Corporate Publicity For Protection Of Investors

December 24, 1934

Report Outline
Corporate Publicity for Protection of Investors
The Movement for Corporate Publicity
Abuses in Corporate Financial Reporting
Enforced Publicity of Corporation Accounts

Corporate Publicity for Protection of Investors

The Three most pressing problems dealt with in the Securities Exchange Act of 1934, according to the report on that legislation of the Senate Banking and Currency Committee, were (1) the excessive use of credit for speculation, (2) the unfair practices employed in speculation, and (3) “the secrecy surrounding the financial condition of corporations which invite the public to purchase their securities.” The provisions of the act which attempt solutions for the first and second of these problems are now in full force and effect. Provisions which set up machinery for making available to the public all facts concerning the financial condition of corporations about which “an average prudent investor ought reasonably to be informed” will come into effect on July 1, 1935.

After July 1 no security now listed for trading on a registered securities exchange may continue to be dealt in unless the security has been accorded the status described in the act as “permanent registration.” As a condition of permanent registration, the act requires full disclosure by the issuing corporation, in a form to be prescribed by the Federal Securities and Exchange Commission, of all financial data “necessary or appropriate in the public interest or for the protection of investors.”

Publicity Required by Securities Commission

The full scope of the information to be required for permanent registration was disclosed for the first time on December 20 when the Securities and Exchange Commission made public the form of application to be executed under oath by the officers and directors of corporations with listed securities. In drafting the new requirements, the Commission said in an accompanying statement, it had “attempted to secure for the investor the maximum amount of pertinent information succinctly and clearly expressed, while burdening the corporation to the least possible extent.” The reception of the new requirements in Wall Street was unexpectedly cordial. President Whitney of the New York Stock Exchange said they struck a “nice balance.”

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