Munger Interviews Chairman
Following is a reprint from the Chicago Daily News of November 26, 1941:
By Royal F. Munger
Robert W. Baird, president of the Wisconsin Company of Milwaukee, and chairman of the board of the National Association of Securities Dealers, made the suggestion in Chicago today that the state department for the regulation of the securities business, far from being on the way out, were an indispensable part of the future conduct of the business. He believes that they will be found co-operating with and supporting the efforts of the Securities and Exchange Commission and providing a local contact which cannot be obtained entirely through a centralized federal agency.
“This should not be understood in any sense as a move in opposition to the SEC,” said Mr. Baird with emphasis. “It is rather in cooperation with the SEC. Our business has nothing to hide and has no desire (as far as I can speak for it) for any business that does not result constructively in greater welfare for the country as a whole.
“Many situations in the security business are national in scope and can only be handled through the federal government. This obvious truth was long neglected and the correction was long overdue when it came. But that does not mean that all raising of capital or sale or exchange of securities is to funnel through Washington.
“State control of securities has a definite place in the picture. Such state control should be on its own budget, financed independently of any other department of the state, and should have ample authority to deal with situations which may arise in connection with local financing.”
It is a commonplace in government that the power to regulate goes to those who do the best job of regulation and it is equally a truism that the controlling power in any situation is that which is exercised with the greatest strictness.
That is why, during the last few years, on both counts, the SEC has entirely eclipsed local agencies in security control. Its large staff and the broad powers given it under the law have made the state efforts look puny. Even more important is the fact that, particularly from the Chicago office, it has done an excellent piece of work.
While the investment banking business would seem to have been regulated almost to the point of extinction, its members will do well to remember that it has to be the punching bag on which the SEC and the state security commissioners take turns demonstrating their prowess. That double tatoo is still worth while if it preserves a measure of local control of strictly local investment.
It would seem, in theory, that the best interest of the country would be served by the preservation of a large number of small investment dealers. The channel ought to be kept open for an energetic young salesman of good character to go into business for himself, with capital saved or subscribed. The present investment firms started that way.
In practice, regardless of the theory, any central control through Washington tends to make operation easy for the large and established gropu that can afford Washington or New York contacts, and to make it difficult for the small concern operating entirely within the limits of a local community.