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Show t Col George B. Squires Seeding Out Resolutions Bearing on Insurance The commissioner of insurance of this state. Colonel George 13. Squires, is sending out, copies of a resolution adopted adopt-ed at, the recent nationnl convention of insurance commissioners at . Colorado Springs, and which deals with the attitude atti-tude of the convention towards the sale lo the public, through' soliciting agents, of the stocks of newly organized or projected insurance companies or so-called so-called in vestment or securities companies, com-panies, whose principal assets consist of such slocks. ... The resolution, which covers the matter mat-ter pretty thoroughb' and contains four sections, can not bo produced in full, but its main points arc as follows: 1. The yalc of such Stock through soliciting so-liciting jipcnlB necessarily Involves a large promotion expense, which must come out of tho amount Invested by the purchaser and cnnnol go to the treasury of the company for Its use and benefit. Most of the plans now being followed in the sale, of Ktich stocks provide for the payment out of the shareholder's con- tributlou of 20 per centum or more of the nmount contributed ly tlie purchaser pur-chaser to the selling agent and his employing em-ploying promoter as promoting expenses und pro tits, from whlcli It must necessarily neces-sarily follow that when the corporation begins business the book value of the slock pnrc-hnscd. shall be only SO per centum or less of the amount which lias been paid In. Iii 'other "H'ordw, the own-,ors own-,ors of a company so promoted- must sustain sus-tain a loss of 'JO per centum or mlii' of the amount they have Invested before the corporation begins, the transaction of Insurance In-surance business. 2. Even if the total contribution of the. shareholder In a ncwiy-organlzed Insurance Insur-ance corporation goes Into the treasury of the company and no considerable loss through promotion expenses is sustained before" it begins tho transaction of Insurance Insur-ance business, still capable, connervntlvo and economical management Is absolutely essential, not only to Insure reasonable returns to stockholders upon their Invest' ments, but to prevent them sustaining severe losses. For such management sound business Judgment and at least some knowledge of the proper methods of ' conducting the business of an Insurance Insur-ance corporation are Indispensable, and the fact that a man Is an experienced and successful Insurance agent or salesman sales-man docs not prove that, he possesses the capacity and training necessary to suc-cessful suc-cessful company management. Where stock in a proposed Insurance company Is purchuscd from a. soliciting agent the purchaser can have practically no as-ouninee as-ouninee as lo the personnel or Llic capability ca-pability or character of iLs management, as the laws of most. Idiot all. states , require that the officers shall be chosen by the directors." whoshalI be chosen by the stockholders, whoever they may be, when a sufficient amount of stock has been sold' to permit organization to be effected. We fully recognise that new-insurance corporation! can be, as they have been and are being, organized and conducted con-ducted so that they will conserve the Interests of their patrons and after some years cnih fair dividends for their stockholders.' stock-holders.' and that the formation of such companies, oi'gu'nlzcd "Upon "sound lines and .to .be conducted under proper management. man-agement. Is desirable and should be encouraged en-couraged In many sections, but the stock-selling stock-selling scheme and substantial promotion expcDxcs or profits are wholly unnecessary unneces-sary to the organization of such companies. compa-nies. This Is amply proved by tho number num-ber of such organizations which have been formed during recent years without with-out the use of such methods and without with-out nny considerable expense of promotion. promo-tion. 4. Representations made by promoters and agents In their efforts to sell such stocks and In the literature used -by them are In many cases misleading and deceptive decep-tive In that they call attentl6n to the present value of the stocks of a few successful suc-cessful Insurance corporations and the dividends' earned by them, whjlo making no mention of the large, number of such corporations whose shareholders have suffered great loss through the.lr operation. opera-tion. While under the reserve laws that have long been In force tho losses to the public through tlie failure of Insurance companies to meet their obligations have been comparatively small, the losses- of tho stockholders of such' companies have been many and severe. Be it further resolved that wc pledge ourselves-, to -put forth our; best endeavors In all practicable and proper ways to put an end to this trafflv. which we believe is pernicious and wholly Indefensible and will result In widespread disappointment ami llnanclal loss to the public and the .serious Injury and demoralization of the legitimate Insurance business, doing a special harm lo tho legitimate progress-arid progress-arid development of tho smaller and younger companies. . lie It further resolved that wc recommend recom-mend tlie passage by the various states of laws requiring that the capital stock of ull Insurance corporations shall be fully paid up In cash before a charter is isued. and prohibiting the licensing to transact Insurance business of any corporation cor-poration hereafter formed If the expense of lis organization and of placing Us stock has exceeded 5 per cent of the total contribution by Us stockholders. |