Lyndon B. Johnson photo

Remarks Upon Signing Bills for the Protection of Investors in Securities

July 29, 1968

Chairman Cohen, Chairman Martin, Chairman Staggers, Members of the Congress, ladies and gentlemen:

In the early 1930's, President Franklin Roosevelt and the 73d Congress began building a program of protection for the American investor. Some of us can recall the destructive manipulations and "fast buck" operations that led to those reforms of the thirties. Through the years, we have strengthened the investor's protection. We have expanded our capital markets--making investment more attractive for more people.

Today, in our flourishing economy, over 20 million Americans have a personal stake in our free enterprise system. They own directly more than $500 billion worth of shares in America's industries, utilities, and corporations.

The three bills we will sign today enlarge the investor's protection by bringing old laws up to date, and looking ahead to the future.

The first law deals with "take-over bids." It will assure full and fair disclosure of the facts when an offer is made for stockholder shares. The shareholder will have all the information that he needs to choose wisely.

The second measure will expand credit operations of capital markets by enlarging on an advance that we made 4 years ago. In 1964, I signed legislation requiring full information on stocks sold over the counter. Disclosure has proved effective. Now we can permit the most marketable of those stocks to be sold by brokers and dealers on the margin, under Federal Reserve Board regulations, just like stocks traded on the exchanges.

The third measure--this is a three-in-one bill signing today--will permit the Securities and Exchange Commission to make a thorough study of the impact of institutional investment on the stock market. This is a dramatic phenomenon. It requires very careful attention. I hope the study will help us to nip any problems in the bud--and to prevent any trouble before it starts.

We all welcome these three new laws. They will move us further along the road to good investment protection.

But 18 months ago--on February 16, 1967--I urged the Congress to take another step in the battle to help the small investor. I pointed to the explosive growth of mutual funds--from a $450 million fledgling industry in 1940 when President Roosevelt first signed the Investment Company Act to a mushrooming $45 billion giant today.

And the funds are growing larger and larger as more millions of Americans--many of modest means-entrust their hard-earned savings to build a nest egg for their retirement days or to pay for the education of their children.

The funds have helped Americans to share in the growing prosperity of our Nation.

The average American has been complaining to Chairman Cohen and Betty Furness. The small investor wants answers to some of these questions:

--Why do the mutual funds eat up nearly 10 percent of every dollar invested for sales commissions instead of putting that money to work?

--Why do they allow "front end loads" that make the investor forfeit half of the money he puts in, if he can't afford to continue?

Well, the Congress has the chance to answer some of those questions.

The Senate last Friday passed the mutual fund reform bill. It wasn't all we asked for. But it is a great improvement over the current situation.

Now I hope the House will move ahead with important consumer measures in the days ahead. Millions of mutual fund investors, I believe, are looking to the Congress-and to us--for legislation in this field. And I genuinely hope that we will not disappoint them.

Thank you very much.

Note: The President spoke at 5:45 p.m. in the Fish Room at the White House. In his opening words he referred to Manuel F. Cohen, Chairman of the Securities and Exchange Commission, William McC. Martin, Jr., Chairman of the Board of Governors of the Federal Reserve System, and Representative Harley O. Staggers of West Virginia, Chairman of the House Committee on Interstate and Foreign Commerce. During his remarks he referred to Betty Furness, Special Assistant to the President for Consumer Affairs.

As enacted, the bills (S. 510, S. 1299, and S.J Res. 160) are Public Laws 90-439, 90-437, and 90-438 (82 Stat. 454, 452, and 453), listed in the order referred to by the President.

Lyndon B. Johnson, Remarks Upon Signing Bills for the Protection of Investors in Securities Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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