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advertising to issues listed on New York Stock Exchange and affiliates which are exempt under terms of most blue sky laws. Telegraphic estimates around West indicate section would add half million people to unemployed ranks, these including workers and officials of many industries now partly financed besides office help, brokers, advertising men, financial writers, and publishers, printers, telegraphers,

and professional and business people dependent on them for maintenance. Would also increase cost of corporation shares to public since advertising backed by mail solicitation raises money at cost of 5 to 15 percent while use of salesmen generally runs over 35 percent and listing on stock exchanges brings financing cost above 70 percent with extreme instances as high as 99 percent. In other words section 14 would interfere with people who put 90 cents on dollar into actual industry but place no curb on those who obtain exchange listing and put only 30 cents down to 1 cent on dollar into productive work. Many other industries besides mining will be adversely affected, in fact all concerns which depend on public financing for capital but lack stock exchange affiliations. Many thanks for your cooperation. Good luck.

LEON STARMONT.

THE AMERICAN Mining CONGRESS,

Washington, D.C., April 5, 1933. THE COMMITTEE ON BANKING AND CURRENCY,

United States Senate. GENTLEMEN: May I present to you a short statement, with special reference to section 14 of the securities act, which is now before you?

I speak particularly for the gold-mining industry of the West. May I say at the outset, that I am not in sympathy with the many appeals of various industries for governmental aid. If such aid is justified, it is likely to be because of improper prior legislation, or because of the failure of the Government to exercise its full responsibility with reference to some particular matter which has been made a Federal matter by the Constitution of the United States.

One of the primary responsibilities of Federal Government is to provide a proper and sound medium of exchange with which business may be effectively carried on; according to the Constitution, “To coin money, regulate the value thereof and of foreign coin, and fix the standard of weights and measures.

At this time, the money of the world is based upon gold and silver. The gold industry does not ask for governmental aid but it does ask that it shall not be hampered in its efforts to produce the one necessity of all necessities in relation to world and internal commerce.

Section 14, as we understand its import, will effectually destroy a link in the chain between the undiscovered gold resources and the only sound bases of currency:

In looking for the various causes which have led to the present world-wide business depression, I fear we have not given enough attention to that common denominator of all commerce, money,

Gold mines are not discovered. The prospector finds a promising outcrop. He stakes his claim. He proceeds in the uncovering of that lode so far as his financial condition will permit, He must needs have aid from the outside. What he has is not a mine but a claim to an outcrop of a vein which promises, upon development, to become productive. Recognizing the vast importance to world commerce of an increase in its gold supply, he regards himself, and we regard him, as a benefactor of the human race to the extent that he is able to add to the basis of our money system. In order to carry on this effort, he must reach capital elsewhere. To employ promoters and investment bankers to raise this money means that only a small percentage of the total amount received will be available for development work. He appeals first to his friends, dividing up his holdings in proportion to their contribution. Further development adds to the promise and opens up a body of ore, low in grade but requiring a mill for its beneficiation. His desire is to secure this capital for the least possible expense, An honest statement of his proposal in ordinary times will bring the required financial aid.

The method through which he can reach many possible investors is through the public press. Let us say that he takes this statement of his proposal to the Denver Mining Record, or the Salt Lake Mining Review, each of which has a more or less extended distribution among people in various States who are interested in the mining industry. The publisher, in the face of section 14 of the act before you, will not dare to publish the prospector's statement because

he becomes liable to a severe penalty in case a single copy of his paper shall follow an old-time subscriber into a State where the particular requirements of registration have not been complied with. It is an expensive job to secure the registration of an investment proposal in any State. Ordinarily the prospector is not financially able even to secure one registration.

Senator Gore told you yesterday of the difficulties in the way of securing registration, to the effect that only certain attorneys, who would demand enormous fees, could possible hope to secure the registration. The writer knows of other instances where the prospector is first required to put up a considerable sum of money to pay the fees and expenses of an examiner sent from the State to report upon the property. In many instances, these examiners must first be bribed, and after the report is made to the local commission, it is found again necessary to employ certain attorneys to accomplish the registration. With all of this difficulty in securing registration in one State, how impossible it would be for a mining prospector to secure registration in 40 or more States in which the publication might have subscribers, before a reputable paper would be permitted or dare to publish the prospector's story and carry his proposal to those who perhaps would be glad of the chance to aid in the further development of the prospect, the results to be either complete failure or ultimate success.

This is the requirement of section 14, and its adoption will close the door to further and practical means by which the average prospector can hope ever to secure any aid in the development of his prospect.

We might pass by the interest of the prospector, but, as a nation, possessing double our share of the world's gold, we found it necessary to place an embargo upon its exportation. The necessity for increasing the gold supply, thus developing a larger basis for the structure of credit which is necessary to world commerce, is a vastly important proposal.

I am sure that your committee will not knowingly approve a section in the proposed law which will so effectually bar that great public benefactor, the gold prospector, from further activities in behalf of world prosperity.

May I, in closing, file as a part of my statement a telegram received from Mr. Leon Starmont, secretary of the Northwest Mining Association, with headquarters at Spokane, Wash.? Respectfully submitted.

J. F. CALLBREATH,

Secretary of the American Mining Congress. The CHAIRMAN. Can we meet tomorrow, do you think, and go on? [After a pause:) Without objection, we will meet tomorrow morning at 10 o'clock and try to make more headway in this hearing.

We will now go into executive session to take up the farm mortgage bill as reports by the subcommittee.

(Whereupon, at 11:25 a.m., the committee proceeded to executive session, this hearing being adjourned until 10 a.m. of the next day, Thursday, April 6, 1933.)

SECURITIES ACT

THURSDAY, APRIL 6, 1933

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met, pursuant to adjournment on yesterday, at 10 o'clock a.m., in room 301 Senate Office Building, Senator Duncan U. Fletcher presiding.

Present: Senators Fletcher (chairman), Wagner, Barkley, Gore, Costigan, Byrnes, McAdoo, Adams, Norbeck, Townsend, Couzens, Steiwer, and Kean.

The CHAIRMAN. The committee will come to order. We will go on with the hearings this morning on the proposed Federal Securities Act, and Judge Fletcher will be the first witness.

Please state your name, address, and profession.

STATEMENT OF R. V. FLETCHER, WASHINGTON, D.C.; GENERAL

COUNSEL OF THE ASSOCIATION OF RAILWAY EXECUTIVES

Mr. FLETCHER. My name is R. V. Fletcher. My address is Transportation Building, Washington, D.C. I am general counsel of the Association of Railway Executives.

Mr. Chairman and gentlemen of the committee: I appear here just for a minute or two to represent the American railroads and to call attention to 1 or 2 provisions of the bill being considered by your committee, which deal with securities issued by railroad companies.

I call attention more particularly to section 11 of the proposed bill, which undertakes to except certain securities from the provisions of the bill. It is therefore provided, among other things, that securities issued by common carriers subject to regulation or supervision by commissions, and so forth, shall be exempt from the provisions of the bill, except that sections 5 and 8 shall apply to those securities.

Now, the proviso subjecting railroad securities to the provisions of section 5 seems to contemplate that the reports, which section 5 deals with, should be made in this case to the Interstate Commerce Commission and not the the Federal Trade Commission. The precise language used is:

Submitting to the respective supervisory units of the Government of the United States.

I take it that that language means in the case of railroads that the proper supervisory unit is the Interstate Commerce Commission.

Now, the only point I want to make about it, Mr. Chairman and gentlemen of the committee, is that this bill deals primarily, as I understand it, with measures which will make it certain that securities that have been issued without public authority shall not be offered to the public without full information as to the character of the securities and the assets that lie behind them.

In the case of railroad securities, under the provisions of the Interstate Commerce Act, they are issued only, as we all know, by the authority of the Interstate Commerce Commission, under rules that are laid down by that Commission and which contain most elaborate provisions as to the purpose of the issue, character of the issue, assets of the railroad which lie behind the issue, terms upon which they are being offered to the public, commissions that are being paid, and everything which would give the public complete information with reference to the type and character of the securities.

Senator KEAN. I should like to ask the witness whether he thinks that has made the securities any better lately.

Mr. FLETCHER. Well, it certainly did not lead to any misunderstanding about the securities. And I do not think this bill probably would make securities any better if railroad securities were subjected to it in case there was a lack of substantial credit lying behind the securities.

Senator KEAN. Mr. Chairman, does the witness think that railroads ought to go through the Interstate Commerce Commission and then go through this bill besides?

Mr. FLETCHER. No. My point is that since the railroads are fully subject to the requirements of the Interstate Commerce Commission that is sufficient, and that railroads ought not to be put under this bill at all.

And that is practically the only point which I want to make. I want to elaborate that point, however, for just a minute or two. I should like to offer and have made a part of the record, if I may, the regulations of the Interstate Commerce Commission which determine just what the railroads have to file with them, the information the railroads have to furnish to the Interstate Commerce Commission before their securities can be issued at all. I refer to the order of February 19, 1927, which I will not take the time to read, nor to comment upon, if I may make it a part of the record.

The CHAIRMAN. Yes; that may be done. I think it important.

(The print of the order of the Interstate Commerce Commission promulgated February 19, 1927, was furnished, and will be found at the end of the statement orally made by Judge Fletcher, where it will be printed as a part of the record.) · Mr. FLETCHER. You gentlemen of the committee will see in that order just what the Interstate Commerce Commission requires. A comparison of those requirements with the requirements contained in the bill before you I think will convince the committee that the railroads have already been required to submit themselves to public authority and to make full disclosure of just what is involved in every issue of railroad securities, whether they be bonds, stocks, notes, or what.

But I do want to call attention to this provision: Section 5, subsection (d), on page 12, which provides that when statements are filed there shall be paid to the Federal Trade Commission a fee of one hundredth of 1 percent. There is nothing in the Interstate Commerce Act requiring the payment of a fee, nor does it seem proper that such a fee should be exacted of a railroad in view of the whole scheme of railroad regulation. Certainly if section 5 is to remain in the bill as

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