nated by the commission under an escrow agreement that the owners of such securities shall not, in case of dissolution or insolvency, participate in the assets of the corporation until after the owner of such other securities shall have been paid in full. Said escrow agreement shall remain in full force until the securities of the issuer thereof are on a dividend paying basis.

The commission may deny any application to sell securities, or in the alternative if it so desires, permit the sale upon condition that all literature, etc., in respect thereof shall be stamped in red, large type "Speculative Security" (C. L., sec. 5235 (a) 5, as amended).

PERTINENT DECISIONS DIGESTED

Agreement for buyers' certificates in a mining corporation to be organized in the future to operate mines to be developed in the future is a speculative security under the blue-sky law (State, ex rel. Rosson v. Welsch, 49 N. Dak. 44, 172 N. W. 234).

(36) OHIO

After providing for the exemption of certain securities including any security issued or guaranteed as to principal or interest or dividend by a corporation owning or operating any public utility, provided that such corporation is, as to its rates and charges or as to the issuance and guaranteeing of securities, under supervision of or regulated by a public commission of the United States or any municipality therein or of the Dominion of Canada or of any province or municipality therein. The law provides for the sale of securities in Ohio either by registration, by description (sec. 5), or by registration by qualification (sec. 10).

In the event of registration by qualification, the issuer must furnish the commission with detailed financial statements as to the condition of the company, copies of all prospectuses, income and expense accounts, and a statement showing the consideration received or to be received by the issuer of such securities.

The law also makes provision for licensed dealers (sec. 17) and licensed salesmen (sec. 19), and provides (sec. 25) various penalties for its violation (G. C. 8624-1 through 47, inclusive).

PERTINENT DECISIONS DIGESTED

Compliance by corporation with the blue-sky law to enable it to sell stock to the public is no defense to the company's suit for cancelation of stock received as secret profits by promoters and directors. Constitutionality upheld (Hall v. Geiger-Jones Co., 242 U. S. 539).

(37) OKLAHOMA

A securities commission has been created to administer and provide for the enforcement of all provisions of the blue-sky law (L. of 1931, ch. 24, art. 11, sec. 2).

Provision is made in the law for the exemption of certain securities, including those of a railroad or any other public-service utility, provided that such corporation is subject to regulation or supervision, either as to its rates and charges and as to the issue of its own securities by a public commission, board, or officer of the Government of the United States or of any State, territory, or insular possession thereof, or of any municipality therein, or of the District of Columbia, or of the Dominion of Canada or any Province thereof.

Nonexempt securities must be registered either by notification or by qualification. Securities eligible for registeration by notification are set forth in full. (See L. of 1931, etc., supra, sec. 7).

Securities required to be registered by qualification must be supported by filing with the commission complete financial data concerning the corporation concerned, including statement of the capitalization, balance sheet within 60 days, income account, property account, etc.

The act contains provisions for registering dealers and salesmen. (See L. 1931, supra, secs. 11, 12, 13).

It provides penalties for violation (L. 1931, supra, sec. 15).

The law provides, however, that if a statement containing information as to securities to be registered by qualification 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, trademark, process, formula, or goodwill, or for organization or promotion fees or expense, or for goodwill or goingconcern value or other intangible assets, the amount and nature thereof shall be fully set forth, and the commissioner may require that such security so issued in payment of any such intangibles shall be delivered in escrow to the commission, under an escrow agreement that the owners of such securities shall not be entitled to withdraw them 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 percent, shown to the satisfaction of the commissioner to have been actually earned on the investment in any common stock so held.

PERTINENT DECISIONS DIGESTED

This act has been held not to be a revenue measure, but a valid exercise of the police powers of the State (Meek v. State, 22 p. (2d) 933).

An agreement that in the event a shareholder who has purchased direct from the company finds it necessary to dispose of his preferred stock the company will handle resales on the prevailing market basis less $2 per share to cover the cost of transaction was held not to bring the company within the act (0. A. G., Oct. 16, 1931).

The securities of a public-service corporation are exempt from registration only when such corporation is subject to the type of regulation specified in the act (O. A. G., Aug. 6, 1931).

Exemption as to the issuance of additional capital stock applies only where an existing corporation has, pursuant to law, increased its authorized capital stock and sells or distributes the same among its own stockholders exclusively and pays no commission on such sales (O. A. G., Feb. 29, 1932).

(38) OREGON

The law provides for certain securities to be exempt and includes among such exempt securities those listed on the New York, Chicago, San Francisco, and Los Angeles Stock Exchanges, and the New York curb market, together with any securities senior thereto or securities listed in any standard manual and which have therein a rating approved for exemption by written order of the corporation commissioner (O. C. 25–1303).

The law empowers the corporation commissioner, in his discretion, upon written application, to permit issuance of certain-named classes of securities having a minimum prescribed ratio between their earnings and fixed charges, makes provisions as to mortgages securing bonds, etc. (O. C. 25-1305).

If the application for a permit to sell securities 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, formulae, or goodwill, or for promotion fees or expenses, or for other intangible assets, the amount and nature thereof shall be fully set forth, and the commissioner may require that such securities so issued in payment of any such patent right, copyright, trade mark, process, formulae, or goodwill, or for promotion fees or expenses or other intangible assets, shall be delivered in escrow under such conditions and for such time as the commissioner shall prescribe in the permit issued by him on such application (O. C. 25—1307).

The act contains provisions for licensing brokers and dealers, together with penalties for its violation.

PERTINENT DECISIONS DIGESTED

The "blue-sky law" is a criminal statute and cannot be enlarged by construction (Kirk v. Farmers Union Grain Agency, 103 Oreg. 43, 202, P. 731). The legislature, under the police power, may regulate the sale of corporatė stock (American Trust Co. v. McCallister, 299, P. 319).

The term " securities" in the "blue-sky law" is used in a broad, not literal, sense, and means written assurances for the return or payment of money, and includes security or investment contracts. Good faith or advice of counsel is not a defense to an illegal sale of securities (State v. Whitaker, 247, P. 1077).

An indictment charging that the defendants engaged in selling or offering for sale certain securities states a single offense, though an offer for sale alone would constitute a violation of the statute (State v. Gerritson, 124 Oreg. 525, 265 P. 422).

(39) PENNSYLVANIA

The securities commission is empowered under the securities act to regulate all sales of securities within the State. After exempting isolated transactions and certain-named classes of securities from its operation, the law provides that no dealer shall, through agents or otherwise, directly or indirectly, advertise or offer for sale any securities within the State without first being registered as provided in the act (L. 1927, P. 273, secs. 2 and 3).

The employees of a company subject to the provisions of the public-service company law of Pennsylvania shall not for the purpose of registration be considered as salesmen or agents within the meaning of this act, and shall not be required as to securities issued by such company or as to securities issued by a company subject to regulation by the Interstate Commerce Commission, which latter company controls directly or otherwise such other company, to procure registry certificates, to enable such employees acting for either of such companies and no other, or for a securities company owned or controlled by either of them and engaged in promoting the distribution of such securities as incidental to their regular employment, to sell, or solicit, or negotiate for the sale of or purchase for such securities in the territory served by the company by which they are employed. Such employees shall, however, be subject to the other provisions of the act to the same extent as though in fact registered as an agent or salesman thereof (id., sec. 3).

PERTINENT DECISIONS DIGESTED

This act is intended to regulate registration of stock and bond dealers and salesmen rather than issuance of securities, and the commission errs in refusing to register a corporation as a dealer because it does not approve of the plan of financing, of control and management of an investment trust, and of the rate of return (Western Oil & Refining Co. v. The Securities Commission, 34 Dauph. 76).

The securities commission was held to be not justified in refusing registration to a dealer in securities under this section because in one or two instances under prior registration it had sold securities not authorized to be sold and promptly ceased such sales when notified by the commission to do so.

Nor is the commission justified in refusing registration to the dealer on the ground that securities sold by it were overpriced, for the commission has no power to regulate the price of securities (Lackawanna National Investing Corporation v. Pennsylvania Securities Corporation, 35 Dauph. 1).

A foreign corporation selling, offering for sale, or soliciting subscriptions or orders for capital stock is a dealer within the statute (Commonwealth v. Pastor, 89 Pa. Super. Ct. 291).

(40) PHILIPPINE ISLANDS

It shall be unlawful for any person, partnership, association, or corporation, either himself or itself, or through brokers or agents, directly or indirectly, to sell or cause to be sold, offer for sale, take subscriptions, or negotiate for the sale in any manner whatsoever, except as herein provided, of any speculative securities in the Philippine Islands other than those expressly exempted without a written permit from the treasurer of the Philippine Islands as hereinafter provided (L. 1916, no. 2581).

Exempted securities include those of public or quasi-public corporations, the issues of which are regulated by the board of public-utility commissioners or other similar authority.

In order to obtain permission to sell securities there must be filed with the insular treasurer a statement showing in detail the plan on which the proposed business or enterprise is to be conducted; a copy of all contracts, bonds, or other instruments which it is proposed to make with or sell to contributors; a statement which will show the name and location of the person, partnership. association, or corporation and an itemized account of the actual financial condition and the amount of property, debts, and liabilities of the person. partnership, association, or corporation, and any and all other information

that may be desired by the treasurer of the Philippine Islands. Such statements must be verified by oath. Thereupon it becomes the duty of the treasurer to examine such data and when he is satisfied that the corporation is entitled to offer its securities for sale he shall issue his permit therefor, at all times, however, retaining the right of revocation of the permit (L. 1919, no. 2817, sec. 2).

The power of attorney must be filed by nonresidents with the auditor for service of summons and the making of false statements is penalized by a fine of not more than 10,000 pesos or for imprisonment of not more than 5 years, or both (L. 1919, no. 2817, secs. 6 and 7).

None.

(41) PUERTO RICO

(42) RHODE ISLAND

For the purposes of this act the term "commissioner " means the bank commissioner.

Provisions of the chapter do not apply to the isolated sale of any security or, among others, to securities of corporations owning or operating publicservice utilities, provided that the same are issued subject to the approval of a public officer or officers of the United States or any State, Territory, or district or insular possession, or by any officer or officers of the Dominion of Canada or its Provinces, and all securities senior thereto, nor does it apply to securities issued by a holding company holding or owning solely securities within the provisions of the utility exemption and issuing its own securities against such securities not exceeding in par value the total par value of such securities owned and held by it. The exempted list also includes securities listed on any such regular organized stock exchange as the commission may from time to time specify (G. L. ch. 273, as amended).

No person shall sell securities as a broker or salesman within the State unless he is registered as such with the commissioner, who must be satisfied as to his character, and that he will conduct his business without fraud (id. sec. 3).

No such person shall sell securities not exempted within the State unless there shall have been filed with the commissioner prior to such sale a notice of intention to offer such securities, such notice to include such information as the commissioner shall prescribe. If the commissioner within 3 days of the filing of the information notified the person filing the notice of intention that any provision of the chapter is being violated and that additional information is required. The commissioner may require such information, but the sale of the security shall be deemed to have been tentatively permitted and may continue until notice of the contrary, at which time it shall be suspended pending further investigation as to its fraudulency or illegality (id., sec. 4).

The commissioner shall have the power at any time to require full information concerning the assets, earnings, liabilities, plan of business, contracts, control, personal experience, and character of the personnel of any person selling securities or of the issuer in the event that it is selling securities. And in the event that the commissioner suspects fraud he may at any time require from the issuer such information as to promotion, underwriting, man aging, and selling profits, commissions, and fees if in his judgment it shall be necessary to determine whether fraud is present and in this connection he may require appraisals and audits of the expense of the issuer (id., sec. 5 (a)). Any permission given to sell securities may be canceled by the commissioner at any time when he suspects that fraud is present in the transaction (id., sec. 5 (d)).

A person aggrieved by an order of the commissioner may require a public hearing thereon and may appeal to the Supreme Court for the reversal of the commissioner's order on the ground that it is unlawful or unreasonable (id., secs. 6 and 12).

(43) SOUTH CAROLINA

Among the securities exempted by the act are those of public or quasi-public corporations, the issue of which securities are regulated by a public-service commission or board of equal authority of the United States or of any State or territory of the United States or securities senior thereto. Also securities

which are listed in any standard manual of information approved by the insurance commissioner provided that the commissioner may have the power to call for additional and further information than that contained in such manuals and also suspend temporarily or permanently the sale of such securities after a hearing upon notice to the issuer if the commissioner shall find that the sale of such securities works a fraud upon issuers of securities offered by them for sale, whether personal or corporate, domestic or foreign, are deemed for the purposes of this act to be investment companies (Code 1932, sec. 8116). Before selling, offering for sale, taking subscriptions for or negotiating for the sale in any manner, of any stocks, bonds, or other securities of its own issue, every investment company shall file with the insurance commissioner a statement showing in full detail the plan upon which it proposes to transact business; a copy of all contracts, stocks, bonds, or other instruments which it proposes to make with or sell to its contributors or customers together with a copy of its prospectus and of the proposed advertisement of its sale of its securities, which statement shall also show the name and location and main office of the investment company, the names and addresses of its officers and an itemized account of its financial condition, together with such other information as the commissioner may require. Partnerships must file a copy of their partnership agreement and corporations their charters (id., sec. 8118). The commissioner may require such additional information, including appraisals, which shall cover the value of patents, goodwill, promotion, and intangible assets and may require that securities issued against the same shall be deposited in escrow under such terms as the commissioner may prescribe. He may withold his license to sell stock, etc., for any failure on the part of the investment company to comply with the provisions of the act (id., sec. 8121).

The insurance commissioner is authorized to investigate the plan of business of any investment company, and if it would, in the opinion of the commissioner, work a fraud upon the purchaser he shall disapprove the sale of any proposed securities, so notify the investment company, and it shall be unlawful for such company to do any such business within the State. If the commissioner approves he shall so certify, but shall also state in large type that he does not recommend the purchase of the security involved (id., sec. 8122).

Dealers are defined as any person, firm, partnership, corporation, or association, domestic or foreign, not the issuer, who shall offer securities for sale, not exempted in the article. The act contains the usual provisions for their registration and licensing (sec. 8123-8124) and provides that it shall be unlawful for any investment company or dealer to offer for sale any securities unless the commissioner has approved thereof and further provides that it shall be unlawful for any newspaper published in South Carolina to advertise the sale of any stocks, bonds, or securities not approved by the commission or exempt (id., sec. 8127).

The act provides that it shall constitute a misdemeanor to violate its provisions (id., sec. 8134).

PERTINENT DECISIONS DIGESTED

Neither the insurance commissioner nor his surety is liable to a defrauded stock buyer for the commissioner's negligence in not making a proper investigation before issuing to a company engaged in a fraudulent scheme a certificate to sell stock under this act prohibiting the selling of securities without such a certificate, in view of the provision requiring the words "The Commission Does Not Recommend Purchase of This Security" to be printed on the certificate in type two sizes larger than any other part of the certificate (Minter v. McSwain, 126 S. C. 371, 119 S. E. 901).

(44) SOUTH DAKOTA

The securities act is administered by the State's securities commission (Laws 1927, ch. 206, sec. 1).

The law exempts certain securities from qualification under the act, including those listed on the New York, Boston, and Chicago stock exchanges and those issued or guaranteed by a railroad or public utility, provided such corporation is subject to regulation or supervision either as to rates and charges or as to issuance of its own securities, by public-service commissions or any similar body of any political subdivision of the United States and the Dominion of Canada, together with all securities senior thereto (id., sec. 3).