Each share of stock will be sold under a written guarantee to pay ten per cent interest per annum on the amount in vested, interest payable quarterly, and if the stock earns more than ten per cent, you will receive pro rata whatever the stock earns in excess of that amount, as during the fiscal year of 1907, the business earned 2,5 per cent on the out standing stock.
More recently, a tire and rubber company headed an advertisement: Invest Invest $10 80 per cent Guaranteed $10 In fine print, well down in the advertisement, how ever, there occurs the following statement: The fact that this Company is now earning at the rate of 20 per cent on its entire capitalization, with less than one-third (%) issued, is a positive guarantee of your 80 per cent and proof of the still larger earnings you will re ceive when their production facilities have been increased.
A letter addressed to this firm, asking if this in ference was the sole guarantee, brought the reply, We really expect to be able to earn 80 per cent, and you can see what this will mean, if we do. However, we will guar antee you that you will receive an amount equal to at least 6 per cent on your investment per year.
No individual responsibility was hazarded in this offer, however, for the letter bore a rubber-stamped company signature.
14. Blue Sky long and miserable history of fraudulent promotion is responsible for the stringency of the Blue Sky legislation which swept the country in the years 1911, 1912, 1913 and 1914.
In those years, twenty-eight states passed statutes so drastic as to hamper considerably the operations of the conservative and legitimate bond and stock selling houses. In several states, the laws have been de clared unconstitutional by state courts, but in those states litigation has either been carried to the United States Supreme Court, or amendatory acts have been passed.
The general purpose of these laws is to require a license from every one who sells securities within the state. A commission is established to examine all ap plications for licenses and to make a final decision as to the advisability of issuing them. The underlying idea of the legislative bodies appears to be the super vision of the activities of concerns selling securities, as banks and insurance companies are supervised.
The opposing theory as to the proper manner of combating investment frauds, as presented by the In vestment Bankers' Association of America, is that full publicity concerning the nature of the proj ects offered should be secured by legal agencies, leaving freedom to make his own decisions to the individual investor