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FEDERAL SECURITIES ACT

HEARING

BEFORE

THE COMMITTEE ON INTERSTATE AND FOREIGN (COMMERCE

HOUSE OF REPRESENTATIVES

SEVENTY-THIRD CONGRESS

FIRST SESSION

ON

H.R. 4314 TO. PROVIDE FOR THE FURNISHING OF INFORMATION

AND THE SUPERVISION OF TRAFFIC IN

INVESTMENT SECURITIES IN

INTERSTATE COMMERCE

MARCH 31, APRIL 1, 4, 5, 1933

Printed for the use of the
Committee on Interstate and Foreign Commerce

UNITED STATES
GOVERNMENT PRINTING OFFICE

WASHINGTON : 1933

16. 465

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SAM RAYBURN, Texas, Chairman GEORGE HUDDLESTON, Alabama

JAMES S. PARKER, New York CLARENCE F. LEA, California

JOHN G. COOPER, Ohio ROBERT CROSSER, Ohio

CARL E. MAPES, Michigan PARKER CORNING, New York

CHARLES A. WOLVERTON, New Jersey JACOB L. MILLIGAN, Missouri

JAMES WOLFENDEN, Pennsylvania ALFRED L. BULWINKLE, North Carolina PEHR G, HOLMES, Massachusetts VIRGIL CHAPMAN, Kentucky

SCHUYLER MERRITT, Connecticut
PAUL H. MALONEY, Louisiana

B. CARROLL REECE, Tennessee
WILLIAM P. COLE, JR., Maryland
SAMUEL B. PETTENGILL, Indiana
EDWARD A. KELLY, Illinois
E. W. MARLAND, Oklahoma
EDWARD A. KENNEY, New Jersey
GEORGE G. SADOWSKI, Michigan
JOSEPH P. MONAGHAN, Montana
FRANCIS T. MALONEY, Connecticut

ELTON J. LAYTON, Clerk
II

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FEDERAL SECURITIES ACT

FRIDAY, MARCH 31, 1933

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The committee met in the committee room, no. 226, House Office Building, at 10 o'clock a.m., Hon. Sam Rayburn (chairman) presiding.

The CHAIRMAN. The committee will come to order.
The following message has been received from the President:

THE WHITE HOUSE, March 29, 1933. TO THE CONGRESS: I recommend to the Congress legislation for Federal supervision of traffic in investment securities in interstate commerce.

In spite of many State statutes the public in the past has sustained severe losses through practices neither ethical nor honest on the part of many persons and corporations selling securities.

Of course, the Federal Government cannot and should not take any action which might be construed as approving or guaranteeing that newly issued securities are sound in the sense that their value will be maintained or that the properties which they represent will earn profit.

There is, however, an obligation upon us to insist that every issue of new securities to be sold in interstate commerce shall be accompanied by full publicity and information, and that no essentially important element attending the issue shall be concealed from the buying public.

This proposal adds to the ancient rule of caveat emptor, the further doctrine “let the seller also beware." It puts the burden of telling the whole truth on the seller. It should give impetus to honest dealing in securities and thereby bring back public confidence.

The purpose of the legislation I suggest is to protect the public with the least possible interference to honest business.

This is but one step in our broad purpose of protecting investors and depositors. It should be followed by legislation relating to the better supervision of the purchase and sale of all property dealt in on exchanges, and by legislation to correct unethical and unsafe practices on the part of officers and directors of banks and other corporations.

What we seek is a return to a clearer understanding of the ancient truth that those who manage banks, corporations, and other agencies handling or using other people's money are trustees acting for others.

FRANKLIN D. ROOSEVELT. We have before us this morning for consideration H. R. 4314, a bill to provide for the furnishing of information and the supervision of traffic in investment securities in interstate commerce.

(The bill referred to is here printed in full as follows:)

(H.R. 4314, 73d Cong., 1st sess.) A BILL To provide for the furnishing of information and the supervision of traffic in investment securities

in interstate commerce Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act shall be known as the "Federal Securities Act."

SEC. 2. That when used in this Act the following terms shall, unless the text otherwise indicates, have the following respective meanings:

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