In saying this, I do not mean to imply that stockbrokers have not a duty in the premises.
[Sidenote: _Does the public get fleeced?_]
On the contrary, they have a very distinct and comprehensive duty towards their clients, especially those less familiar with stock market and financial affairs, and towards the public at large. And they have furthermore the duty to abstain from tempting or unduly encouraging people to speculate on margin, especially people of limited means, and from accepting or continuing accounts which are not amply protected by margin. In respect of the latter requirement, the Stock Exchange has rightly increased the stringency of its rules some years ago, and it cannot too sternly set its face against an infringement of those rules or too vigilantly guard against their evasion.
Against unscrupulous promotion and financiering a remedy might be found in a law which should forbid any public dealing in any industrial security [for railroad and public service securities the existing Commissions afford ample protection to the public] unless its introduction is accompanied by a prospectus setting forth every material detail about the company concerned and the security offered, such prospectus to be signed by persons who are to be held responsible at law for any wilful omission or misstatement therein.
[Sidenote: _Does the public get fleeced?_]
Such a law would be analogous in its purpose and function to the Pure Food Law, Any, let us call it, "anti-fleecing" law which went beyond that purpose and function would overshoot the mark. The Pure Food Law does not pretend to prescribe how much a man should eat, when he should eat or what is good or bad for him to eat, but it does prescribe that the ingredients of what is sold to him as food must be honestly and publicly stated. The same principle should prevail in respect of the offering and sale of securities.
If a drug contains water, the quantity or proportion must be shown on the label, so that a man cannot sell you a bottle filled with water when you think you are buying a tonic. In the same way the proportion of water in a stock issue should be plainly and publicly shown.
The purchaser should not be permitted to be under the impression that he is buying a share in tangible assets when, as a matter of fact, he is buying expectations, earning capacity or goodwill. These may be, and often are, very valuable elements, but the purchaser ought to be enabled to judge as to that with the facts plainly and clearly before him.