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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,

W. W. LANAHAN & Co.

UNION TRUST Co. OF MARYLAND,

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,

WILLIAM G. Dancy.

Vice President.

REAL ESTATE BOARD OF BaltimORE,

April 4, 1933. Hon. PHILLIPS LEE GOLDSBOROUGH,

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.)

can.

APPENDIX

A STUDY OF THE ECONOMIC AND LEGAL ASPECTS OF THE PROPOSED FEDERAL

SECURITIES ACT

(Prepared in the Department of Commerce.)

BIBLIOGRAPHY

Ashby, Forrest Bee, The Economic Effect of Blue Sky Laws (1926).
Berle and Means, The Modern Corporation and Private Property.
Bonbright and Means, The Holding Company.
Bowen, Charles H., Jr., How Blue Sky Laws Work, American Bankers Associa-

tion Journal, December 1930.
Brandeis, Louis D., Other Peoples Money.
Bureau of Securities, New York, 1932 report.
Chase, Stuart, A New Deal, The Enemy of Prosperity, Harper's, November 1930.
Colorado, Securities Act of 1923; Fraudulent Practices Act of 1931.
Commercial & Financial Chronicle, monthly statements.
Congressional Record:

March 13, 1932, page 6219, United States Senator Hiram Johnson.
March 15, 1932, United States Senator Hiram Johnson, Résumé of Foreign

Loans.

May 23, 1932, page 11262, Congressman David A. Reed of New York. Consolidated Companies Act of 1929 (England), 19 and 20 George V, Chitty

Annual Statutes, 1928–29, page 557, part II. Corpus Juris, Contracts, sections 52 and 581. Cowan, Leonard L., Manual of Securities Laws and Service. Coyle, David Cushman, Business versus Finance. Dawson, Mitchell, American Mercury, March 1932, page 354. Directors Must Direct, Printer's Ink, February 5, 1931. Dewing, A. S., Financial Policy of Corporations. Durand, E. Dana, Introduction of American Industry and Commerce. Federal Digest, Commerce, sections 40 and 66 to 68, inclusive. Finlayson's Report of the Case of Twycross v. Grant, London, 1877, Flynn, John T., Investment Trusts Gone Wrong. Frankfurter, Felix, The Public and Its Government. Gay, Edwin F., The Great Depression, Foreign Affairs, July 1932. Groseclose, Elgin E., Annalist, March 20, 1931. Helton, Roy, Sold Out to the Future, Harper's, July 1932. Investment Bankers Association, Report of Convention, October 1932. Kansas, Session Laws of, 1911, chapter 133. Lawson, Thomas W., Frenzied Finance. London Financial News, May 18, 1932, The Law and Holding Companies. Maryland, Annotated Code of General Laws of, article 32-A, sections 11 to 14. McCoy, Joseph S., The United States Legion of Capitalists, American Bankers

Journal, February 1927, pages 559–560, 626-628. Mead, Edward S., Corporation Finance. Means, Gardiner C., The Diffusion of Stock Ownership in the United States,

Quarterly Journal of Economics, August 1930, pages 561-600. Michigan,

Public Acts, 915, page 63; Act 20, Public Act, 1923. National Petroleum News, January 7, 1931, Liability of Directors. New Jersey, Laws of_1920, chapter 234; Laws of 1927, chapter 79. New York General Business Law, article 23–A (secs. 352-359g) as amended in

1921, 1923, 1925, 1926, 1927, and 1928. Dealer Licensing Law in 1932 (July), Ohio, Code of, 1916, volume 2, sections 6373–1 to 6373–24. Osgood, Roy C., The Trend of Blue Sky Laws. Investment Banking, December

28, 1932. Public Documents, 1485 and 1836, Capital Issues Committee Report to Sixty

fifth Congress, December 2, 1918. Reed and Washburn, Blue Sky Laws.

312

Ripley, William Z., Main Street and Wall Street, The Modern Corporation and

Private Property, Our Corporate Revolution and Its Perils. New York

Times, July 24, 1932. Sackett, Hon. F. M., Exploitations of Finance Which Call for New Line of

Legislative Defense, Trust Companies, November 1929. Sherrod, J., Scapegoats. South Dakota Laws, 1915, chapter 275. Statistical Abstract, 1931, page 295. Statutes 19 and 20, George V, chapter 23. Stoddard, William L., Financial Racketeering, page 199. Thompson, Hon. Huston, Federal Trade Commissioner, American Bar Associa

tion Journal, 9:57, March 1923. Uniform Sale of Securities Act, National Conference of Commissioners on

Uniform State Laws.
Wharton on Criminal Law and Procedure, ninth edition, section 31.
World's Work, March 1919.

ACTS AND HEARINGS

on

H.R. 188 (Taylor bill). Hearings before the Committee the Judiciary,

Sixty-sixth Congress, first session. H.R. 2789. Regulation of Stock Ownership in Railroads. page XLIX, testimony

of Interstate Commerce Commissioner Jos. Eastman. H.R. 7215 (67th Cong., 1st sess.; Denison bill). Hearings before Committee on

Interstate Commerce. Paul _V. Keyser, attorney for Investment Bankers Association; Hon. Clarence F. Lea of California; Letters from security com

missioners of 38 States reprinted in hearings. H.R. 8932 (Sabath bill). H.R. 9065 (Bowman bill; 72a Cong., 1st sess.; S. Rept. 412). Hearings before

Committee on the District of Columbia on the Prevention of Fraud in the

Sale of Securities in the District of Columbia. H.R. 9447. H.R. 12898 (LaGuardia bills). H.R. 12603 (Volstead bill; 66th Cong., 2d sess.). Hearings pursuant to S.Res. 19,

Seventy-second Congress, first session. (Foreign bonds.) H.Res. 57, H.Res. 59, H.R. 348, H.R. 4604, H.R. 4639, H.R. 4642, H.R. 11509,

H.R. 11510. Bills relating to short selling of securities and commodities and bucket-shop transactions introduced during the first session of the Seventysecond Congress.

FOREIGN LOANS

Walter H. C. Laves, National and International Control of Foreign Investments,

American Political Science Review, August, 1931. George W. Edwards, Government Control of Foreign Investments, American

Economic Review, December 1928. H. Feis, Europe, the World's Banker, 1870–1914. J. Viner, International Finance and Balance of Power Diplomacy, Southwestern

Political and Social Science Quarterly (IX-1); Political Aspects of International

Finance, Journal of Business, I, 141. B. Williams, Capital Embargoes, Political Science Quarterly, June 1928. Walter H. Č. Laves, German Government Influence on Foreign Investments. L. H. Jenks, Migration of British Capital to 1875. E. M. Borchard, Diplomatic Protection of Citizens Abroad. C. K. Hobson, Export of Capital. H. Lowenfeld, All About Investments. Arthur N. Young, Department of State and Foreign Loans, New York Times,

August 27, 1924. John Foster Dulles, Our Foreign Loan Policy, Foreign Affairs, October 1926,

page 34.

TABLE OF CASES

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.
Book Co. v. Pigg, 217 U.S. 91; 30 Sup.Ct. 481; 54 L.Ed. 578; 27 L.R.A. 493; 18

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.
Dickerson v. Northern Trust Co., 176 U.S. 181.
Duke v. Olson, 240 Ill. App. 198.
Edward v. Ioor, 205 Mich. 617.
Ex parte Hoffstot, 180 Fed. 240; affirmed 218 U.S. 665.
Ex parte C. H. Taylor, 66 South, 292.
Gibbons v. Ogden, 9 Wheat. 1; 6 L.Ed. 23.
Grain case-Shafer v. Farmer's Grain Co., 268 U.S. 189.
Hall v. Geiger-Jones, 242 U.S. 539; 230 Fed. 233.
Hanover National Bank v. Moyses, 186 U.S. 181.
Hosiery case--Real Silk Mills v. Portland, 268 U.S. 325.
Hyatt v. People, 188 U.S. 691; affirming 172 N.Y. 176.
Ice case— Knickerbocker Ice Co. v. Stewart, 253 U.S. 149.
Insurance case-Paul v. Virginia, 8 Wall. 168 (decided in 1868).
In re Rahrer, 140 U.S. 545.
In re Suchow's Estate (Wis.) 212 N.W. 280.
Jones v. Leonard, 50 Iowa, 106.
Knickerbocker Ice Co. v. Stewart, 253 U.S. 149.
Lemke v. Farmer's Grain Co., 258 U.S. 50.
Lightning Rod case- :-Browning v. Waycross, 233 U.S. 16.
Lottery cases--188 U.S. 321; 23 Sup.Ct., 321;_47 L.Ed. 492.
Mail Order_Cases-Ex parte Hoffstot, 180 Fed. 240; affirmed 218 U.S. 665;

Hyatt v. People, 188 U.S. 691; 172 N.Y. 176. Merrick v.

Halsey & Co., 242 U.S. 568.
Original Package Case-In re Rahrer, 140 U.S. 545.
Pandolfo v. U.S., 286 U.S. 8.
Paul v. Virginia, 8 Wall., 168 (decided in 1868).
Public Utilities Commission of Rhode Island v. Attleboro Steam & Electric Co.,

273 U.S. 83.
Railroad Co. v. Husen, 95 U.S. 465; 24 L. Ed. 527.
Real Silk Mills v. Portland, 268 U.S. 325.
Rearick v. Penn, 203 U.S. 507.
Robbins v. Shelby Taxing District, 120 U.S. 489.
Savings Bank of San Diego v. Burns, 104 Cal. 473.
Shafer v. Farmer's Grain Co., 268 U.S. 189.
Stafford v. Wallace, 258 U.S. 495.
Stock Quotations case Western Union Tel. Co. v. Foster, 247 U.S. 105.
Stone v. United States, 167 U.S. 178.
Telegraph cases:

Telegraph Co. v. Pendleton, 122 U.S. 347; 7 Sup. Ct. 1126; 30 L. Ed. 1187.
Telegraph Co. v. Telegraph Co., 92 U.S. 1; 96 U.S. 1; 24 L. Ed. 708.

Telegraph Co. v. Texas, 105 U.S. 460. Textbook case -Book Co. v. Pigg, 217 U.S. 91; 30 Sup. Ct. 481; 54 L. Ed. 678;

27 L.R.A. 493; 18 Ann. Cas. 1105.
United States v. Donaldson-Shultz Co., 148 Fed. 581.
Weeks v. United States, 245 U.S. 618.
West v. Kansas Co., 221 U.S. 229; 31 Sup. Ct. 564; 55 L. Ed. 716; 35 L.R.A. (N.

S.) 1193.
W'estern Union Telegraph Co. v. Foster, 247 U.S. 105.
White, Potter & Page Mfg. Co. v. Pettes Importing Co., 30 Fed. 864.
Wilkes v. Dinsman, 7 How. 89.
Wire Co. case - American Steel & Wire Co. v. Speed, 192 U.S. 500.
Woodruff v.

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

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