FLAW IN ACT.

Auckland Star, Volume LXIX, Issue 98, 28 April 1938, Page 18

FLAW IN ACT.

EXCHANGE OF SHARES

CHANCE FOR HAWKERS. JUDGE EXPLAINS POSITION. (From Our Own Correspondent.) SYDNEY, April 23. A few weeks ago Arnold Lovell was convicted at Armidale of "offering shares for purchase." It will be remembered that as a tesiilt of th© outcry over the activities of "urgers" and other more or less unscrupulous sellers of shares and floaters of companies, legislation was passed both in New Zealand and in several Australian States two years ago to restrain or prevent such operations. \

The New South Wales Act lays down the general rule that "a person shall not, whether by appointment or otherwise, go from house to house or from place to place offering shares for subscription to the public or any member of the public."

Grounds for Appeal. Lovell was charged under this clause of the Companies Act (1030), was found guilty and was ordered to pay a fine of £100 and, in addition. £135 costs, in default, to suffer 471 days' imprisonment with hard labour, and imprisonment for three months.

Last week he appealed against the conviction on the ground that he had offered shares not for purchase money, but for exchange, and that the Act does not cover euch transactions.

The case came before the State Full Court, and the Chief Justice (Sir F. Jordan) gave judgment in favour of Lovell's point—Mr. Justice Davidson and Mr. Justice Halse Rogers concurring. -

Their Honors were unanimously of the opinion that "purchases are included in the sale section of the Act only where the sales are true sales for money," but the Chief Justice pointed out that while Lovell had effected some exchangee, he had also sold shares in the manner forbidden by the Act, and therefore the sentence imposed on him at Armidale should not be remitted.

However, Sir F. Jordan remarked that Lovell "still has right of appeal to the High Court," and he will probably avail himself of this last resort.

But the general public—and more especially our stockbrokers and financiers—are less interested in Mr. Lovell and his than in the working of the Companies Act, and a great many of them were both surprised and alarmed to learn from the Full Court judgment that exchanges of shares do not come under the prohibition set forth in the special legislation designed to prevent "urging." Should Be Amended. The most obvious comment is that the Act should be amended at once, and this suggestion the Chief Justice has already made.

"It was notorious," lie said in his remarks last week on the Lovell appeal, "that at the time when the Act was passed one of the most usual methods by which share-hawkers perpetrated their frauds was that of beguiling the unwary into exchanging valuable shares for worthless rubbish. In these circumstances it is deplorable that exchanges should be left outside the purview of the Act."

Following up this hint several of our leading Stock Exchange brokers have expressed a strong desire for the extension of the Act in this direction. The idea has been taken up and emphasised by the "Sun," and now the Minister -A Justice has announced that he has noted Sir F. Jordan's remarks "for future action."

He has also reminded the critics of the Act that, so far, "no legislation in the Empire has seen fit to place the exchange of shares in the same category as sale of shares for the purposes of share hawking."