Pedlars in Shares

Sun (Auckland), Volume III, Issue 798, 19 October 1929, Page 8

Pedlars in Shares

Where Companies Act Is At Fault

WAR lias been declared by commercial men upon peddling stare-salesmen, and a strong movement lias been instituted for the early amendment of the Companies Act. under which there exists inadequate protection for small investors. This article, the first of two, will deal with the itinerant share-salesman and his wares, and the second will advance suggested general amendments to the Companies Act.

Two conferences held at Auckland during the past week, both of them widely representative of the commercial interests of the Dominion, expressed a keen desire to have the Companies Act amended in order to protect the people from themselves, and also to bring within the law many unscrupulous promoters who retain their liberty only because of a statutory hiatus.

The importance of this Act, and its far-reaching influence upon the people of New Zealand of all financial positions, cannot be overlooked when it is recalled that the capital involved in companies throughout the country is more than £115,000,000. The need for its consolidation and alteration cannot be denied, moreover, in view of the fact that the rules governing liquidation proceedings have never been overhauled since 1887, whereas conditions have changed immeasurably since that time.

One of the most significant reactions of a defective Companes Act has been the restrictive effect imposed ujon genuine business by a feeling of insecurity among the investing public. So many people who could ill afford to lose their savings have been brought to the verge of ruin through the persuasion of salesmen hawking shares through the country, that genuine investments are now sometimes regarded as something to be avoided at any cost. GET-RICH-QUICK CONCERNS

While politicians and businessmen have been deploring the hesitancy of the people to invest their money in developing enterprise, a literal harvest has been reaped by door-to-door canvassers whose daintily coloured pamphlets and attractive verbal pictures of big profits rapidly obtained were nothing but seductive instruments to secure signatures on the dotted line.

Land development schemes, flaxgrowing concerns, and afforestation were handled in a tremendous way, and while many of the propositions were irreproachably sound, others have turned out to be nothing more nor less than get-rich-quick stunts for the benefit of a few hard-headed opportunists. A class of investor that is particu-

larly susceptible to plausibility and to the vision of a quick return widows with small capital, young- girls possessing ideas of ultimate financial independence, nurses, w r ives of thrifty working men, and those who are ready to sign away their savings upon the face value of a subtle prospectus have been made the victims of these wild-cat flotations.

If persuasion alone had been used, the investors could blame themselves alone for their indiscretions, but in some districts the names of prominent members of the Stock Exchange were used as having given their moral support to the undertakings. A member of the clergy walked into the ofiice of the chairman of the Stock Exchange in one city in the Dominion, and announced: —“I took a thousand of those shares you recommended.” “What shares?” the broker asked.

He was then informed that his nans* had been used in connection w r ith what he considered to be the biggest swindle of the year. The cleric had sunk £I,OOO in it. LOOKING THE PART

A man in a certain North Island town, having failed at most occupations, came to the city, purchased a bowler hat and the best procurable brand of cigars, floated and sold shares in a flax development concern with great success —to himself —and took the first boat for Australia. The most baffling aspect of this harmful misrepresentation is that under the Companies Act there is no redress. Action may be taken under the statutory provisions of the Crimes Act, but experience has proved the disinclination of the authorities to institute proceedings. In the English Companies Act, recently consolidated, salesmen are not permitted to sell upon the door-to-door system. They may call upon a man at his place of business, but not at liis home. In this way investment is diverted more or less through the recognised machinery of commerce, and compels a proposition to stand or fall upon its merits. Auckland businessmen regard seriously the anomalies in the Companies Act. and endeavours are now being made to represent the position to the Government for early attention. L.J.C.