tionable and irritating practice, but it has little about it of public concern. But, on the other hand, the wholesale distribution of a fake stock through pseudo-brokers with Wall Street addresses is a matter of infinite public consequence. And this is particularly so when the fraud is done by listing the stock on a public exchange, by arbitrary inflations of prices, by washed sales, or by other forms of manipulation, by publication of these false quotations in the daily papers, or in fake newspapers shoveled out through the mails by the hundreds of thousands, by cunningly circulated rumors of pool operations, by subsidized market letters, by torrents of confidential telegraph and long distance telephone advices to buy for a rise, by the use of public names whose owners either voluntarily prostitute them for this purpose or which are filched without the owners' consent.

Against raids like these, our gullible public is unable to protect itself and is utterly helpless.

Give the fraudulent stock promoter a remote tract of land in a South American jungle with an abandoned canal, and a casual traveler's romantic deductions peppered with a few legends of the wealth of the Incas, then the telephone, the telegraph, the mails, the radio, the stock ticker, the financial newspaper and the tip'ster sheet will do the rest. Millions of ripe suckers are listening in as the lurid story is broadcast. A wealth equal to that of the Incas is tapped, but it flows in a steady stream out of the savings banks and through the brokers on the exchanges into the pockets of a cunning swindler lurking in the background.

Out of these frauds the entire system profits. Hundreds of thousands of dollars go to the telephone and telegraph company, thousands to the postal service, hundreds of thousands in double, triple and quadruple commissions to the unscrupulous brokers who manipulate the market, thousands to the subsidized market letter, and untold amounts to insiders who gamble against the public on the sure collapse of the fraud. Out of all these transactions, what the public gets is a conventional stock certificate with an assignment on its back. This represents the dreams and hopes of the owners, their visions of profits and their shares in the romance of business and enterprise. Usually these certificates are such trifling parts individually of tremendous issues

that it is difficult to perceive any practical benefit to the owners, even if the myths they represent were realities.

In a great many instances, however, the victim of these frauds does not even get a stock certificate. Most transactions in securities are made by the payment of only a part of the price, enabling the customer to buy more shares with the same money. To pay for the increased shares the broker is supposed to advance the balance of the price and to hold the stock to protect these advances. All of these shares are then mixed up in one common pot and are in no way earmarked or identified with any particular customer. What the owner gets to represent his purchase is a book entry in the broker's ledger. In the many transactions on a modern exchange with its complicated machinery, this entry becomes so involved with other book entries relating to the stocks in the common pot, that even the most expert auditors have difficulty in unraveling them. The result of this is that brokers, finding it inconvenient to tie up their resources in stock, often satisfy their customers merely with the book entries. In most instances, these perhaps are about as useful and valuable to the customer, who gets precisely the same thrill out of them as he does from the certificate.

Under the complications of modern corporate financing, public clamor early called for State protection against security frauds. The individual was helpless to protect himself, and the penal laws with their exact definitions and the difficulty of obtaining convictions from unskilled juries and adequate sentences from tender judges were wholly unsuitable to cope with these subtle public wrongs. Consequently commencing from the West, forty-five States one after another passed laws to prevent the sale of fraudulent securities. The States of New York and New Jersey, the most prolific sources of security frauds, strangely enough were the last to adopt them. In forty-two States securities and dealers in securities are licensed and applicants for licenses must satisfy the public officer charged with administering the law, of their fitness to sell securities and also of the fitness of the security proposed to be sold. To eliminate the comparatively few dishonest members, the burden of qualifying is here placed on the entire body of security dealers.

In New York, New Jersey and Maryland, on the other hand, any one may freely deal in any security until the Attorney-General discovers that the security is fraudulent or is fraudulently sold, or that some fraud is perpetrated in connection with its sale.

To enable the Attorney-General to expose fraud, he is given broad and drastic powers of investigation, of subpœnaing witnesses, examining them and compelling the production of books and papers. Charges are not required, but mere suspicion or the public interest is sufficient to warrant the investigation. Severe penalties are provided for refractory or contumacious witnesses, who may be arrested and sentenced to a fine of $5,000 or two years' imprisonment for refusing to attend, answer questions or produce necessary documents. Receivers of fraudulently acquired property are provided for, as also are injunctions against fraudulent practices.

At a glance the licensing laws appear to be more effective and drastic than the mere subpoena power and injunctive relief given to New York State's Attorney-General. But in practice and under the conditions prevailing in New York with its enormous volume of complicated financial transactions, the Martin Act, as our Blue Sky law is named, has proved entirely adequate and effective and has presented fewer administrative difficulties than the Licensing acts.

Armed with a subpoena commanding the instant appearance and examination on the spot of the dealer in securities, whether at his office, on the street or in his house, the Attorney-General and his deputies at any moment may surprise the fraud doer in his operations. His confidential books and secret contracts, his hiding places, his hidden profits and his intricate web of intrigue are subject at all times to an immediate and thorough exposure. It has become perilous for even the most cunning operators to work. As I have pointed out, these frauds are carried out by concealments of the truth and by false appearances. So, when the truth is baldly published, the most intricate and subtle fraud expires of its own weakness. Let the naked and unvarnished facts be disclosed about a dry oil prospect, or a fallow copper mine, and it is difficult to conceive of even the most confirmed sucker nibbling at this unsavory bait.

In two years of administering the Martin act, we have examined several thousands of promotions and stock selling schemes. Hundreds have been absolutely squelched, not by forbidding the sale of the stock, but by requiring that certain unpalatable facts about them be revealed nakedly and baldly to prospective purchasers.

But beside those that were so restrained, thousands of other promotions have died in still birth, from the certainty of

exposure.

As a result of two years' administration of this act on a budget of $175,000 a year for the period, there has been a general exodus of professional security swindlers from the State of New York and the public of this country has been saved countless millions of dollars.

And what is more to the point, there has been an appreciable uplift in the moral tone of Wall Street.

After all is said, the conduct of the individual is guided not so much by State supervision and a forced correction of his errors, as by the general conscience of the community. In the compact heterogeneous population of New York City, with its close contact one with the other, it is my observation that the vast majority are led by conscientious principles, and that the deliberate cheater is the rare exception. When their appearance is respectable and is surrounded by a halo imparted by the romance of big business and success, then fraudulent transactions gain ground and flourish. But thoroughly ventilate and label them with the ugly name of fraud, and the leaven of public opinion will get in its good work. A sneak is essentially a moral coward. He is peculiarly sensitive to the scorn of his neighbors.

PSEUDO-GENIUSES

BY CARLTON KENDALL

On the furbelow of every profession from medicine to religion is an army of pretenders who endeavor to assume outwardly the attributes of that profession and masquerade as its legitimate practitioners. It is only natural, therefore, that such a "profession" as genius with its attendant publicity and social privileges should attract hordes of these imitators.

I

The rewards of genius are too great to be overlooked by the aspirants for easy fame and fortune. These aspirants we may aptly name "pseudo-geniuses". They are of three classes: the mentally deranged, the temporarily deluded and the deliberate impostors. The first class MacDonald defines as mattoids, persons suffering from cerebral diseases distinguished by psychofunctional disturbances. "Such persons," he says, "show peculiarities in thought, feeling and action and they are called strange and foolish because the great majority of men feel or act otherwise. Their combinations of ideas are uncommon, new, striking and often interesting; yet they are incapable of making use of these new thoughts. Such individuals are not yet insane, but still they are not quite right; they form the passage over to insanity-they are on the threshold." Lombroso designates them as strikingly peculiar, eccentric and original, generally in useless ways and closely allied by heredity to mental diseases. They may have peculiar talents in certain lines but lack the critical power, the capacity to look at themselves from an outside standpoint, and so consider their oddities higher than the virtues of others.

Many of them with a little self-concentration could cure themselves of their malady and apply their talents with intelligence. They are most commonly found in the numerous "artistic