During the months leading up to the JofA ’s centennial issue in October 2005, we are publishing excerpts from past editions that offer a glimpse into some of the timeless subjects the JofA has covered throughout its first 100 years. “For Protection of the Public” was an editorial in the October 1930 issue. Written only one year after the start of the Great Depression, and before passage of the 1933 and 1934 securities acts, it made points about independence, transparency of reporting and serving the public interest that remain relevant 75 years later.
“I n times of stagnant markets the public does not feel a vital interest in security markets, but when there are sharp rises and falls people who have investments or may have investments become aroused, and then comes the request for explicit information for the guidance of investors and demand for the amelioration of any conditions which may be adverse to the general welfare. There was a time not many years ago when every stock exchange maintained a sort of top-lofty attitude. There was a feeling, although perhaps not openly expressed, that the public, if the public objected, could be damned. But that time has gone. There may be an individual financial house here and there which still labors under the delusion of autocracy, but for the most part people, whether in finance or business, are beginning to find out that there is a common level of things and that to that level all will ultimately return. The committees which are to be appointed will not bring about perfection. [Editor’s note: The writer evidently refers to committees being appointed at that time by the American Institute of Accountants and the New York Stock Exchange to work on problems relating to investors, exchanges and accountants.]
They will probably, like most committees, fall somewhat short of the great expectations which accompany their birth. But if, as is to be hoped, the committees selected by the two organizations are strong and truly representative of the best, it is not too much to expect that they will bring about substantial benefits. They will no doubt devise plans for presenting the public with that sort of information to which the public is entitled and has not always had. Questions of technical accounting which have a bearing upon the valuation of securities should emerge from joint conferences of the two committees answered partly, if not completely. A stock exchange is supposed to be in a sense a purely mechanical clearing house without sentiment or partiality. An accountant, if he is really an accountant, stands in an equally impartial position. He is supposed to present facts irrespective of the effect of their presentation. These two impartial agencies, on the one hand, and the extremely partial agencies which are responsible for the issuance of securities, on the other, should be able to strike a mean and afford protection to the people who have money to invest or even to those who feel an urge to gamble in the purchase and sale of securities. Everybody knows that the number of investors has increased within the past twenty years to a point which is altogether amazing. The investing public which was originally a small section of the nation has spread to include folk in all walks of life. Men, women and even children engaged in gainful occupations find themselves in a position to spare from their earnings something for storing away against the rainy day. Most of them, unfortunately, incline to the speculative rather than the permanent form of investment, but, whatever be their chosen medium or method, they are entitled to have placed before them complete information in a way which they can understand. There have been repeated efforts to effect the desired reformation, but most of them have accomplished nothing and all of them, of which we have knowledge, have died away. This new attempt to bring about better conditions may follow the same path but at the beginning it looks like something which will have good and lasting effect.”