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Pending the hearing the commission shall have the power to order the suspension of such dealer's or salesman's registration : Provided, That such ortler shall state the cause for such suspension,

Until the entry of a final order the suspension of such dealer's registration, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice.

In the event the commission determines to refuse or revoke a registration as hereinabove provided, it shall enter a final order herein with its findings on the register of dealers and salesmen; and suspension or revocatica of the registration of a dealer shall also suspend or revoke the registration of all his salesmen.

It shall be sufficient cause for refusal or cancellation of registration in <a se of a partnership or corporation or any unincorporated association, if any member of a partnership or any officer or director of the corporation or association has been guilty of any act or omission which would be cause for refusing or revoking the registration of an individual dealer or salesman.

BURDEN OF PROOF

SEC. 13. It shall not be necessary to negative any of the exemptions in this act provided in any complaints, information, indictment, or any other writ or proceedings laid or brought under this act, and the burden of establishing the right to any such exemption shall be upon the party claiming the benefit of such exemption, and any person claiming the right to register any securities by notification under section 7 of this act shall also have the burden of establishing the right so to register such securities.

ESCROW AGRFEMENT

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Sec. 14. If the statement containing information as to securities to be registered, as provided for in section 8 of this act, shall disclose that any such securities or any securities senior thereto shall have been or shall be intended to be issued for any patent right, copyright, trade-mark, process, formula, or good will, or for organization or promotion fees or expenses or for good will or going-concern value or other intangible assets, the amount and nature thereof shall be fully set forth and the commission may require that such securities so issued in payment of such patent right. copyright, trade-mark. process, formula, or good will, or for organization or promotion fees or expenses, or for other intangible assets, shall be delivered in escrow to the commission or other depository satisfactory to the commission under an escrow agreement that the owners of such securities shall not be entitled to withdraw such securities from escrow until all other stockholders who have paid for their stock in cash shall have been paid a dividend or dividends aggregating not less than 6 per centum shown to the satisfaction of said commission to have been actually earned on the investment in any common stock so held; and in case of dissolution or insolvency during the time such securities are held in escrow, that the owners of such securities shall not participate in the assets until after the owners of all other securities shall have been paid in full.

INJUNCTIONS

SEC. 15. Whenever it shall appear to the commission, either upon complaint or otherwise, that in the issuance, sale, promotion, negotiation, advertisement, or distribution of any securit'es in the District of Columbia, including any security exempted under the provisions of section 4, and including any transaction exempted under the provisions of section 5, any person, as defined in this act, shall have employed or employs, or is about to employ any device, scheme, or artifice to defraud or for obtaining money or property by means of any false pretense, representation, o: promi:e, or that any such person shall have made, makes, or attempts to make in the District of Columbia fictitious or pretended purchases or sales of securities or shall have engaged in or engages in or is about to engage in any practice or transaction or course of business relating to the purchase or sale of securities which is in violation of law or which is fraudulent or which has operated or which would operate as a fraud upon the purchaser, any one or all of which devices, schemes, artifices, fictitious, or pretended purchases or sales of securities, practices,

transactions, and courses of business are hereby declared to be and are hereinafter referred to as fraudulent practices, or that any person is acting as dealer or salesman in the District of Columbia without being duly registered as such dealer or salesman as provided in this act; the commission may investigate, and whenever it shall believe from evidence satisfactory to it that any such person has engaged in, is engaged or is about to engage in any of the practices or transactions hereinbefore referred to as and declared to be fraudulent practices, or is selling or offering for sale any securities in violation of this act or is acting as a dealer or salesman without being duly registered as provided in this act, the commission may, in addition to any other remedies, bring action in the name and on behalf of the commission against such person and any other person or persons concerned in or. in any way participating in or about to participate in such fraudulent practices or acting in violation of this act, to enjoin such person and such other person or persons from continuing such fraudulent practices or engaging therein or doing any act or acts in furtherance thereof or in violation of this act. In any such court proceedings the commission may apply for and on due showing be entitled to have issued the court's subpæna requiring forthwith the appearance of any defendant and his employees, salesmen, or agents, and the production of documents, books, and records as may appear necessary for hearing of such petition, to testify and give evidence concerning the acts or conduct or things complained of in such application for injunction. In such action the equity courts shall have jurisdiction of the subject matter, and a judgment may be entered awarding such injunction as may be proper.

REMEDIES

Sec. 16. (1) Every sale made in violation of any of the provisions of this act shall be voidable at the election of the purchaser; and the person making such sale and every director, officer, or agent of or for such seller, if such director, officer, or agent shall have personally participated or aided in any way in making such sale shall be jointly and severally liable to such purchaser in an action at law in any court of competent jurisdiction upon tender of the securities sold or of the contract made for the full amount paid by such purchaser, with interest, together with all taxable court costs and reasonable attorney's fees: Provided. That no action shall be brought for the recovery of the purchase price after two years from the date of such sale: And provided further, That no purchaser otherwise entitled shall claim or have the benefit of this section who shall have refused or failed within thirty days from the date thereof to accept an offer in writing of the seller to take back the security in question and to refund the full amount paid by such purchaser, together with interest on such a mount for the period from the date of payment by such purchaser down to the date of repayment, such interest to be computed

(a) In case such securities consist of interest-bearing obligations, at the same rate as provided in such obligations; and

(b) In case such securities consist of other than interest-bearing obligations, at the rate of 6 per centum per annum, less, in every case, the amount of any income from said securities that may have been received by such purchaser.

(2) Any person having a right of action against a dealer or salesman under this section shall have a right of action under the bond provided in section 11.

(3) A registration by notification made in good faith and after the commission, on application, shall have given tentative consent to such registration, shall not, as to sales made prior to revocation of such registration, result in the liabilities prescribed in this section, although the securities may not be entitled to such registration.

PENALTY

Sec. 17. Whoever violates any provision of this Act shall be punished by a fine of not more than $10,000 or by imprisonment for not more than five years, or by both such fine and imprisonment; but an affirmative showing that an act or omission which constituted a violation occurred in good faith, and on reasonable grounds for believing it not to be a violation shall relieve from the penalty prescribed in this section.

STATUTORY OR COMMON-LAW REMEDIES

Sec. 18. Nothing in this act shall limit any statutory or common-law right of any person to bring any action in any court for any act involved in the sale of securities, or the right of the United States or District of Columbia to punish any person for any violation of any law.

IPPELS

SEC. 19. An appeal may be taken by any person interested from a ial order of the commission to the Supreme Court of the District of Calumbia by serving upon the commission within twenty days after notice of the entry of such order a written notice of such appeal stating the grounds upon which a reversal of such final order is sought; a demand in writing for a certified transcript of the record and of all papers on file in its office relating to such order and executing a bond in the penal sum to be fixed by the court to the United States, with sufficient surety to be approved by the court, conditioned upon the faithful prosecution of such appeal to final judgment, and the payment of all such costs as shall be adjudged against the appellant. Thereupon the commission shall within ten days make, certify, and file with the clerk of said court such a transcript, or in lieu thereof the original papers if the court shall so order; and the appellant shall within five days thereafter file the same and a copy of the notice of appeal with the clerk of said court, which said notice of appeal shall stand as appellant's complaint and thereupon said cause shail be entered on the trial calendar of said court for trial de novo and may be given precedence by the court over other matters pending in suid court. The court shall receive and consider evidence, whether oral or documentary, concerning the order of the commission from which the appeal is taken. If the order of the commission shall be reversed, said court shall by its mandate specifically direct said commission as to its further action in the matter, including the making and entering of any order or orders in connection therewith, and the conditions, limitations, or restrictions to be therein contained: Provided, That the commission shall not thereby be barred from thereafter revoking or altering such order for any proper cause which may thereafter accrue or be discovered. If said order shall be affirmed, said appellant shall not be barred after thirty days from filing a new application: Provided. That such application is not otherwise barred or limited. Such appeal shall not in anywise suspend the operation of the order appealed from during the pendency of such appeal unless upon proper order of the court. An appeal may be taken from the judgment of the said court on any such appeal on the same ternus and conditions as an appeal is taken in civil actions,

SCE. 20. The directors, officers, or agents referred to in section 16 of this act shall be liable under said section and shall also be liable to prosecut.on under section 17 for any unlawful act or omission of other persons who were employed by or associated with them, if by the exercise of reasonable care and diligence such directors, officers, or agents might have learned of such acts or omissions and given notice thereof to the comm ssion, or might otherwise have prevented such acts or omissions and failed to do so.

Sec. 21. In all advertising, circulars, and other printed or written matter that may be used in selling securities there shall be specifically and dist netly stated in bold or black-faced type not less than eight point in size, the amount and character of any prior or superior lien, mortgage, or incumbrance underlying the security offered.

SEC. 22. No deed of trust or similar instrument covering property in the District of Columbia encumbered or used to give value to security shall be held to be valid as such security by the commission in passing upon applications for registration by qualification or for reg 'stration by notification unless at least one of the trustees named in such deed or similar instrument is a resident of the District of Columbia and has been such for at least five years last past or is a corporation (rganized and existing under the laws of the D'strict of Columbia, neither such person nor corporation to be otherwise associated or connected with other parties thereto.

SEC. 23. In any case where the commission is in doubt as to the substantial correctness of the value of property upon which securities are based, as stated by the applicant for registration by qualification or in the statement for registration by notification, it may select and appoint appraisers for the purpose of determining the value of the property, the expense of such appraisal to be borne by the applicant for registration.

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SEC. 24. Where it is sought to secure registration by notification or qualifcation for a security payment of the principal and dividend or interest of which or payment of any part of the underlying obligation of which is guaranteed or assured by an insurance company, surety company, individual, corporation, partnership, or association, a certified copy of the guaranty, contract, or other agreement providing for the fulfillment of the obligation warranted to be paid or performed shall be filed with the commission, and the commission shall have the right to require proof of the financial and legal ability of those undertaking the liability.

SEC. 25. In any statement as to the value of property sought to be used as the basis for security the commission may require a detailed itemization showing separately the value claimed for land, improvements, furnishings, equipment, machinery, and other tangible or intangible items of the total value claimed.

SEC. 26. If an issuer or dealer desires to include in any advertising, circular, or other written or printed matter an estimate of prospective or future earnings, the commission may require also the inclusion of a statement of actual earnings for such period as is deemed proper or practicable for all or any part of the property or properties covered by the security.

SEC. 27. The commission may require the use in advertising, circulars, or other written or printed matter of statement of the assessed valuation of property covered by a security, and of the actual cost of construction of improvements upon real property.

SEC. 28. Where in advertising, circulars, and other printed or written matter concerning a security there is included an estimate of prospective or future rental incomes, the commission shall have the power to order the inclusion also of a statement showing the actual percentage or proportion of occupancy and actual rental income for such period as it may deem proper or practicable.

SEC. 29. The commission shall have the power to order the statement in advertising, circulars, and other written or printed matter concerning the security of the purpose of the issue of the security; and if such purpose shall be stated as that of refunding existing obligations, the commission sha il have the power to require satisfactory provision for the proper application of the fund realized to the purpose stated.

Sec. 30. The commission shall have the power to require, by any appropriate means, immediate notice to it and to security holders of any default in paymert of principal, interest, dividends, sinking-fund deposit, or default in the performance of any other condition or obligation of a se urity by the person primarily obligated to pay or perform, notwithstanding payment or performance in his stead by any other person.

SEC. 31. If in any advertising, circular, or other written or printed matter concerning a security, an appraisal value is stated, the commission shall have power to require also the inclusion of a statemet showing whether such appraisal is based on earnings, aciual or prospective, the original cost of the property less depreciation, or whether based on reproduction cost less depreciation.

SEC. 32. The assessor of the District of Columbia shall make his assessment and taxes shall be levied and collected in conformity with appraisals or valuations stated in advertising, circulars, or other written er printed matter concerning a security based on property located in the District of Columbia : Provided, That such appraisals or valuations shall be in excess of previous assessments or the assessments that would otherwise be made by the assessor, but this shall not affect the assessment of like, similar, or contiguous property.

VALIDITY OF PORTIONS OF ACT

SEC. 33. If any provision of this act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this act, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

UNIFORMITY OF INTERPRETATION

SEC. 34. This act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those States which enact it.

SHORT TITLE

SEC. 35. This act may be cited as the uniform sales of securities act.

REPEAL AND CONSTRUCTION

Sec. 36. This act supersedes and repeals the act of Congress approved May 29, 1916, entitled "An act to prevent fraudulent advertising in the District of Columbia," and any and all other laws and clauses of laws in conflict with this act, to take effect upon the day this act goes into force, to the extent only and in so far as such other laws or parts of laws relate or apply to acis, transactions, or omissions with reference to securities as defined in this act subject, however, to the limitations provided in subdivisions (b) and (c) followng:

(b) The provisions of all laws which are repealed by this act shall remain in force for the prosecution and punishment of any person who, before the effective date of this act, shall have violated the provisions of any law in force at the time of such violation, and such person may be prosecuted and punished under the law as it existed when such violation occurred.

(c) In the case of sales, contracts, or agreements made prior to the effective date of this act, the civil rights and liabilities of the parties thereto shall remain as provided by the law as it existed at the time such sales, contracts, or agreements were made and all parts of laws repealed by this act shall remain in force for the enforcement of such rights and liabilities.

Sec. 37. All fees and other money paid to or coming into possession of the commission by virtue of the provisions of this act shall be paid into the Treasury of the United States to the credit of the District of Columbia.

Sec. 38. This act shall take effect sixty days after its approval.

Senator BLAINE. The committee will come to order. Some of the local organizations interested in legislation now pending beiore the District Committee desire to be heard on the bill or bills relating to the issuing of securities, the so-called blue sky law. There are two bills, one known as the Capper bill, which has been introduced, I think, at the request of local organizations, and the other a bill that was introduced by myself, as chairman, after reviewing all the various security bills of the country, following the uniform bill that had been recommended by the American Bar Association.

We will be glad to hear from you gentlemen as to which bill is the best and why. I might also state that I would like to have an opinion as to whether or not there is any necessity in the District for this type of legislation; and if so, have you briefly state the necessity for it in as concrete examples as you may have. If there

no necessity for it, we will hear that.

I assume you have selected your representative. Whoever he is, we will be glad to hear from him.

STATEMENT OF MR. PAUL V. KEYSER, REPRESENTING THE

INVESTMENT BANKERS' ASSOCIATION OF AMERICA

Mr. KEYSER. Mr. Chairman, it happens that our local committee in an informal way asked me to serve as chairman of that committee. By virtue of that fact only I am rising at this time. Our committee has not designated me in any particular way to present the matter especially to your committee, and I do not know whether your committee would rather hear from the various members of our local committee or whether you would prefer to have me undertake to make a statement.

Senator BLAINE. Go ahead. Let us spend as little time upon these explanations as possible, and go into this matter.

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