receive 100000 Of
stock. Promoters are to receive
81 million worth of stock.
So long as these companies tell
the truth in giving information
required by the SEC, the Gov
ernment agency must clear these
issues although obviously the in
vestor should take a couple OF
long looks at these propositions.
The SEC warns investors to
study the registration material
cleared with the agency and
when the salesman adds some
thing to this. ask him to put It
in writing. If he declines, don't
put up any money or you may
be sorry
Campbell Will Speak
Joseph Campbell, Comptroller
General of the United States.
will address dinner meeting Of
the Federal Government Ac-
countants Association at the
Willard Hotel next Thursday
night.
Mr.. Campbell's subject: "A
Philosophy of Public Service"
He has had his own account
ing firm and is a member of the
American Institute of Account
ants and other professional So
cieties.
Annual Meeting Planned
The Washington Society of
Investment Analysts will hold it's
annual dinner meeting and cleo
ton of officers at the Occidental
Restaurant Thursday night.
After a business meeting, Ma
than A. Baily of American Uni
versity will serve as moderator
for round table on investment
analysis.
Joint Office to Open
Trans World Airlines and Ma
tional Airlines will hold a formal
opening in their new joint ticket
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