Business: Dreaded Event

Businessmen now generally accept—with reservations—the Securities Act as a wholesome reform. But in 1933 many fought it bitterly, arguing that no one could take the risk of issuing securities because Section 11 of the Act provides that any purchaser of securities can recover damages from the issuers for subsequent losses if misrepresentations or omissions were made in the official registration statement. In six years of the Act's operations this bugaboo failed to materialize. Last week the dreaded event took place for the first time.

Subject to suit for a faulty registration statement are all the directors or partners in the firm issuing...