Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-02-07
Training Is Lacking


which traded themselves into
bankruptcy and took their
customers money with them.
No training or experience is re-
quired here Of either the bro
ker-dealers or their statesmen.
If the firms stay out Of the
National Association of Securi-
ties Dealers, even the protec-
ton Of an examination is lost.
The lack Of experience was
clearly revealed in The Stars
survey of newcomer firms
where some Of them had no
experience. some had less than
a year and less than a third
Of them could report that all
members of the firm were ex-
perienced.
In contrast, half the State
laws refer to lack OF training
or inexperience as sufficient
grounds to keep a broker
dealer out Of business.
Virginia requires a broker
dealer to have three consecu-
tive years Of experience in the
securities business before he
can register. II the firm is a
partnership, the majority of
the firms members must have
three years experience and If
it's a corporation, at least two
officers must meet the expert
ence qualification.
Maryland's proposed law al
lows the commissioner admin
istering the blue sky" law to
deny registration to a broker
dealer lacking training, 'expe-
rience or knowledge of the Sc
curities business. It also allows
him to require an examination
of both broker-dealers and
statesmen.
Situation on Fraud
In Washington, no local law
deals specifically with fraudu-
lent practices in securities. The
city is protected by Federal law
more fully than the States
since all but a few securities
here are considered interstate
and subject to SEC rules.
Virginia's law and Mary
lands proposed law, however,
offer the kind Of broad cover
age that would give the United
States attorney here some clear
cut law to use against fraud
artists in the securities field If
Washington had a local law.
Virginia's law, paralleled by
the Maryland proposal. makes
it unlawful to employ any de-
vice, scheme or artifice to de-
fraud in the offer or sale of any
security, directly or indirectly.
It also makes it a crime to OBJ
tain money or property by I'M
truth or omission Of a material
fact or to engage in any prac-
tice which defrauds or could
defraud or deceive the stock
purchaser.
Rules on Criminals
In Washington, O man with
a criminal record can go into
the business of dealing with
other peoples money as long
as his record doesn't involve
securities. The SEC rules bar
the registration of anyone con-
victed in the past 10 years OF
a crime involving securities OF
the conduct Of the broker
dealers business. The SEC also
bars those previously enjoined
in connection with securities
transactions or cited by the
SEC for violating its laws OF
regulations.
Virginia's law requires that
the broker-dealer be of good
character and reputation. Vir-
ginia's commission can revoke
or refuse to renew a registra-
ton in the public interest OF
if the broker-dealer has en-
gagged in a fraudulent transac-
ton, become insolvent, faces
insolvency or has been con-
victed of a misdemeanor in
volving securities or any felony
Maryland's proposed law al
lows the commissioner to deny
or revoke a license for any
felony conviction, any false OF
misleading statements on the
registration. any dishonest OF
unethical practice in the Sc.
curities business or insolvency
Fast Fraud Action
Virginia'S law and Mary.
lands proposed law allow the
administrator to move fast
against the unethical or fraud
ulent stock dealer-faster thar
the authorities can move ir
Washington.
Both the SEC and the Ma.
tional Association of Securi
ties Dealers acknowledge thai
they can rarely go after thu
unqualified, financially unfit
and INSCRIPTIONS firms II
Washington until some Gus.
toners have already been hurt
1.-THE reason they're selline
junk stocks here" one securi.
ties official summed it up, I'll
because the people coming II
are promoters. They don't havt
the capital or the experienc,
to deal in good stocks even l.
they wanted to-"
Experts in the field, from
official investigators to repu
table investment executives, arr
convinced the promoters will
continue to prey on Washing
ton investors as long as there