HAWKING OF BONDS

New Zealand Herald, Volume LXX, Issue 21449, 24 March 1933, Page 9

HAWKING OF BONDS

PRACTICE IN AUSTRALIA

WARNING TO INVESTORS

Tn a broadcast address in Sydney last week, Mr. F. 0. Steele, chairman of the Sydney Stock Exchange, warned investors against the pitfalls set the unwary by house-to-house share or bond canvassers.

The attacks of these people, he said, had become a me'nace in many countries. Australia and New Zealand had been happy hunting grounds. In Canada, also, this menace had 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 this offence ranged up to 12 months' imprisonment or a fine up to £SOO. Queensland and Tasmania had followed England's example, and also made this canvassing illegal, but the other States had not falleYi into line. Early legislation, however, was promised by tho Stevens' Government, and it was hoped that the new bill would become law next session. Mr. Steele said that formerly cash subscriptions only were invited, but shareholders in various investment companies and institutions were now being approached to seil their holdings, and in exchange were offered shares and bonds in the new companies. How was it possible, he asked, for any new company to pay 6 per cent or 8 per cent on their funds when those funds were supposed to be invested by these new companies in sound securities which at present gave a return at tho most of 4 per cent to 5 per cetit ? Tho expenses of these new companies were heavy, and as 8 per cent was frequently offered it was necessary that from 12 per cent to 14 per cent must be earned. The only way this could be accomplished was for tho company to gamble with the money, and gambling usually led to disaster and crash.

Mr. Steele said lie firmly believed that a largo amount of the distress which existed in the United States at present had been caused through over-specula-tion. He warned the public to hasten slowly in the matter of investments. "Do not believe the statements made to you by strangers and outsiders who are probably adventurers, said. "If you hold shares and are invited to exchange them for shares in new companies, do nothing without first seeking advice from the manager of your company, your banker, or a member of any recognised Stock Exchange in Australia. Avoid house-to-house canvassers like you would the plague."