SECURITIES: From the Boiler Room

For five years the name W. Kennedy had been on the sucker lists of security salesmen who, finding the going too tough in the U. S. under SEC administration, had fled to Canada to sell their wallpaper mining stocks by long-distance telephone. Fortnight ago, W. Kennedy’s turn came. The telephone in his Chicago office rang. He picked up the receiver. The conversation:

Voice: “This is Mr. Marples of F. H. Marples & Co., specialists in mining and industrial securities, of Toronto, Canada, calling.”

Kennedy: “Yes.”

Voice: “I just happened to call into my Chicago press wire and thought I would give you a call at the same time. There is a terrific amount of activity in Payco Gold Mines. The price is now 40½. . . . The stock will definitely touch around $1 on this move. Four years ago I suggested Waite Amulet. This mine is within striking distance of the Payco mine. It moved from 84¢ to $3.05 in eleven weeks [actual time: 52 weeks]. … I would like to make a commitment for you on that Payco. . . .”

Kennedy: “What are the chances of its going down?”

Voice: “. . . When I say a dollar, I speak of something that is more than conservative. …”

Kennedy: “What kind of management does the company have?”

Voice: “The greatest in the world! The management is recognized in this country and in yours as the greatest board on any mine. …”

Kennedy: “Are you on the inside of this manipulation so that you will know when to sell?”

Voice: “I have been in on five different mines. . . . I’ll know definitely when I think it is the right time. If all I ever did was one trade with you, it would hardly pay me. I think my only bet is a continued clientele. . . .”

Kennedy: “How much would you recommend buying?”

Voice: “You suggest, Mr. Kennedy. I never look into a man’s pocketbook.”

Kennedy: “I naturally hesitate to do business with anyone that I have never seen. I have been getting your literature, but I don’t know anything about you.”

Voice: “Ninety per cent of our business is done on the phone with people I have never seen, unless they take a trip through Canada.”

Kennedy: “Are you a member of the exchange?”

Voice: “We are not members of anything; never have been. We are individual mining brokers.”

‘Kennedy: “I would like to sleep on it for a day or two.”

Voice: “I don’t want you to sleep on it while it goes to 75 or 80¢ a share. …”

Kennedy: “I want to think about it a little bit. I’ve always done business with local firms and I’ve gotten a prospectus or something.”

Voice: “I don’t want to force you into anything, and we don’t use high-pressure attempts. We are not American brokers.”

Kennedy: “I must admit I’m very much interested because it sounds very safe, but I wonder if I could buy it through my own broker?”

Voice: “It doesn’t make any difference from whom you buy it. Your own broker cannot do any business with Marples. . . . If you put your business through some other broker, it means that I step out of the picture. If that broker is in touch with the picture and knows the situation, he knows when to sell.”

Kennedy: “But my broker wouldn’t know anything about the manipulation.”

Voice: “That’s right. That’s why you should do business with me. . . .”

Kennedy: “I’ll get in touch with you if I’m. interested.”

Voice: “I won’t put any of my clients in above the 55 or 60¢ figure. My judgment of today won’t be my judgment of a week from today. What’s the smallest commitment you ever made?”

Kennedy: “Well, I’ve usually been pretty careful; I’d say five or six thousand dollars. …”

Voice: “Did you ever make a commitment as small as $200 or $400? . . .”

Kennedy: “Let me think about it. . . .”

Voice: “A real small commitment isn’t going to inconvenience you. Within the next two or three days there will be a difference of five or ten points.”

Kennedy: “If I decide to buy, I’ll call you. Good-by.”

Voice: “Good-by.”

The call had consumed some 28 minutes, cost Salesman Marples $30. That sum he could kiss goodby, for Sucker W. Kennedy was blond young (31) W. McNeill Kennedy, Regional Administrator of SEC in Chicago. Although SEC had no power to act against a Canadian firm, Kennedy could (and last week did) inform the Ontario Securities Commissioner, who has a handy law for cracking down on boiler rooms in his Province.