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section 4, should properly be signed by the principal executive officer or officers, and in certain cases specified directors, trustees, or managers; but it would appear to us that it is an onerous condition to compel all directors to sign a registration statement which may force resignations from corporation directorates of all but a comparatively few men who will be compelled because of the tremendous responsibility placed upon them to have practically as full knowledge of the affairs of their companies as the chief executive officers.

We believe that a serious fault with many boards of directors is due to the fact that they are too large, and are composed of a number of men who have not taken their responsibility seriously, and some measure of responsibility should be placed upon all directors; but their responsibility may vary in degree. Section 4, as it is written, may deprive many corporations of the benefit of the advice of a number of men of character, experience, and judgment, who would be unwilling to serve on boards of directors if they are subjected to the penalties of the bill.

Our reading of the bill leads us to believe that it is only intended to cover new issues of securities, and is not intended to apply to outstanding issues; but we understand that the committee is giving consideration to amending the bill so as to include all securities issued as well as those to be issued. We feel strongly that this should not be done, as no one can foretell what effect it may have on outstanding securities in an already thoroughly demoralized securities market.

We appreciate that you cannot say what changes, if any, will be made; but we do hope that such changes that are made will clarify the bill as originally presented, a copy of which you were good enough to send to us—modifying the responsibility of directors who must depend for their information upon information furnished to them by the principal executive officer or officers, for, even to compel the principal executive officers to guarantee all data and statements regarding the conditions of their companies, including reports of auditors, engineers, appraisers, etc., etc., will as a practical matter operate to prevent issues of any new corporate securities, and, as regards outstanding issues, would prevent practically all interstate transactions in securities, thus seriously affecting their marketability and value.

Thanking you for giving us an opportunity of presenting certain of our views regarding S. 875, we remain, Respectfully yours,



Baltimore, April 1, 1933. Hon. PHILLIPS LEE GOLDSBOROUGH,

Senate Office Building, Washington, D.C. DEAR SENATOR GOLDSBOROUGH: Please let me respectfully call your attention, to the proposed Federal securities bill, as, in my opinion, it is of great importance that the language of this bill be clarified.

Whereas we are fully in accord with the principles announced in the President's message, we think that this bill, as now written, contains provisions which, unless changed, will interfere with the honest distribution of securities. We think that the personal liability placed on directors of corporations by making them guarantee all data and statements regarding the condition of their companies, including reports of auditors, engineers, appraisers, etc., will, as a practical matter, operate to prevent the issue of any amount of new corporate securities. Also, as regards outstanding issues of securities, it will prevent practically all interstate transactions, because all such securities will have to be registered, thereby seriously affecting their marketability and value. Your cooperation in this respect will be greatly appreciated. Sincerely yours,


Vice President.



Senate Office Building, Washington, D.C. DEAR SENATOR GOLDSBOROUGH: Thank you for your very prompt reply to our letter regarding H.R. 4314, which is a duplicate of S. 875, known as the Federal Securities Act. It is our understanding that this bill in its present form imposes somewhat drastic regulations and restrictions upon all corporations or promoters who may engage in the sale of common stock or other securities to persons located in States other than the States in which such securities are interested.

We feel reasonably sure that it was not intended that the restrictions and regulations provided in this Act should apply to the building and loan associations of the country.

While it is true that a large majority of the building associations of Maryland, most of which are located in Baltimore City, do not advertise their stock for sale outside of their own local communities, it is quite possible that many of them receive installment payments on stock through the mails from nonresidents of the State. In addition to this, there are a considerable number of building associations located near the border lines of Maryland who have many members and shareholders in Delaware, Virginia, District of Columbia, West Virginia, and Pennsylvania. I know of no way to meet this particular problem except by inserting a provision in the bill to exempt all building and loan associations operating under the laws of their respective States.

To compel building and loan associations to comply with all of the provisions of the act would impose a very drastic hardship and make it increasingly difficult for those associations to continue operations under existing conditions.

I am therefore asking on behalf of the building associations of Maryland that you endeavor to have this bill amended so that it will not apply to such associations.

We are making the same request to Congressman William P. Cole, who, we understand, is a member of the House committee now considering this bill. Yours very truly,

C. Philip Pitt, Secretary. The CHAIRMAN. I think that is all. This committee meets regularly on Tuesday. I do not think we need to set any more time for hearings on this bill. We will take the matter up in due course and consider it ourselves and go through the whole question. We will have no more open hearings on the bill so far as I know. This closes the hearings. If there is any occasion for anybody else to be heard, they will be called. And we will consider the bill just as soon as we

The committee will now stand adjourned until Tuesday. (Thereupon, at 1:05 p.m., Saturday, April 8, 1933, the hearings on S. 875 were closed.)





(Prepared in the Department of Commerce.)


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Alabama and New Orleans Transport Co. v. Doyle, 210 Fed. 173.
Alpha Portland Cement Co. v. Commonwealth, 268 U.S. 203.
American Steel & Wire Co. v. Speed, 192 U.S. 500.
Binderup v. Pathe Exchange, 263 U.S. 291.
Blue Sky casesHall v. Geiger-Jones, Caldwell v. Sioux Falls Stock Yards Co.,

Merrick v. Halsey, 242 U.S. 539-568.
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Ann. Cas. 1105.

Bowditch v. New England Mutual Insurance Co., 141 Mass. 292.
Bracey v. Darst, 218 Fed. 282.
Brennan v. Titusville, 153 U.S. 289.
Broom case-Rearick v. Penn., 203 U.S. 507.
Brown v.

Maryland, 12 Wheat. 419; 6 L.Ed. 678.
Browning v. Waycross, 233 U.S. 16.
Caldwell v. Sioux Falls Stock Yards Co., 242 U.S. 559.
Cashin v. Pliter, 168 Mich. 386.
Chy Lung v. Freeman, 92 U.S. 275; 23 L.Ed. 550.
Clark Distilling Co. v. Western Maryland Railroad, 242 U.S. 311.
Coffey v. United States, 116 U.S. 436.
Compton Co., Wm. R. v. Allen, 216 Fed. 537.
Crenshaw v. Arkansas, 227 U.Ś. 150.
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S.) 1193.
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Woodruff v.

Parkham, 8 Wall. 123.
Youngstown Sheet & Tube v. Bethlehem Steel Co.

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