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Government and Business: A Case Study of State Regulation of Corporate Securities, 1850–1933

Published online by Cambridge University Press:  24 July 2012

Gerald D. Nash
Gerald D. Nash
Affiliation:
Assistant Professor of History, University of New Mexico
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Abstract

One of the aims of the States has continually been to provide a favorable legal framework for the work of responsible entrepreneurs and corporations issuing stock and to protect them both against illegitimate competition. This paper illustrates this relationship of government and business through a general survey of State administrative practices in executing corporate securities legislation and a closer study of the single State of California.

Type
Research Article
Information
Business History Review , Volume 38 , Issue 2 , Summer 1964 , pp. 144 - 162
Copyright
Copyright © The President and Fellows of Harvard College 1964

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References

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2 Of the many studies treating select aspects of State activities the most brilliant include Hurst, James Willard, Law and the Conditions of Freedom in the Nineteenth Century United States (Madison, 1956), pp. 1–76Google Scholar, and Hartz, Louis, Economic Policy and Democratic Thought: Pennsylvania, 1776–1860 (Cambridge, 1948)CrossRefGoogle Scholar, passim.

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6 The above two paragraphs are based on: 1859 Indiana Stats. 45; 1862 Oregon Stats. 658; Loss, Louis, Securities Regulation (Boston, 1951), pp. 3–18Google Scholar.

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11 Evans, Business Incorporations, p. 49, notes increase in number of incorporations. Nicholas, Francis C., “The Wrongs and Opportunities of Mining Investments,” Annals of the American Academy of Political and Social Science, vol. XXXV (1910), pp. 208–209Google Scholar. National Association of Securities Commissioners, Proceedings, 1918 (Chicago, 1918), pp. 5–9, 41–44Google Scholar; Associated Advertising Clubs of America, Seventh Annual Convention (Boston, 1912), pp. 79–80, 153–72Google Scholar; Associated Advertising Clubs of the World, National Vigilance Committee, Bulletin, Nos. 1–6 (May-July, 1918). Historians have yet to study advertising clubs and better business bureaus. U.S. Postmaster-General, Report, 1911 (Washington, 1912), p. 17; ibid., 1912 (Washington, 1913), p. 15; ibid., 1915 (Washington, 1914), pp. 35–38; ibid., 1914 (Washington, 1915), pp. 46–47. President Taft appointed a distinguished committee headed by Arthur T. Hadley to investigate the feasibility of federal regulation of railway securities, but in 1911 it made a negative report. See “Report of Railroad Securities Commission,” op. cit., pp. 3–20; Brandeis, Louis D., Other People's Money (Boston, 1914), pp. 82–84, 101–108Google Scholar.

12 There is no satisfactory historical account of this movement. But see Edelman, Jacob M., Securities Regulation in the 48 States (Chicago, 1942), pp. 1–53Google Scholar; Loss, Securities Regulation, pp. 19–55; Barron, Mary, “State Regulation of Securities, 1918,” Annals of the American Academy of Political and Social Science, vol. LXXVI (1918), pp. 167–90CrossRefGoogle Scholar; Stein, Emanuel, Government and the Investor (New York, 1941), pp. 63–147Google Scholar, and Loss, Louis, Blue Sky Law (Boston, 1958)Google Scholar analyze blue sky legislation after 1933.

13 1850 Cal. Stats. 347; 1853 Cal. Stats. 87.

14 Hittell, John S., “The Mining Excitements of California,” Overland Monthly, vol. II (March, 1869), pp. 415–17Google Scholar; King, Joseph L., History of the San Francisco Stock and Exchange Board (San Francisco, 1910), pp. 3–14Google Scholar.

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16 California, Governor, Annual Message, 1865, p. 59; California Legislature, Assembly, Committee on Corporations, Majority Report (Sacramento, 1880), pp. 5–8; Hittell, John S., A History of the City of San Francisco (San Francisco, 1878), p. 488Google Scholar.

17 1880 Cal. Stats., 115, 131; California Constitution, 1879, Art. IV; Parker v. Otis, 130 Cal. 322; See also 89 Cal. 374, 187 U.S. 606.

18 Record of Incorporations, California Department of Corporations, Sacramento.

19 California, State Bureau of Mining, Report, 1901 (Sacramento, 1902), pp. 15–16; ibid., 1905 (Sacramento, 1907), pp. 11–12; ibid., 1907 (Sacramento, 1908), p. 17; Benas, Lionel B., “The Corporate Securities Act: Recent Cases and Amendments,” California Law Review, vol. XIV (January, 1926), pp. 101–125CrossRefGoogle Scholar.

20 Ayres, A. V., “Government Regulation of Security Issues,” Political Science Quarterly, vol. XXVIII (December, 1913), pp. 586–97CrossRefGoogle Scholar; Dykstra, C. A., “Blue Sky Legislation,” American Political Science Review, vol. VII (May, 1913), pp. 230–34CrossRefGoogle Scholar; Hichborn, Franklin K., The Story of the Legislature of 1913 (San Francisco, 1913), p. 349Google Scholar.

21 1913 Cal. Stats. 715; Commonwealth Club of California, Transactions, vol. IX (1914), pp. 602–606Google Scholar; Key, V. O. and Crouch, Winston, The Initiative and Referendum in California (Berkeley, 1939), pp. 500–501Google Scholar.

22 The above is based on California, Commissioner of Corporations, Report, 1915–1916 (Sacramento, 1916), pp. 6–10, 12–19, hereafter cited as CCC Report; ibid., 1918 (Sacramento, 1918), pp. 3–8, 11–12; Dalton, John A., “The California Corporate Securities Act,” California Law Review, vol. XVIII (January, 1930), pp. 129–36Google Scholar.

23 1917 Cal. Stats. 673; Mowry, George E., The California Progressives (Berkeley, 1951), p. 219Google Scholar; E. A. Dickson to Hiram Johnson, December 18, 1914; J. H. McCarthy to Hiram Johnson, March 20, 1915, Hiram Johnson Papers (University of California).

24 CCC Report, 1922 (Sacramento, 1924), pp. 3–5; John A. Dalton, “The Administration of the California Corporate Securities Act” (Ph.D. dissertation, University of California, 1929), pp. 53–138, examined materials of the Commissioner which have since been destroyed.

25 CCC Report, 1920 (Sacramento, 1922), pp. 3–13; ibid., 1926–1928 (Sacramento, 1928), pp. 3–10, 21–23; interview with Assistant Commissioner of Corporations Donald A. Pearce, San Francisco, August, 1960.

26 Corporation Commissioner File, State Archives, Sacramento, California; Dalton, , in California Law Review, vol. XVIII (November, 1929), pp. 123–27, 134–36, 388–90Google Scholar.

27 “Legislative History of the Securities Act of 1933,” George Washington Law Review, vol. XXVIII (October, 1959), discusses the framing of the federal act, found in 48 Statutes at Large 74; see also Kessler, Friedrich, “The American Securities Act and Its Foreign Counterparts; A Comparative Study,” Yale Law Journal, vol. XLIV (May, 1935), pp. 1133–65CrossRefGoogle Scholar; Nussbaum, Arthur, “American and Foreign Stock Exchange Legislation,” Virginia Law Review, vol. XXI (June, 1935), pp. 839–75CrossRefGoogle Scholar; Smith, Russell A., “State ‘Blue Sky’ Laws and the Federal Securities Acts,” Michigan Law Review, vol. XXXIV (June, 1936), pp. 1135–66CrossRefGoogle Scholar.