Protection of Investors

January 19, 1955

Report Outline
Concern for Investor Safety in Bull Market
Federal and State Laws to Shield Investors
Self-Regulation in the Securities Business
Special Focus

Concern for Investor Safety in Bull Market

Abull Market that had carried stock prices steadily upward over a period of almost 16 months was abruptly checked in the first week of the new year, when the Federal Reserve Board raised margin requirements on stock transactions. Although the order issued late on Tuesday, Jan, 4, increased the required cash payment on stock purchases and short sales only from 50 per cent to 60 per cent, the market broke sharply the following morning and the selling wave continued into a second day. Recovery then set in, but the market had lost most of its previous buoyancy.

The moderate increase in margin requirements had had the effect of notifying traders that fiscal authorities, though perhaps not yet deeply concerned over the growth of speculative tendencies, at least were watching the market closely; they were prepared in case of necessity to apply curbs that would impose more than a psychological restraint. It became evident simultaneously that members of the new Congress felt some concern over the situation.

Projected U. S, Senate Study of Stock Market

On Jan. 6, when the securities selling spurt that followed the change in margin requirements was subsiding, Sen. Fulbright (D-Ark.) made it known that the Senate Banking and Currency Committee, of which he was to become chairman, probably would make “a study of the continued sharp climb in the stock market.” Fulbright said he was not suggesting an “investigation,” but he thought “a study might keep things a little more in balance.”

ISSUE TRACKER for Related Reports
Investment and the Stock Market