There came to the attention of members of the General Assembly certain instances of burdensome losses incurred by citizens of Virginia by reason of the purchase of securities sold to the public after having been issued improvidently or with the intent to defraud. It was not known whether such occurrences were widespread, but there was apprehension as to the adequacy of the security laws and regulatory functions of the State in regard to the issuance of securities for sale to the public.

This and the related problems discussed below led the General Assembly, at its 1972 Regular Session, to adopt Senate Joint Resolution No. 25 creating a Commission to study and make recommendations on the subject.

Pursuant to this resolution, the President of the Senate appointed to the Commission from the membership of the Senate the following: Elmon T. Gray, Edward M. Holland and J. Harry Michael, Jr.; the Speaker of the House of Delegates appointed to the Commission from the membership of the House the following: William M. Dudley, Dudley J. Emick, Jr., Frank E. Mann, C. Hardaway Marks and John C. Towler; and the Governor appointed to the Commission Bert Ely, Financial Consultant of Salem, W. Gibson Harris, Attorney at law of Richmond, and Walter H. Steel, retired financial consultant of Kilmarnock.

The Commission, at its organization meeting, elected Senator J. Harry Michael, Jr., Chairman.

The Division of Legislative Services made staff and facilities available to carry out this study. Assigned to assist the Commission in carrying out its directives were Courtney R. Frazier and L. Willis Robertson, Jr.

The Commission met several times and held two hearings. At the first, representatives of the securities industry selected from various parts of the State were invited to appear. Mr. John C. Hagan, III, of Craigie-Mason-Hagan, Inc. of Richmond, appeared on behalf of the member firms of the Securities Industry Association, headquartered in the Commonwealth of Virginia. There also appeared Mr. John W. Riely, Attorney at law of Hunton, Williams, Gay & Gibson of Richmond, Mr. William F. Calliott of Investment Corporation of Virginia of Norfolk, Mr. John L. McElroy, Jr., and Mr. James B. Farinholt of Wheat First Securities, Inc. with offices in several Virginia cities, and Mr. Philip L. Strader, an underwriter specializing in municipal bonds, of Lynchburg. Each of these representatives gave a presentation incorporating their recommendations. Under questioning, they gave the benefit of their advice and experience.

At the second hearing, persons selected from the files of the Division of Securities and Retail Franchising of the State Corporation Commission, who had suffered losses as the result of the purchase of worthless securities, were invited to attend. As a result of the testimony of Mr. William N. Bracey and Mr. James H. Wells, both of South Hill, the Commission was able to follow the history of the losses connected with Regency Manor International Corporation. Mr. Michael S. Hollis of Richmond explained the circumstances relating to Teen Scene U.S.A., Inc.

Mr. Lewis W. Brothers, Director of the Division of Securities and Retail Franchising of the State Corporation Commission, and members of his staff Mr. Robert G. Lewis and Mr. Donald Martin attended the hearings and several meetings of the Commission. Their advice, assistance and recommendations were of great value to the study.

Mr. Toy D. Savage, Jr., of Willcox, Savage, Lawrence, Dickson & Spindle of Norfolk was engaged as counsel for the Commission. He attended all of its meetings, except the first, and assisted with the proceedings of the Commission.