FOREWORD The Commission administers several statutes in the general field of securities and finance, all enacted by Congress for the protection of the interests of investors and the public. Securities are by their very nature much different from almost any other type of “merchandise” for which there are established public markets. A person who wishes to purchase a new car or household appliance-or for that matter, a peck of potatoes or a bag of beans-can pretty well determine from personal inspection. the quality of the product and the reasonableness of the price in relation to other competing products. But this is not so with respect to a bond or a share of stock. An engraved certificate representing an interest in an abandoned mine or a defunct gadget manufacturer, for example, might look no less impressive than a "blue chip" security with a history of years of unbroken dividend payments. Beyond that all comparisons cease-and for the average investor to differentiate between the securities of little or no value and those offering at least reasonable prospect of a satisfactory return on his investment requires (1) a personal inspection of the properties and operations of the issuer (which for all practical purposes is generally impossible), or (2) that he place almost complete reliance on the oral and written representations and available literature about the company, its prospects, and the terms of its securities. Recognizing this and the further fact that traffic in securities often extends across State lines, thus restricting the ability of particular States to suppress fraud in their sale, Congress enacted the "truth in securities" laws to protect investors against misrepresentation, manipulation and other fraudulent acts and practices in the purchase and sale of securities. Congress also sought to establish and maintain just and equitable principles of trade in the securities markets and thus to reestablish investor confidence in securities as an investment medium and to revitalize our capitalistic economy. It should be understood that the securities laws were designed to facilitate informed investment analyses and prudent and discriminating investment decisions by the investing public. It is the investor, not the Commission who must make the ultimate judgment of the worth of securities offered for sale. The Commission is powerless to pass upon the merits of securities; and assuming proper disclosure of the financial and other information essential to informed investment analysis, the Commission cannot bar the sale of securities which such analysis may show to be of questionable value. It is hoped that the following description of the nature and scope of the Commission's work and authority will contribute both to a better understanding of the laws and to their objective of investor protection. |