SECURITIES: A Test for Teacher's Pet

SEC's favorite new rule—compulsory competitive bidding for utility securities —flunked its first test last week. But it was not the rule's fault. Next day it got another test, passed with flying colors.

New York State Electric & Gas Co.

wanted to sell $35,393,000 of 3 1/8% first-mortgage bonds, 120,000 shares of 5% preferred. Three underwriting groups and an insurance company entered competitive bids. When they were opened, the company sadly rejected all four because none offered anything for the preferred stock.

Chief reason for this misfortune was a head-on collision between an SEC ruling and a New York State law. SEC,...

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