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situations where people are giving deeds, but if their pattern of conduct indicates that they are not taking steps to have these deeds recorded in the public records, then they still fall under our jurisdiction.

Senator MONDALE. If you have an installment contract, a contract for deed, but you record it, is that transaction within the jurisdiction of your Board?

Mr. MOYLE. Yes, sir; it is.

Senator MONDALE. But if you have a straight deed, not an installment contract, and that is in fact recorded, then it is not within the jurisdiction?

Mr. MOYLE. That is right, but it can be delivered to the purchaser and unless the subdivider takes steps to have the deed recorded, according to our attorney general, this can be classified as an installment contract.

Senator MONDALE. So the only area outside of your jurisdiction is where you do not have an installment contract but in fact, a deed is transferred and recorded.

Mr. BERTOCH. Yes, sir, that would appear to be true. If they "resort," I shouldn't use that word, because the conventional form of real estate transactions takes the form of a deed and mortgage, the conveyance of the title to the purchaser, a mortgage back which is then recorded.

Our problem is trying to determine those areas where we should exercise jurisdiction. This area was reviewed in our 1965 legislative proposal. This is a problem of drawing circles, of drawing the circle large enough to bring those people within our jurisdiction who are involved in a substantial way in this kind of activity and not getting in the normal day-to-day real estate activity. We feel there are sufficient laws standing on the books now to cover the local, conventional, traditional real estate transactions.

Senator MONDALE. Have you issued any warning to the public about Golden Palm?

Mr. BERTOCH. Not at this point, sir, because we felt we did not have sufficient information to give notice to the public. Our usual form of notice where we do find somebody, and we have evidence of violation of the law, is to issue a cease-and-desist order.

Senator MONDALE. Has the matter of Golden Palms been discussed by your board ? Mr. BERTOCH. This matter has not. Well, yes, I should say the is

. suance of the subpena was done by myself and my actions were ratified by the board at their May meeting. Because of the present situation of the record, which was just delivered to us a few days ago, we now have to

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back to the board and determine if we can initiate contempt proceedings against this individual. This involves a determination as a matter of law as to whether he can successfully invoke the attorneyclient privilege in this situation.

Senator WILLIAMS. I regret that I haven't heard all of your testimony.

Mr. BERTOCH. I might bring you up-to-date, we are discussing the Golden Palm Acres operation, which is principally operating out of New Jersey, although the product or real estate is situated in Florida.

Senator WILLIAMS. But your conversations, you mentioned subpena. Mr. BERTOCH. Yes, sir.

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Senator WILLIAMS. Were your conversations with an individual as a result of subpena?

Mr. BERTOCH. The transcript is up there, sir. Let me check with my counsel. We are in an investigative position at this point. Some of this may be confidential, but it is a matter of public record that this subpena was issued to Mr. Lawrence Hoffman, I believe that is his name, who is an attorney and resident agent of the company.

Senator WILLIAMS. Not the owner.

We have talked about this one subdivision that has been rather graphically described in Florida, Golden Palm Acres. Is that area still for sale under that name?

Mr. BERTOCH. I understand now there has been a change in the ownership of some or all of the property formerly owned, allegedly owned by this Golden Palm Acres. It may be operating now under the name of Atlantic & Pacific Land Co. We are not aware of any sales

Senator WILLIAMS. Atlantic and what?

Mr. BERTOCH. Atlantic & Pacific Land Co. is the information I have at this point.

Senator WILLIAMS. That is sort of a disclosure, there must be some water there.

Mr. BERTOCH. Or that it is water between two oceans.

Senator WILLIAMS. I regret I haven't had a chance to read your very carefully prepared full statement. I understand that you have asked now for time to make a formal statement; is that it?

Mr. BERTOCH. We would like to amend our remarks and probably make them a little more timely. We prepared our statement last week, upon receipt of the bill. I think the Senators are very much aware of the interest of the Florida Installment Land Sales Board and its staff in correcting any abuses that still remain in the State of Florida.

I would like to call to the attention of the committee the efforts: that have been exercised and steps that have been taken to insure purchasers of property, whether it is in the State of Florida or outside, are given full and complete and ultimate facts regarding their offering.

A question comes to our mind when we talk about full disclosure, because we feel in Florida that full disclosure is not enough, because the people who are buying much Florida real estate today are buying part of the dream of Florida and the ultimate retirement to the State of Florida and they make their deposit and they start their monthly payments. We are dealing with a situation, a contractual situation that extends over a period of time. There is then the responsibility on the regulatory authority, as well as the developer to make sure that the improvements promised are installed and completed by the final payment date on that contract, as well as to see that any outstanding encumbrances on the property are satisfied. So the purchaser does, in fact, receive good title to this property and those improvements that were promised in the advertising.

Now, it is to this ultimate goal that we are working. We think we have achieved considerable success in the past by talking to the people, advising them of the existence of the land sales board, which is a new agency. We control their advertising, sir, and we feel that the control

of advertising is very important because, as Senator Mondale has pointed out, the legalistic jargon in SEC prospectus may be confusing to the type of purchaser who the land may be offered to.

We submit that in the absence of control of advertising, and as S. 2672 presently stands, there is no provision other than antifraud provisions, that the job will not be done by this law.

We feel that advertising control is essential to make sure that the person receives, in the colorful brochures, certain disclaimers that should exist as well as a property report. We have available and will submit to you copies of property reports (see p. 432) that are required to be given to every purchaser prior to his execution of an agreement, and this extends far beyond our borders, whether they are selling the land in the State of Minnesota or in the State of New Jersey, unless, sir, that State has adopted a law and is using a report that is similar to ours and reveals the same kind of information. Most of the developers who are operating in Florida

register in many other States and they request of us the right to substitute the Minnesota property report, the New York offering statement, the New Jersey report in lieu of the Florida report. We feel that the inundation of purchasers with several, two, three, four property reports would not be beneficial, so we will permit the use of the local State's report—if this is where the sale is going to take place in lieu of the Florida report so long as it conforms to our standards.

I would like to further point out that we have implemented our statutory law in 1963 with rules and regulations that set up advertising standards control. We would also like to point out that our law requires licensing of the salesman by a subdivider. This requires dual licensing for those persons who sell installment land sales land because they must have a permit from our board in addition to their real estate license.

We are in the process of educating these gentlemen of the standards that we expect of them in the conduct of their activities, and I would like to submit for the record a notice which we just recently transmitted out to every salesman and will be attached to these salesmen's licenses, because we find, sir, that this industry that was called the mail-order land industry back in 1963, for possibly want of a better name, has now changed tremendously.

As Mr. Van Horn stated so eloquently yesterday, that many of these activities are being conducted in the local State at a cocktail party and a fly-down program. So we find the industry has changed with the economy of the country and they are engaging local real estate brokers. So I think as I indicated to this committee in 1964, there is additional level of State regulation and local control presently existing and in the absence of this local control of salesmen further problems can arise.

In our comments we feel that the failure to require registration of the salesmen constitutes, possibly, a serious defect in the law. We find it is necessary to control the salesmen because it is no longer the advertising material, per se, that misleads or deceives the purchaser, it is the on-site presentation which may be the subject of the greatest misrepresentation.

Now, most of the people are trying to do an adequate job in controlling their sales people. We get good cooperation from our developers, but in a sales situation, you are going to have those persons who get carried away with their enthusiasm; and we must also recognize that their commission lies upon their ability to close a transaction at that particular time. This creates a situation that can be abused. So it is necessary-I think the SEC has found it is necessary—to make sure there is a degree of competency on the part of those persons who sell securities. And you just can't leave it on some kind of a disability situation, as is presently proposed, where a person, if he has a bad record, can't get a license, because you need administrative control over these people so they know that if they are called on the carpet because of complaints received that their license and livelihood may be placed in jeopardy. We have found this to be a very effective method of eliminating any misrepresentation in the sales program of our registrants.

Senator WILLIAMS. Are you suggesting that our legislation should be broadened to deal with these areas that you are now describing ?

Mr. BERTOCH. Senator, I submit to you that unless you are prepared to preempt the field and move in to a full and complete reguÎation of this activity, you may frustrate your efforts by coming up with a weaker law, because, as Mr. Van Horn indicated yesterday, they very well may repeal their local State law in the event a Federal law is passed and I submit to you that full disclosure is not enough because

Senator WILLIAMS. Have you ever been elected to a legislative office ?

Mr. BERTOCH. At one time I got involved in some local politics, sir.

Senator WILLIAMS. You know, it has taken 30 years to bring adequate standards of training and experience in the investment field. We just recently, in 1964, described standards for the education and training of a securities salesman. That has taken 30 years to do.

You are suggesting that this legislation will not be useful unless it goes all the way through the whole transaction from standards for salesmen ?

Mr. BERTOCH. When you say, will not be useful, we may be talking about two different things, because I am looking at it from the administrator's standpoint in a situs state, and as Mr. Wenig so eloquently put it this morning, we would like very much to have, and stated in our prepared remarks, we suggest that the committee consider a proposal for making it a Federal crime to sell land or offer to sell land in violation of the laws of a local State. This, I think, would be an admirable area for this committee to go into. This type of legislation, I personally would wholeheartedly endorse. Again, I would wish to remind the Senators that Mr. Moyle and myself are here today in making our personal observations based on our experience. We do not represent the opinion of the board as such because the board has not been able to meet and consider your proposal. They are familiar with your activities, and they are very much aware and they are highly appreciative of the efforts of the Senator to expose this problem, because they cannot live with unfair competition, as you pointed out earlier.

This Golden Palms Acres, this hurts every registrant of our board.

The members of our board or and the registrants of the board are as much, if not more interested in that abuse being stopped than the members of this committee.

Mr. MoYLE. Senator Williams, I wonder if I might amplify a little bit on the theory that we are proposing to the committee. "As I understand the bill that is presently before the committee, it is a full disclosure law in which you are going to present to the purchaser pertinent facts about the offering. There has been a lot of discussion about a legalistic prospectus and whether or not this will do the job.

Senator Mondale has talked about a plain, bold-faced statement. Well, this is all part of it, but in a subdivision, particularly in Florida, and I think this applies all over the country, there is more than the initial contact. The man buys the lot, he signs the contract. Even if he has information fully disclosed to him, we submit to you, that the important thing is down the road 7 or 8 years during the life of this contract when this developer promises that he is going to put in improvements. He has the title to the property encumbered with first, second, or third mortgages, he has to pay off these mortgages from the proceeds of his sales, he has to put the improvements in with the proceeds of these sales, and we are suggesting that there needs to be some control during this time and not just at the beginning. They both work together.

I guess what I am suggesting to you is that we feel you should inciude in this bill some qualification sanguage, or a determination by the agency that regulates that the offering is fair, just, and equitable, that the developer can do what he says he will do or else there are certain safeguards provided such as we have in Florida.

If a subdivider in Florida has less than 70 percent of his improvements in when he registers, he has to either have an improvement bond or escrow a certain percentage of his sales to insure that during that contract period he is going to put in the improvements.

Senator WILLIAMS. Now let's see if we have any analogous situations. We thought we were working here on disclosure of land sales in interstate commerce with the Securities Act that calls for disclosure. I would imagine that a company selling a new issue of equity shares says in its prospectus what it wants to do with the money that is raised by the sale of new equity. Now, in analogy, does the Securities & Exchange Commission follow through the years just how the proceeds from the new issue are used and whether they do fulfill the prospectus ?

Mr. PRICE. Yes.

Senator WILLIAMS. They do. And what happens if the company decides rather than a new refinery, it goes into another area of activity?

(Discussion off the record.)

Senator WILLIAMs. It seems a little unrealistic to me to imagine the Securities & Exchange Commission that will develop a staff to watch developers in Florida and Hawaii, and to see whether the roads go in 5 years later and whether they don't. Do you see my problem, Senator Mondale? I would think our beginning is a fair statement of what is being sold. That is where we begin.

Mr. BERTOCH. This is admirable and this is where I think Florida started, in making sure there is a fair statement. In 1956 they enacted

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