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SEC. 18. Nothing in this act shall limit any statutory or common-law right of any person to bring any action in any court for any act involved in the sale of securities, or the right of the United States or District of Columbia to punish any person for any violation of any law.


SEC. 19. An appeal may be taken by any person interested from any fal order of the commission to the Supreme Court of the District of Columbia by serving upon the commission within twenty days after notice of the entry of such order a written notice of such appeal stating the grounds upon which a reversal of such final order is sought; a demand in writing for a certified transcript of the record and of all papers on file in its office relating to such order and executing a bond in the penal sum to be fixed by the court to the United States, with sufficient surety to be approved by the court, conditioned upon the faithful prosecution of such appeal to final judgment, and the payment of all such costs as shall be adjudged against the appellant. Thereupon the commission shall within ten days make, certify, and file with the clerk of said court such a transcript, or in lieu thereof the original papers if the court shall so order; and the appellant shall within five days thereafter file the same and a copy of the notice of appeal with the clerk of said court, which said notice of appeal shall stand as appellant's complaint and thereupon said cause shall be entered on the trial calendar of said court for trial de novo and may be given precedence by the court over other matters pending in said court. The court shall receive and consider evidence, whether oral or documentary, concerning the order of the commission from which the appeal is taken. If the order of the commission shall be reversed, said court shall by its mandate specifically direct said commission as to its further action in the matter, including the making and entering of any order or orders in connection therewith, and the conditions, limitations, or restrictions to be therein contained: Provided, That the commission shall not thereby be barred from thereafter revoking or altering such order for any proper cause which may thereafter accrue or be discovered. If said order shall be affirmed, said appellant shall not be barred after thirty days from filing a new application: Provided, That such application is not otherwise barred or limited. Such appeal shall not in anywise suspend the operation of the order appealed from during the pendency of such appeal unless upon proper order of the court. An appeal may be taken from the judgment of the said court on any such appeal on the same terms and -conditions as an appeal is taken in civil actions.

SCE. 20. The directors, officers, or agents referred to in section 16 of this act shall be liable under said section and shall also be liable to prosecut.on under section 17 for any unlawful act or omission of other persons who were employed by or associated with them, if by the exercise of reasonable care and diligence such directors, officers, or agents might have learned of such acts or omissions and given notice thereof to the comm ssion, or might otherwise have prevented such acts or omissions and failed to do so.

SEC. 21. In all advertising, circulars, and other printed or written matter that may be used in selling securities there shall be specifically and dist netly stated in bold or black-faced type not less than eight point in size, the amount and character of any prior or superior lien, mortgage, or incumbrance underlying the security offered.

SEC. 22. No deed of trust or similar instrument covering property in the District of Columbia encumbered or used to give value to security shall be held to be valid as such security by the commission in passing upon applications for registration by qualification or for registration by notification unless at least one of the trustees named in such deed or similar instrument is a resident of the District of Columbia and has been such for at least five years last past or is a corporation organized and existing under the laws of the District of Columbia, neither such person nor corporation to be otherwise associated or connected with other parties thereto.

SEC. 23. In any case where the commission is in doubt as to the substantial correctness of the value of property upon which securities are based, as stated by the applicant for registration by qualification or in the statement for regis tration by notification, it may select and appoint appraisers for the purpose of determining the value of the property, the expense of such appraisal to be borne by the applicant for registration.

SEC. 24. Where it is sought to secure registration by notification or qualifi-cation for a security payment of the principal and dividend or interest of which or payment of any part of the underlying obligation of which is guaranteed or assured by an insurance company, surety company, individual, corporation, partnership, or association, a certified copy of the guaranty, contract, or other agreement providing for the fulfillment of the obligation warranted to be paid or performed shall be filed with the commission, and the commission shall have the right to require proof of the financial and legal ability of those undertaking the liability.

SEC. 25. In any statement as to the value of property sought to be used as the basis for security the commission may require a detailed itemization showing separately the value claimed for land, improvements, furnishings, equipment, machinery, and other tangible or intangible items of the total value claimed.

SEC. 26. If an issuer or dealer desires to include in any advertising, circular, or other written or printed matter an estimate of prospective or future earnings, the commission may require also the inclusion of a statement of actual earnings for such period as is deemed proper or practicable for all or any part of the property or properties covered by the security.

SEC. 27. The commission may require the use in advertising, circulars, or other written or printed matter of a statement of the assessed valuation of property covered by a security, and of the actual cost of construction of improvements upon real property.

SEC. 28. Where in advertising, circulars, and other printed or written matter concerning a security there is included an estimate of prospective or future rental incomes, the commission shall have the power to order the inclusion also of a statement showing the actual percentage or proportion of occupancy and actual rental income for such period as it may deem proper or practicable.

SEC. 29. The commission shall have the power to order the statement in advertising, circulars, and other written or printed matter concerning the security of the purpose of the issue of the security; and if such purpose shall be stated as that of refunding existing obligations, the commission shall have the power to require satisfactory provision for the proper application of the fund realized to the purpose stated.

SEC. 30. The commission shall have the power to require, by any appropriate means, immediate notice to it and to security holders of any default in payment of principal, interest, dividends, sinking-fund deposit, or default in the performance of any other condition or obligation of a security by the person primarily obligated to pay or perform, notwithstanding payment or performance in his stead by any other person.

SEC. 31. If in any advertising, circular, or other written or printed matter concerning a security, an appraisal value is stated, the commission shall have power to require also the inclusion of a statement showing whether such appraisal is based on earnings, actual or prospective, the original cost of the property less depreciation, or whether based on reproduction cost less depreciation.

SEC. 32. The assessor of the District of Columbia shall make his assessment and taxes shall be levied and collected in conformity with appraisals or valuations stated in advertising, circulars, or other written or printed matter concerning a security based on property located in the District of Columbia: Provided, That such appraisals or valuations shall be in excess of previous assessments or the assessments that would otherwise be made by the assessor, but this shall not affect the assessment of like, similar, or contiguous property.


SEC. 33. If any provision of this act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this act, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.


SEC. 34. This act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those States which enact it.


SEC. 35. This act may be cited as the uniform sales of securities act.


SEC. 36. This act supersedes and repeals the act of Congress approved May 29, 1916, entitled "An act to prevent fraudulent advertising in the District of Columbia," and any and all other laws and clauses of laws in conflict with this act, to take effect upon the day this act goes into force, to the extent only and in so far as such other laws or parts of laws relate or apply to acts, transactions, or omissions with reference to securities as defined in this act subject, however, to the limitations provided in subdivisions (b) and (c) followng :

(b) The provisions of all laws which are repealed by this act shall remain in force for the prosecution and punishment of any person who, before the effective date of this act, shall have violated the provisions of any law in force at the time of such violation, and such person may be prosecuted and punished under the law as it existed when such violation occurred.

(c) In the case of sales, contracts, or agreements made prior to the effective date of this act, the civil rights and liabilities of the parties thereto shall remain as provided by the law as it existed at the time such sales, contracts, or agreements were made and all parts of laws repealed by this act shall remain in force for the enforcement of such rights and liabilities.

SEC. 37. All fees and other money paid to or coming into possession of the commission by virtue of the provisions of this act shall be paid into the Treasury of the United States to the credit of the District of Columbia.

SEC. 38. This act shall take effect sixty days after its approval. Senator BLAINE. The committee will come to order. Some of the local organizations interested in legislation now pending before the District Committee desire to be heard on the bill or bills relating to the issuing of securities, the so-called blue sky law. There are two bills, one known as the Capper bill, which has been introduced, I think, at the request of local organizations, and the other a bill that was introduced by myself, as chairman, after reviewing all the various security bills of the country, following the uniform bill that had been recommended by the American Bar Association. . We will be glad to hear from you gentlemen as to which bill is the best and why. I might also state that I would like to have an opinion as to whether or not there is any necessity in the District for this type of legislation; and if so, have you briefly state the necessity for it in as concrete examples as you may have. If there is no necessity for it, we will hear that.

I assume you have selected your representative. Whoever he is, we will be glad to hear from him.


Mr. KEYSER. Mr. Chairman, it happens that our local committee in an informal way asked me to serve as chairman of that committee. By virtue of that fact only I am rising at this time. Our committee has not designated me in any particular way to present the matter especially to your committee, and I do not know whether your committee would rather hear from the various members of our local committee or whether you would prefer to have me undertake

to make a statement.

Senator BLAINE. Go ahead. Let us spend as little time upon these explanations as possible, and go into this matter.

Mr. KEYSER. We have set forth in this report as succinctly as we could our individual views with regard both to the question of the necessity of legislation here and the character of legislation that to us seems preferable.

Senator KEAN. Did you say who you were?

Mr. KEYSER. My name is Paul V. Keyser.
Senator KEAN. Whom do you represent?

Mr. KEYSER. I am here in a dual capacity. In one capacity I am chairman of the local committee.

Senator KEAN. What local committee?

Mr. KEYSER. The committee of representatives of local associations. Senator KEAN. What local associations?

Mr. KEYSER. You will find them listed there on the first page of the report, Senator; and, in the second capacity, I am also counsel for the Investment Bankers' Association of America, and I am interested in both ways, both as a local citizen and also as counsel for the American Bankers' Investment Association.

The substance of our report covers only a few pages and I think, if the chairman of the committee will give me his permission, I can say what I have to say most shortly by simply reading that report.

Senator BLAINE. We can read that ourselves. I do not like to take the time of the committee reading extracts from reports unless it has to do with some particular point that is being made.

Mr. KEYSER. Well, I am very glad to pursue any course you prefer. Senator BLAINE. I don't mean to be arbitrary. I say the committee can read that. There is no necessity of having it twice.

Mr. KEYSER. On the question of the need for legislation, our committee recommends that Congress pass a law to regulate the sale of securities in the District of Columbia. At the present time we have no such statute here. The mere enforcement of criminal statutes does not seem to be adequate to safely control the fraudulent promoter. Prevention is important. Our opinion is that legislation is necessary. We have no specific instance to cite you, but we do make this general observation, that by far the great majority of security transactions in the District of Columbia are honest and honorable transactions. Instances in which fraud and improper practices occur are comparatively few, and when such instances arise they exaggerate in the public mind the extent of the evil. We think it is quite undesirable that an exaggerated view of the evil should obtain, and therefore we offer that comment.

Senator BLAINE. What is that exaggerated view?

Mr. KEYSER. The instances in which fraud occur, of course, are magnified in the public mind.

Senator BLAINE. Well, are they? What do you mean? Let us have that magnified picture.

Mr. KEYSER. Take a specific instance of a fraudulent transaction. Senator BLAINE. Well, let us take this Smith case. Do you think that is an exaggeration?

Mr. KEYSER. I know very little about the Smith case, and I do not care to discuss it, but it is an instance in which parties have been tried and convicted in the local courts.

Senator BLAINE. That is a very outstanding case. The F. H. Smith Co. issued something like $50,000,000 in bonds. Do you mean to say that is not of any great consequence?

Mr. KEYSER. I mean to say this, that if you take all of the security transactions that occur in the District of Columbia

Senator BLAINE. No, no. Answer my question on the Smith Co. I am a realist. I like to get down to a specific case or cases. Mr. KEYSER. I do likewise.

Senator BLAINE. This general talk is of very little value. largely opinions.

Mr. KEYSER. May I ask the chairman this question-
Senator BLAINE. Let us take a specific case.

That is

Take the F. H. Smith Co., which issued $50,000,000, and practically that whole $50,000,000 has been lost to the investors. Do you regard that as unimportant? Mr. KEYSER. In the first place, I wish to challenge the statement of the chairman that the $50,000,000 of bonds is lost.

Senator BLAINE. Well, I did not say all lost.

Mr. KEYSER. I know nothing about the Smith promotion, except what I have read in the public press, but the bonds sold by the Smith Co., while they may have been sold on an inflated appraisal, do not represent a total loss.

Senator BLAINE. Oh, no.

Mr. KEYSER. And I have yet to hear any person make such a sweeping and general statement.

Senator BLAINE. I did not say they meant a total loss, but there was a loss on all of the $50,000,000 that was issued by the F. H. Smith Co. Will you challenge that?

Mr. KEYSER. Mr. Chairman, I will also challenge that statement. Senator BLAINE. All right; state in what respects there was no loss on the bonds.

Mr. KEYSER. My general information is that in certain instances the bonds are amply secured.

Senator BLAINE. Specify in what instance.

Mr. KEYSER. I told you in the beginning I am not here to discuss the Smith Co. episode.

Senator BLAINE. I am trying to qualify you as a witness. You say you challenge that statement. Now you say you do not know of any instance where they will not pay out.

Mr. KEYSER. Mr. Addison of my committee reminds me that the Smith Co. sold the bonds secured on the Investment Building here in Washington, at Fifteenth and K Streets, and the general local belief is that those bonds are fully secured.

Senator BLAINE. Is not that case in the hands of a receiver at the present time?

Mr. ADDISON. Senator, I simply wish to state

Senator BLAINE. Let us have the facts on that, now. That is in the hands of a receiver?

Mr. ADDISON. The Investment Building is not involved as one of the principal first issues since this new crowd got into the Smith Co. coffers.

Senator BLAINE. Just wait a minute; there have been several mortgages on this building?

Mr. ADDISON. Oh, yes.

Senator BLAINE. And several foreclosures of those mortgages? Mr. ADDISON. I do not question that, but not under the F. H. Smith Co. bonds.

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