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! Broker Defends Private
Prices
"IGNORANCE IS
1ILISS"
By The Herald Finance Editor
Defending secret sales of
shares in public companies
(criticised in The Herald on
June 111. a leading share-
broker quotes the following
type of case: —
At. n critical stngc In the war. n
holder of n large parcel of shores
lost confidence, nnd asked the
broker to sell them immediately
regardless of price. By ofTering
them considerably below the mar
ket value, the broker wns able to
place them privately.
Had the price been divulged, he
contends, it would have caused a
fall In the market price. By
keeping it secret, the market re
mained up, and a number of
shareholders were so much the
happier.
Tills argument, In effect, rests
nil the comfortable basis that
ignorance is bliss.
The doctrine that concealment
saves people from worrying Is a
highly dangerous one.
Who Is to decide which prices
might worry people nnd which
ones might not? If every separate
broker Is to mnkc his own decision
in every separate case as to whe
ther or not to report, moreover
to mnkc that decision according
to the wishes of his client, how
can the suspicion be removed
that a client may be Inllucnced by
self-interest rather than public
benefaction?
The nnswer Is thnt it is Impos
sible to remove that suspicion, and
to guard against self-interest, if
secret deals are permitted.
Moreover, under the new regula
tions, minimum and maximum
price limits now prevent the mar
ket. from being unduly nflectcd by
cither boom or panic transactions.
The broker's argument Is there
fore lost.
The system of public auction
for public company shares, as
provided by the Stock Exchange,
should prevail.- If sales arc per
mitted by members outside the
room, the least to ask is that the
details be publicly reported. Any
thing less weakens the functions
of the Exchange, nnd endangers
the official recognition at present
accorded to the Exchange ns being
a necessary institution.
$