Business: Reform & Realism

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"Wee." But even Joe Kennedy with his Olympian police powers cannot go forth within his precinct and command companies to borrow money that they do not need. All he can do, as he has done, is to make it easy for the honest. He has stumped the land proclaiming his credo: "No honest business need fear the SEC." He has been not only a good policeman, but also a polite one, insisting that all SEC subordinates be courteous and cooperative. Doing business is infinitely more difficult than before the New Deal but bankers now know that it can be done.

Making it hard for the shady is as prime an SEC principle as making it easy for the honest. Bucket shops, boiler rooms and the sell-&-switch racket are for the first time up against toothy Federal laws. But the downright crook is not so annoying as the shady dealer operating on the frontiers of legality. Last week Director of Registration Bane cracked down with a stop-order suspending sale of stock in a Tulsa concern called Wee Investors Royalty Co. Wee Investors proposed to sell its stock on a chain-letter basis. In the studied understatement of Mr. Bane's phraseology the proposition appeared to be "misleading." And last week Counsel Burns obtained injunctions against two security dealers, one of which was blandly assuring prospective investors that "the Government and John D. Rockefeller were behind all oil properties."

Over-the-Counter. SEC's chief difficulty in policing the borders of the legitimate securities business is its lack of control of over-the-counter markets, a vast and undefined realm composed of perhaps 8,000 dealers. Congress provided SEC with powers to regulate over-the-counter by "such rules & regulations as the Commission may prescribe as necessary or appropriate in the public interest." Just what would be necessary or appropriate no one knew, and Commissioner Landis and his researchers have been groping diligently ever since. SEC's first step was a census: all dealers must be registered before Aug. i or cease business. So far about 4,500 have filed.

In size, over-the-counter dealers range from a single individual with desk. space and a telephone to the big unlisted Wall Street houses with the capital and prestige of a first-flight member of the Stock Exchange. They make the markets for the nation's unlisted issues, varying from active Manhattan bank stocks to local real-estate mortgages. All the listed issues on. all U. S. stock exchanges foot up to only 7,000. The roster of unlisted issues may be as high as 500,000.

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