Investors' Research

". . . Honesty plays little part in American business," said a new book published in Manhattan last week.* "Our morality ... in a game of cards or in sports is irreproachable ... we are gentlemen of honor ... in life's pastimes, but devoid of it in serious pursuits."

No tyro in fiscal postmortems, the author of these flat statements is 42-year-old Bernard Joseph Reis. who graduated magna cum laude from New York University in 1915, earned an LL. B. there in 1918, a C. P. A. in 1921. Since then he has been professionally exploring such corporate cadavers as the collapsed G. L. Miller Bond & Mortgage Guarantee Co. business of 1926, done accounting work for courts and public prosecutors in bankruptcies and reorganizations. In his book he reviews what happened to $11,988,814,205 of defaulted securities "sold to the public by reputable banking houses." He declares: "The author ... is unwilling that the billions of dollars lost in so-called gilt-edged investments shall be written off to the Depression, when he knows that much of the fault lies in the lack of honesty in American business."

The picture painted for the 15,000,000 current U. S. investors by Author Reis is as disheartening as that which a 1933 book 100,000,000 Guinea Pigs painted for purchasers of a long list of U. S. advertised products. Mr. Reis's basic point is that, though the public assumes the New Deal has made U. S. banking and finance safe for the small investor, nothing of the sort has yet taken place. After long, sorry rehearsals of fiscal crimes committed "rider the Old Deal, he delivers this warning cry: "It is imperative that the investor rid himself once and for all of the illusion that the Securities Act is the weapon he so desperately needed, and look to other means of self-protection. . . . The average investor assumes that registration signifies that the Commission has passed on the merits and given approval to such security. . . . Under the law the Commission does not and cannot indicate in any way whether it considers such registered issue safe or speculative."

Author Reis offers a remedy. He does not name it but it might well be styled "Investors' Research" after Consumers' Re-search for which Mr. Reis was secretary-treasurer in 1932-33. His plan is to form a national organization with dues assessed to individual security owners according to their holdings. A paid staff of lawyers, accountants and financial experts would analyze and evaluate new issues as applications were made to the SEC for listings.* Investors' Research would not only issue confidential bulletins to members but they would attend stockholders' and bondholders' meetings, play watchdog on corporate activities, maintain legislative lobbies to protect investors' interests at Washington and among the States.

Reminded of the large sums which U. S. investment trusts spend annually in their research departments, Author Reis believes non-profit organizations can operate more cheaply; colleges and universities will help a non-profit project; Investors' Research would not worry about day to day market fluctuations, merely report whether securities were safe investments. Analogous to Investors' Research is the 64-year-old British Corporation of Foreign Bondholders. "But that's a little organization for big investors," says Author Reis. "What we need is a big organization for little investors."

-False Security, the Betrayal of the American Investor -- Equinox Cooperative Press Inc.

($2-75). -Any U. S. citizen may secure photostatic copies of any application listed by the SEC at a charge of 10-c- per page for the first 100 pp., if for additional pages.

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