TRAPS AND PITFALLS

Evening Post, Volume CXV, Issue 92, 20 April 1933, Page 14

TRAPS AND PITFALLS

INVESTORS WARNED

BY, STOCK EXCHANGE CHAIRMAN

-■.; '.' :• ''''/Evening Post," April 20.' ; '"' The chairman of the Sydney Stock Ex-; change in. a forthright and.official statement, warns investors and potential investors .against "the traps and pitfalls" set for the unwary 'by what he calls "go-getters," who hawk bonds and shares from house to house. "The clever attacks of these people have become a menace' in many countries," states the chairman, and he continues: "Australia and New Zealand have beenhappy hunting grounds. ' In Canada, also, this menace has grown to enormous proportions. It became so bad in England a , few years ago that an Act was passed by the British Parliament making it a criminal offence for a person to hawk shares or bonds from house to house. The penalty there for the offence ranges up to twelve,months' imprisonment and/or a fine up to £500. "Queensland and Tasmania have followed England's example and also made this canvassing' illegal, but the other four States have not yet fallen into line. . . . ' "This canvassing has recently developed into a fresh menace to the investing ' public. Formerly, cash subscriptions only were invited; but, finding these more ditficult to obtain, shareholders in various investment companies and institutions are now being approached to sell their holdings, to the go-getters, and, in exchange, are offered shares or bonds in the new companies. The inducement held out is a higher rate of return and a consequent increase in income. APPEAL TO COMMONSENSE. ' "But I ask you to use • your common sense in this matter and reason out the proposition. How is it possible for any •new company to pay you 6 per cent, or 8 per cent, on your'.'funds,'.when" those; funds are supposed to be invested by these ,new companies in sound securities, which,. 'at the present time, give a return at the mbst'of '4'per 'cent.'to.'s /per-cent'.?"; .';'■: I . • Dealings on margin or cover, as-in the United States; are likewise condemnedby the chairman, who adds: "I firmly believe that a large amount of the distress which exists in America at the present time has been caused through overspeculation of this .character." ' "As a: representative .of...the. Sydney Stock Exchange,'':'the,chairman concludes,! "I would counsel you to hasten ■' very1 slowly in the matter of investments. Do not risk losing your savings, perhaps of many years, without investigation.' Do notbelieve the statements•' made to. you by .strangers and outsiders, who are probably adventurers. If you hold shares and are invited to exchange them for shares ■or 1 bonds in new companies, do nothing without first seeking, advice from the manager of your company, or your banker, or a, member of any recognised Stock Exchange in Australia. This advice will be given free of charge." A final word of warning is given in reminding investors that it is very difficult to sell investments not listed by the Stock Exchange.