ITS OWN SECURITY.

Auckland Star, Volume LVII, Issue 251, 22 October 1926, Page 5

ITS OWN SECURITY.

INVESTING COUNCIL FUNDS. NOTHING TO PREVENT IT. HAMILTON BALANCE-SHEET " TAGGED." (By Telegraph.—Own Correspondent.) HAMILTON, this day. The Hamilton Borough Council, having, invested £5000 cf its funds in its own debentures, has had a. "tag" attached to its balance-sheet by the Audit Department, drawing attention to the matter. The council has decided to send a reply to the Department stating that it knows of no regulation forbidding this particular form of investment of council moneys. NOT ADVISABLE. OPENS WAY TO ABUSE. '"We invest only in outside securities," said Mr. E. H. Potter, Mayor of Mount Eden, when the matter was referred to him this morning. !i We invest in outside securities and the debentures of other local bodies. * I quite admit that occasions may arise when it would be good business for a council to invest in its own debentures, but it is not done, mainlyfor the reason that in matters of finance you must be always on the safe side and free frcm any suggestion of malpractice. On the Hospital Board 'we follow the same policy, using the Public Trustee."

Mr. S. Gray, town clerk of Mount Eden, said he personally could not see any reason why a local bedy should not invest in its own debentures as far as security was concerned, but he did not approve of it in practice as it opened up a possibility of malpractice with a town clerk acting in two capacities, that of seller and buvur.

A leading member of the Auckland Stock Exchange said that, providing the deal was pit through on proper business lines, it should be a good thing for a local body to invest in its own debentures, the thing working out exactly as a man reducing his own overdraft. He quite realised, however, that the practice might open up the way to irregularities. It would be good business providing the council bought at market prices, for in that case it would be buying probably at a discount; but there would always be the opportunity for malpractice. For instance the council might wish to do some man a favour and buy from him £95 debentures for £100, which wculd not be good business.