REGULATING SALE OF SECURITIES HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE COMMERCE UNITED STATES SENATE SIXTY-SEVENTH CONGRESS FOURTH SESSION ON H. R. 10598 A BILL TO REGULATE THE SALE OF SECURITIES IN 26071 Printed for the use of the Committee on Interstate Commerce WASHINGTON GOVERNMENT PRINTING OFFICE 1923 CONTENTS. Adams, Samuel, representing Jones & Baker, Chicago, Ill Baker, Rhodes S., Dallas, Tex.. Ballinger, Webster, representing the National Association of Home Britton, Joseph K.. representing Chicago Real Estate Board, also Illi- Callbreath, J. F., secretary American Mining Congress_- Canright, Garfield S., director of the securities division of the Rail- road Commission of the State of Washington and president of the National Association of Securities Commissioners_ Chassell, E. D., secretary Farm Mortgage Bankers' Association of 24 Davis, W. D., representing the Clearing House Association of Bank- Denison, Hon. Edward E., M. C__ 183 1, 179, 188 Doyle, Edward P., representing the Real Estate Board of New York, Ferguson, W. E.. representing National Association of Real Estate 23 Graham, W. J., representing Developing Operators and Mining Prop- 32 James. C. Clinton, chairman legislative committee, United States 199 Kelly, A. J., jr., chairman of the committee on legislation of the Na- 18 Osgood, Roy C., vice president of the First Trust & Savings Bank, 114 Sheely. R. Preston, representing National Association of Credit Men 103 103 Touvelle. G. T., chief of Nebraska Bureau of Securities and secretary 59 25 201 Woodruff, A. J., manager Fer-Sul Chemical Corporation_- Amendments suggested: Amendment to section 2, by Hon. Edward E. Denison_ By J. G. Williams. By W. J. Graham. 32 REGULATING SALE OF SECURITIES. WEDNESDAY, DECEMBER 6, 1922. UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE COMMERCE, The subcommittee met pursuant to call at 10 o'clock a. m. in the committee room, Capitol, Senator Cummins presiding. Present: Senators Cummins (chairman), McLean, Fernald, and Smith. The CHAIRMAN. The subcommittee upon bill H. R. 10598, a bill to regulate the sale of securities, has come together this morning for the purpose of hearing those who are interested in the question. Inasmuch as Representative Denison, of Illinois, is the author of the bill, the subcommittee will be glad to hear from him. Mr. DENISON. Mr. Chairman, if it meets with your approval, I will make a brief statement, explaining the purpose and briefly the provisions of the bill so as to give the committee a general understanding of it before the witnesses are called who will discuss its provisions in detail. Then I would be glad if those who are present and who have objections to it or to any of its specific provisions would be allowed to present their objections, and thereafter the committee could determine to what extent they wish to hear further testimony from those who are in favor of the bill. The CHAIRMAN. That will be the course adopted unless there is some reason to the contrary. STATEMENT OF HON. EDWARD E. DENISON, A REPRESENTATIVE IN THE CONGRESS OF THE UNITED STATES FROM THE STATE OF ILLINOIS. Mr. DENISON. Mr. Chairman and gentlemen of the committee, there are 39 States that now have fraudulent securities laws or what are commonly called "blue sky' laws. There are three other States that have enacted laws to prevent the sale of fraudulent securities, but they are of an entirely different type and are what are commonly designated as fraud statutes. The following States have typical blue sky laws: Alabama, Arizona, Arkansas, California, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Wisconsin. West Virginia, and Wyoming. The States of Colorado, Connecticut, Delaware, Nevada, Pennsylvania, and Washington have no such laws at the present time. The States of New York, New Jersey, and Maryland have enacted the so-called fraud laws; they are quite different in form from the typical "blue sky" laws in that they do not forbid the sale of the securities, but provide penalties for selling such securities and provide machinery for stopping their sale after the fraud has been discovered. Without going into unnecessary details, I will state here that, generally speaking, the so-called blue sky laws prohibit the sale of all securities within the respective States except under certain conditions. They provide for a State commission or bureau or for some State official to administer the |