Evening Republican, Volume 22, Number 90, Rensselaer, Jasper County, 17 April 1919 — GET AFTER BOGUS STOCK SELLING [ARTICLE]

GET AFTER BOGUS STOCK SELLING

Federal Trade Commission to Curb Widespread Misrepresentation. CLASS SAYS MENACE EXISTS (Holders of Liberty Bonds and War Savings Stamps to Be Protected - Against “Qet-Rich-Quick” Schemes. I Washington.—The federal trade Icommlssibn has officially announced (that it will co-operate with the treasury department, the capital issues comtaittee and banking and commercial Institutions throughout the country to [curb the present widespread misrepresentation in the sale of stocks and securities, recognized as being at this [time a particular menace to holders [of Liberty bonds and War Savings (stamps. The commission will accord immedijate consideration to complaints presented to it involving alleged fraudulent practices in the sale of securities In interstate commerce., The commission has designated Commissioner [Huston Thompson to supervise the lentire subject. The commission’s action follows appeals made to it by representatives of the treasury, capital Issues committee, federal reserve board, Associated Advertising Clubs of the World and numbers of banking and commercial interests, that the power given the commission under its organic act to prevent unfair methods of commerce In interstate commerce be at once employed to protect holders of governiment war securities from bogus, “get-rlch-qulck” schemes under which promoters offer to accept Liberty bonds In exchange for stocks of doubtful -value. i It was urged that the commission act on the ground that misrepresentations in the sale of securities constitute an “unfair method of commerce.” *Federal courts, it was pointed out, have held that securities are “articles of commerce.” Glass Sayg Menace Exists. Secretary of the Treasury Glass, stating that promoters of worthless stocks have “already displaced a very large amount of government bonds by taking them In exchange for stock,” ■declared in a letter to the commission that “a menace exists which may seriously Interfere with the placing of the new issue, if the stock [promoters are left' without any restraint or restriction.” His letter in part follows: “The treasury department is peculiarly interested in the effort to restrict improper stock flotations at this time for the following reasons: ,fi The offering of investments to the public competes with the offering of government securities, and, as you are iaware, treasury proposes to invite the public to subscribe to a very large

issueof securities shortly. Stocks and securities of a legitimate investment character compete with the government, but not nearly so much as highly speculative stocks offered with all the allurements customarily held out by irresponsible persons whose principal design is to obtain money from Investors without regard to the value of the stock sold. The operation of the government in the past, in endeavoring to induce persons of all classes to purchase government bonds, have, to a large degree, brought into being a very large and new class of investors who are without experience or knowledge to guide them wisely in making investments. But the very efforts of the government agents, in persuading such persons to become investors, have prepared the way for promoters to place many worthless stocks. “The result has been that these promoters have already displaced a very large amount of government bonds by taking them In exchange for stock, and to such an extent as to undo the, work which is so essential for the sue-

cess of the government’s financial operations; because the government cannot expect successful flotations of its own securities, or the preservation of a proper price therefor in the financial market, unless the great number of small buyers continue to hold their bonds. May Interfere With Loan. “Warned by the past, the treasury department feels that a menace exists which may seriously interfere with the placing of the new government issue, if the stock promoters are left without any restraint or restriction. “It cannot bd expected that proposed legislation, even if promptly. enacted, can become operative in time to be of' substantial benefit to the government in the next loan campaign. “It has been suggested that the federal trade commission has""Authority, under its organic act, to take action which would remedy the evil, at least in part. If a way can be found whereby even the fraudulent pnflnoters and those who indulge in unfair practices in selling stock can be stopped, the treasury department feels that such action will be of great benefit to it in the immediate future. “This department xyill welcome action by you to that end, and will be glad to co-operate in every proper manner". “CARTER GLASS.”