But for the losses referred to is there not too often somebody else to blame? The seller of investment securities is usually not the maker of them, but a professional middle-man known as a broker. The extent of his responsibility is a very interesting question. Is he justified in assuming that caveat emptor is the rule that is to govern; or is it incumbent upon him to inform himself as to the true character of the paper he offers, and give his customer the benefit of the knowledge he acquires? In other words, does he not, by virtue of the relation he bears to the purchaser, which is ordinarily one of confidence, become, morally at least, a sponsor for what he sells? In view of the millions of trash that have been unloaded upon the public as solid investments, of the true character of which it would not have been difficult for any one making a business of handling paper to inform himself, it is hard to reach any other conclusion than that there has been very great laxity on the part of many who, under the plausible titles of banker and broker, have made the selling of securities an occupation. It will hardly suffice for them to say in defense that they sold the paper at market prices. They should have known that the value of what they sold bore a reasonable approximation to the price that was paid. If they did not know it, and could not ascertain the fact, they had no business to dispose of the property. Manifestly, a higher standard in such matters should prevail, and the way to secure it is to hold those who professionally market investment securities to a far more rigid accountability than has heretofore been insisted on.
By what rule or rules is the investor now to govern himself? No formula can guarantee him absolute safety. One thing, however, he can properly count upon, viz., that he must expect to pay a fair price for a good security—one that will return him no more than a moderate interest on his money. If he wants to speculate, and is willing to take risks, that is another thing. He can then look for bargains. But there is such a thing as going too far in the matter of prudence. The investor may pay too dearly for safety. There are securities which, compared with others that are to be had, sell at prices much above their real value. The reason is that they are universally known to be good both as to principal and interest; but there are plenty of others, that may be had at lower figures, which are just as good. There is no reason in the world why the investor should not get at par all the paper he wants, that will yield him six per cent interest, and be as safe as any property can be under human supervision. In making the selection no more judgment is demanded than in purchasing lands and cattle. Two very common and often fatal mistakes should be avoided. One is in relying solely upon the advice of a broker. By far the greatest number of losses to investors has been in securities purchased exclusively on the recommendations of interested commission-men. While it is well to get the opinion of a reputable broker, the purchaser should investigate and decide for himself. The other
