have approval of securities law than the other type of legislation. I know of no State which has adopted the uniform bill since the report of the commissioners.

Senator BLAINE. Colonel Hinckley stated this in their report of the Conference of Commissioners on Uniform State Laws. He names the commissioners, and he reports the present act—that is, the uniform act-as the result of

seven years' consideration by our committee under instructions of the 1922 conference, and the fourth draft was submitted to the conference of commissioners held at Memphis, Tenn., on October 14-19, 1929, and was given careful consideration, section by section, extending over three sessions of the conference.

He further states:

Usually commissioners from 37 to 40 States attend. Acts are not approved until they have been considered, section by section, by at least two annual conferences.

And then he closes his prefatory note in this language:

The present act has been unanimously approved by the commissioners from all the States represented at the Memphis conference of 1929, and has also been approved by the American Bar Association, and is now submitted to the various States for adoption in the interest of uniformity.

Mr. KEYSER. Yes, sir; that is all correct, Mr. Chairman, and I will simply say that the Conference of Commissioners on Uniform State Laws have recommended a lot of uniform bills which have not been adopted by the various States.

Senator BLAINE. And a lot of them have been adopted.

Mr. KEYSER. Of course. The uniform negotiable instrument bill was their valuable work.

Senator BLAINE. And the warehouse statute

Mr. KEYSER. And the warehouse statute; yes.

Senator BLAINE. And the sales law.

Mr. KEYSER. It has not been adopted.

Senator BLAINE. To a large extent it has been adopted, the uniform sales law.

Mr. KEYSER. Yes; to a considerable extent, but not nearly so much as the other statute.

Senator BLAINE. Of course, there have been some very controversial questions, such as uniform divorce laws, which have been very different. That is something that deals with personal affairs, not business.

Mr. KEYSER. So far as the position of the American Investment Bankers Association is concerned, please understand that in States that have deliberately adopted the other type of legislation we do not decry that type of legislation at all, and we go right along with them and say, "If you want that type of law here, we will go along with you," but we do not recommend that type of law in other jurisdictions that have not adopted the theory of licensing securities, and as I pointed out previously, the uniform bill was based upon the instructions of the San Francisco meeting of 1922, at a time which was a time when thought had not gone as far in the matter of securities legislation as it has gone to-day.

Senator BLAINE. This was not until October, 1929, that the report was adopted.

Mr. KEYSER. Yes; but I am referring to the instructions that were given in 1922, that the law, based upon a numerical count, was to be of that particular type and not the other. I think there were seven or eight States, upon the recommendation of our association, and prior to the uniform bills recognition by the conference of commissioners, which had adopted the principles of that legislation. I refer to the States of Indiana, Kentucky, Utah, West Virginia, North Carolina. I may not have them all in mind, but there were some half dozen or more of them.

We are not out of sympathy at all with that type of legislation, but our view of it is that the other type of legislation is far preferable and it is far more modern and it is far more desirable, and therefore we recommend it as embracing a better and more satisfactory principle of legislation.

If I have not covered any matter that the chairman wishes to ask me about, I will be very glad to answer his questions.

Senator BLAINE. I assume that the issue is as between these two bills, one is enforcement or attempt to enforce before the issuing of securities, and the other is an attempt to enforce after securities have been issued and perhaps during the period of the sale of those securities. That is the issue?

Mr. KEYSER. If I may correct the chairman in just one respect: You used the words "issue of the securities." I do not know whether I misunderstood you or whether you mean technically the issue of the securities, but we should all understand and recognize the fact that in this country our legislation never undertakes to reach the issue of a security. That is an impossibility. They follow that principle of legislation in England and they meet with a fair measure of

success.

Senator BLAINE. We might better use "sale of securities."

Mr. KEYSER. But we can not do that here. We are obliged to lay our legislation against the sale of securities, because we have 48 States which are allowed to charter corporations, and no other State can legislate against a foreign corporation.

Senator BLAINE. I think in the earlier part of the hearing I referred to the sale of the security.

Mr. KEYSER. I just wanted to make sure we did understand the distinction. It is a technical one, but a very practical one at the same time.

Senator BLAINE. The specific provisions of the bill-that is, the details of the uniform act-I assume there is no especial objection to? Mr. KEYSER. Well, there are a number of innovations and adaptations, so far as that bill is concerned, Mr. Chairman. I think you said Mr. Brinkman prepared that. He put in here a number of things of his own that are not in the uniform bill at all. They are quite unworkable, and if you wish me to call attention to those things I will be glad to go into it.

Senator BLAINE. I think that has been gone into, and we have a memorandum incorporating suggestions of amendments, which are well taken, but I refer to fundamentals, not so much to the mere details. You pointed out one matter this morning which should have careful consideration, and that is this supervision of these

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securities long after they have been issued and sold. I see your point very clearly on that.

Mr. KEYSER. For example, Mr. Chairman, here is a provision on page 15 of the bill, which starts at line 11 and runs to the top of the following page. Mr. Brinkman has added two or three words in there that I think makes the whole provision absolutely impossible of application.

Senator BLAINE. What does that refer to?

Mr. KEYSER. That refers to securities based on leaseholds, and he has in here the proposition that the securities shall not exceed 90 per cent of the current assessment for tax purposes of the property mortgaged. Now, your property mortgage is the lease, not the fee, and yet, the assessment of course is on the fee. Of course, with such a set of facts there is absolutely no application of the provision. Senator BLAINE. They do not assess leaseholds?

Mr. KEYSER. No. With those few words you destroy the application of the entire provision.

Mr. BRINKMAN. I would like to explain these in detail later. Senator.

Mr. KEYSER. Of course, if the Senator has already gone over these matters, I would not care to take the time to do so further, but I do wish to observe that in the changes which Mr. Brinkman has made from the uniform draft he has in many instances fallen into errors ⚫ which destroy entirely any proper application of these provisions.

Senator BLAINE. As I recall, we have a memorandum of all that. Mr. BRINKMAN. You have a memorandum before you of all those changes. Just as a matter of record, however, I am not willing to admit I have fallen into error. They were put in for specific reasons to meet specific conditions here.

Senator BLAINE. If you have fallen into error it is not singular. I do not know of anyone who does not fall into error occasionally.

Mr. KEYSER. Mr. Chairman, before you close, Mr. Addison, of my committee, who represents the District of Columbia Bankers Association, asks permission to say a word.

Senator BLAINE. I ought to go into the session. We convened this morning at 11 o'clock. We have 11 minutes until 12, but I must go then.

STATEMENT OF F. G. ADDISON, REPRESENTING THE DISTRICT OF COLUMBIA BANKERS ASSOCIATION

Mr. ADDISON. The District of Columbia Bankers Association is in the hope that there will be some legislation controlling the sale of securities passed. We want to cooperate, and with that view we have cooperated in this committee, which I think has given very serious consideration to this subject, and prolonged study, before Mr. Keyser was authorized to draft his report.

The District bankers are not particularly concerned if that law becomes effective because we are exempted from its provisions. because we are under the Comptroller of the Currency's supervision. Mr. KEYSER. You would be under the fraud feature of the bill? Mr. ADDISON. Yes. I do not think anybody ought to ask to be exempted from the fraud section. I am speaking of the licensing

end. And being under the control of the Comptroller of the Currency we are not concerned other than as the custodian of the people's

money.

We say that there is a dire need of some effective method of stopping what now is promiscuously permitted, the sale of securities without any regulation of any kind.

I do believe personally, our bank committee and the Bankers' Association themselves, having studied both bills, that in so far as the District of Columbia is concerned, being compact, under the conditions that prevail here, that the Capper bill is more effective, will not hamper the business of those 95 out of 100 that would meet the approval of any commission, whether a public utilities commission or any other organized body to whom is given the authority, but we do believe that if by the nature of the Capper bill no one could sell securities until he has first satisfied the District Commissioners that he is of a character that warrants the granting of a license, and, second, that he could not sell securities until he has satisfied a bonding company with at least $1,000,000 capital that they are sufficiently responsible, that that would answer our purposes here.

We freely admit that the Smith Co., if you please, or any other company, could have gotten in under either bill and gotten authority to sell, but these requirements in themselves, in our opinion, will so restrict the small but nevertheless in the aggregate, a large portion of the crooked selling or the sale of fake securities, that we believe you will have eliminated the vast majority so that youI am not speaking about the public-can concentrate to a better advantage on those who do and are permitted to sell under this bill, than if you did not have any restrictions.

We seriously question whether the Public Utilities Commission or any other organization of men selected or appointed are competent in the District of Columbia to pass upon these matters. I do not mean to say you could not set up an organization like the State of New York could afford and be better off under the other law, but for the number of securities that originate in the District of Columbia it would not be possible to have an organization except one which would be almost perfunctory, without a severe tax burden on those who supply it.

Senator BLAINE. Do you not think the fees that are required would pay for the administration of the law?

Mr. ADDISON. No, sir.

Senator BLAINE. If there are a large number of securities issued, and every agent is licensed, and every principal is licensed? Mr. ADDISON. That is true, sir; but take it from this angleSenator BLAINE. And a charge for the certificates? I think it pays the administration expense.

Mr. ADDISON. It will restrict those under your bill who desire to get certificates approved-those who desire to get certificates approved for a small portion of their national sales will not be interested, but where a crooked man-this is only the opinion of the banks-where a crooked man is known as such and he does get permission to sell securities, he can undoubtedly tell his agents to tell

his people that the District authorities have approved the sale of that security, and it will by word of mouth be circulated.

Senator BLAINE. I had reference to the tax burdens, the administration of the law.

Mr. ADDISON. Under Mr. Brinkman's amendment, it is that the Public Utilities Commission pass upon it.

Senator BLAINE. The fees paid, I think, would pay for the administration of a very splendid organization.

Mr. ADDISON. If it was to be perfunctory. But if it was to be thorough, I do not think so.

Senator BLAINE. I know that in my own State the fees return large dividends to the State.

Mr. ADDISON. If I were in the State of Wisconsin and the district attorney for the State, or whatever was the officer, had the power given under the Capper bill, I would be under the definite opinion that the distances in the State would not allow it to work, because of the vastness of the State it would not work.

Senator BLAINE. Under the Capper bill?

Mr. ADDISON. Yes.

Senator BLAINE. I am speaking of the other bill.

Mr. ADDISON. I am of the opinion that because of the vastness of the State it would not work. They could have sales of all kinds that would not get to their attention. But under your bill; yes. But here in the District of Columbia, 10 miles square, with the only means of advertising the daily press, the newspapers, and being watched constantly by competitors and by the banks, who see that the money deposited goes where it should not go, and with the Better Business Bureau, of which I am proud to say I am a member, and with all those things, I think it would work. I say that we could then allow 95 per cent of those to be sold, without any thought, and concentrate on the 5 per cent. I estimate that 50 per cent of this 5 per cent would be prevented from ever trying to sell here, because they could not get the $10,000 bond. They could not get a certificate of character from the commissioners.

Now, when you get down to the big concern, there are laws to-day that will punish crime-and we have no brief for any man who takes advantage of the people, and we hope the prosecution will be as heretofore or even more severe-but we do not want to confuse specific cases where people have lost money by reason of deflation, or even fraud, with the fact that when you try to apply your law under either bill they could have sold those securities. This bill of yours would not have prevented it. I hazard the guess the F. H. Smith Co. could have gone ahead until the issue of the preferred stock. That is my own personal opinion. I do not believe that anyone could have said that when that first Investment Building trust came out that that was a sound and solid value, but as it has developed, in the improvement of values there, it is a sound invest

ment.

When they go out of the District and form corporations and develop methods by which they can defraud there is presumably a remedy, because there has been a conviction, and we do not need legislation for that.