when there is little or no real business doing in the City-how many are there in which a regular man of business, who is possessed of the ordinary amount of practical common sense, would invest a five-pound note of his own, his children's, or his friends' money? Or how many men are there who would invest, even by way of a personal speculation, a shilling of funds they could call their own, or for which they are the trustees? It is true that, of the jointstock companies registered in London, a few are what may be, and often are, called working concerns. Thus when two, three, or more partners who own a business which can be shown by their books to be prosperous, want to increase their capital and means of pushing the affair, they not unfrequently convert what has hitherto been a private firm into a joint-stock company. If the antecedents of the concern are fairly good such a speculation has rarely any difficulty in obtaining the increased capital required.

The reasons are obvious. The profits and losses of the firm can be seen in a moment by any one, and with very little trouble any man of business can realize how the firm stands as regards its financial affairs. Another reason why such speculations when once fairly floated generally succeed is that those who take shares in them are chiefly persons who understand the peculiar line of business for which any company of the kind is got together. Thus, if a publishing firm is turned into a jointstock company, there will not, in all probability, be found a builder or a coachmaker who has a seat on the Board. Nor do those who promote such concerns care to have men with titles but no other qualifications as directors. These speculations, however, are not of the kind that gladden the hearts of Company Promoters, or, as they are now called, Financial Agents; it is not by means of such companies that the City swindler and his followers make their fortunes.

It may be thought that although the number, as given above, of the jointstock companies floated during the month of October in the present year is very large, it is for some reason or other exceptionally so. This is not by any The total capital of

means the case.

new joint-stock companies brought out in the year 1882 amounted to no less than two hundred and fifty millions sterling. In the following year, 1883, it amounted to one hundred and fiftyseven millions; and in 1884, to one hundred and thirty-eight millions sterling.* Let us, for the sake of argument, assume that of these concerns not more than one in every three or four is what may be in plain English called a deliberate swindle; and that not more than a like proportion of the asked-for capital can be placed in the same category. Yet even with these proportions -which, as every City man knows, are far below the true average-it will not require any very great amount of calculation to show what sums of money must be every year taken out of the pockets of honest fools by clever scoundrels. How this is done, those who have investigated the subject know only too well. Would be or what may be termed amateur-men of business take it into their heads that they cannot do better than increase their (perhaps comparatively slender) means by investing in some new concern of which they have read the prospectus, and which promises them, say from fifteen or sixteen to any fabulous sum that may be mentioned per cent on their money, for which they are now getting four or five. They see-and with genuine middle-class Englishmen this goes a long way-the names on the Board of Directors of a lord or a baronet, an M. P. and a couple of generals, and this is for them more than sufficient guarantee for the affair. They know little, and perhaps care less, how these names have been obtained, or what are the pecuniary means or the knowledge of business to which their owners can lay claim.

Persons who are behind the scenes could vouch for the fact that from January to December there rarely passes a week in which one or more cases of financial swindling do not take place under the name of joint-stock company investments or speculations, by which individuals are ruined. And it must be remembered that it is not as a rule the wealthy who are most to be pitied, when

* See the Investor's Guardian and the Finan

cial News of these years.

cajoled by financial schemers to take shares in these concerns. The heaviest sufferers are generally men who have pensions which they have earned in India or in some other public employment; and who after years of careful labor and saving are led to think they have discovered what will, in a very short time, make them wealthy, and increase tenfold their means and the incomes they have at command.

To revert for a moment to this inconsistency of our social laws, what would be said--or rather, what would not be said-of an avowed gambling establishment which advertised in every possible manner the advantages to be gained by those who would frequent the tables, and who would play at certain games where great gain was almost certain and losses of any magnitude almost if not utterly impossible? The question may be called useless, for no such establishment would be permitted to exist for a single week. And yet, as every one who has inquired into the matter knows perfectly well, how much more general is the ruin which has of late years spread and still is daily spreading among wellto-do middle-class people through these financial swindles than ever was the case forty or fifty years ago, when gambling establishments were regarded as forming a part of the necessary, the inevitable, evils of life! In ninety-nine out of every hundred cases, where a man makes up his mind to gamble, he either belongs to what may be called the reckless portion of society, or he has at his command more money than he knows what to do with; and having tried and exhausted every other source of amusement or dissipation, he takes to play as a means of providing himself with a new excitement, which has the recommendation of being an occupation that will always give him enough to think about.

The following account of how a certain joint-stock company was floated not very long ago the present writer can vouch for as being strictly true. For various and obvious reasons, the names of individuals concerned are not given.

A certain promoter of companies, or financial agent, determined to bring out what he was pleased to term a really good thing," and in due time this prospectus of the affair appeared in all the

NEW SERIES.-VOL. XLV., No. 2

leading newspapers in London. The speculation was a gold mine, situated in a far-off district of a foreign land in another continent. The capital, wherewith the concern was to be purchased and worked, amounted to a quarter of a million sterling, in shares of £1 each, of which only five shillings were to be paid when the shares were applied for, a like amount when they were allotted, and the balance of ten shillings in two instalments of five shillings each, at intervals of six months between each payment. The purchase-money of these mines was put down at £50,000, of which half was to be paid in cash, and half in fully paid-up shares. The Board of Directors was seemingly most respectable. The chairman was a noble lord, against whom there had never been even a whisper of anything wrong, and who was only known to certain of his friends to suffer from a chronic state of impecuniosity. Following his lordship's name were those of a baronet, and then came an M. P., two retired Anglo-Indian officers-a colonel and a major-general, --a retired Indian civil servant, and a gentleman who some twenty-five years ago had been a partner of a mercantile firm in Calcutta. In a word, although some persons of this class who are always finding fault might have asked what knowledge of gold mines in the Far West any member of the Board could boast of, still the list as it appeared in print was respectable, and carried no small weight with it in the eyes of that portion of the general public which is given to invest money in such undertakings. The shares were applied for nearly twice over in a very few days. The five shillings for each share applied for was duly paid. The allotment then took place, and another five shillings per share was paid. These two payments put at once the respectable sum £125,000 at the disposal of the Board, out of which the directors, according to the terms of the bargain with the vendor of the mines, paid the fortunate individual the sum of £25,000 in cash, and the same amount in fully paid-up shares, as stipulated in the agreement. Not that the said paid up shares were looked upon as worth much, at any rate by the vendor of the mines; for no sooner did he pocket the £25,000 in

16

of

cash than he disappeared under pretence of going to visit the mines, and was never again heard of in England. In the mean time occasional reports, short but very much to the point, and giving great hopes that the profits from the mine would, so soon as proper machinery could be provided, amount to, if not exceed, double what had been paid for them, were current. But very shortly a reverse came, and the mines were found to be worth little or nothing. The concern was ordered to be wound up. The company being limited, the shareholders had not to pay more than the full price of the shares which were registered in their respective names. But, in many instances, even this fell hard upon those who had thus to pay for their belief in the truth of jointstock company undertakings. Each one of them was called upon to pay up the balance owing on the shares which stood in his name, the said balance being ten shillings per share. Not a few of those who were obliged to pay this sum found it impossible; their lives were ruined in trying to do so, and they had to take refuge in the Bankruptcy Court. The only two persons who were gainers by the affair were the vendor of the mine and the financial agent who had floated the company. The former, as before stated, pocketed £25,000, the title having cost him a little over £100. It was country cousins, to say nothing of a vast number of middle-class Londoners, who were the sufferers and who were ruined.

The average, or usual, Director of such concerns is generally a very curious person; his title is worth more than he is paid in inducing people to take shares. Of real business he perhaps knows as much as he does of shipbuilding, or even less.

He is not conceited; when any difficulty arises in the money or other affairs of the concern, he is quite willing to be guided by the manager or the secretary, and to follow the other directors. Compared with the risk and anxiety of the financial agent, these gentlemen have no easy time of it. The profit they can hope to make is small, but £200 or even £150 is not to be despised; and large as is the demand for names sufficiently high-sounding to look well on the prospectus of a company, the supply of the article is by no

means limited. And it does not follow that our nobleman or gentleman director must confine himself to one company. On the contrary, the fact of being on the Board of a railway or tramcar company is, in itself, a good qualification for a similar appointment with a joint-stock bank in South America, or a gold-mining company in the Himalaya Mountains; and the more Boards he is on, the greater request he is in.

The financial agent or promoter of the company has a much harder and more anxious time of it. It is true that he looks for much larger profits than the gentlemen who join the Board, but his work and care are proportionately great. He does not risk capital, for the good reason that he rarely has any to risk. By regular City business men the promoter is, to use a mild word, avoided. He is not looked upon by members of the Stock Exchange as a persona grata, and yet there are few people who out of so little make so much.

There are many persons who wonder how it is that the respectable portion of the City men of business do not attempt by all lawful means to put down what only brings discredit on all legitimate speculation, and is fast making English joint-stock companies a byword throughout the business world of all lands. But the fact is that those who are engaged in legitimate speculations in the City see little or nothing of what goes on in the regions of swindling. They do not belong to the sharks who prey upon the unwary, nor to the victims who are doomed. The dupes of these schemes are in almost every instance persons who have some, though generally not much, money of their own, and are naturally anxious to increase their means. Retired officials with pensions on which they could live at any rate in ease and comfort, and in some cases in comparative luxury, are very often the victims of those who make their living by fraudulent finance. Those only who have friends among retired Indian civil and military servants can form any idea of the number of this class who have learned by bitter experience to what extent and by what plausible pretences this comparatively new system of cheating is carried on.

One of the most dangerous phases of

what Frenchmen would call this "industry" is the show of respectability it assumes. There are scores of men who would feel themselves grossly insulted if it were hinted that they had resort to the gaming-tables of Monte Carlo, or would play games of chance with cards or dice for high stakes: gambling when it is, so to speak, uncovered is the reverse of respectable; but to take shares in a company by which it is hoped and believed that every five pounds staked will bring in a return of at least so much per annum is not unworthy even of those whose aim in life is to be respectable and respected. And yet, as a wellknown and most esteemed judge said on the bench about a year ago when summing up a case which had arisen out of some Stock Exchange transaction

A great deal of condemnation is cast in England on the gambling that goes on at Monte Carlo, and had taken place at Hamburg and other towns on the Continent, but there at least the play took place on the green table

and in sight of the public. In England, how

ever, where public gaming is not allowed, gambling on the price of stocks took place out of sight of the public for much larger sums, with much more mischievous results.*

Supposing such a thing possible, what would the British public say if Government were to establish in this country legalized gaming-tables such as Monte Carlo is renowned for?

Whatever we may think of their honesty, or of the good faith and fair open dealing with which they do not treat the public, there can be no doubt that the audacity of company promoters in transacting their business is one of the wonders of the day. Nor do they ever seem to acknowledge themselves beaten. An individual of this profession may not have money enough at command to pay for the postage-stamps he requires in his office, but this will in no way interfere with or deter him from his endeavors to float a scheme of which the mere prospectus cannot appear without the expenditure of at least two or three hundred pounds. How this is done we will endeavor to show by the following illustration, which is an accurate account of the manner in which many of these un

* These words were spoken by Baron Huddleston, in the Queen's Bench Division, on July 3, 1885. See law reports in the newspapers of the following day.

dertakings spring into existence, live a short time, and, when they die, go to the grave of insolvency, dragging down with them not a few of those who have been unfortunate enough to believe in them.

A financial agent conceives the idea that a tramcar company started in Patagonia would pay. He does not mean, nor has he the remotest idea, that he or any one else will see tramcars in that land; no, but he thinks if such a scheme is started on paper, and the wires well and cleverly pulled in this metropolis, the undertaking will pay those who have the courage and pertinacity to work it, and that, no matter who loses by it, he himself will not do so. His first care is to find one of those ready writers who are able by their pens to prove almost anything. For a five-pound note, which is to be refunded out of the first money paid on application for shares, the work is undertaken, the prospectus is drawn. out, and, as a specimen of proving with pen and ink what the writer knows nothing about, it is certainly a remarkable document. The next step is to get six or seven gentlemen to act as chairman and directors of the company. individuals, who in joint-stock company slang are designated "guinea-pigs," are not difficult to find; but a wise promoter does not take every one who offers, for it is upon the names of these personages that the success, or otherwise, of the concern mainly depends. The longsuffering, longsuffering, ever ready-to-betaken-in public has a great respect for titles and rank; and a real nobleman as chairman goes a long way with them. In fact, the greater number of those who apply for shares in new companies do so on the faith of the names of the chairman and directors. They do not inquire whether these gentlemen have any experience in business matters, or whether they know anything of the special work for which the company is got together.

These

The

Any one with a title or a handle to his name will inspire more confidence in the class of people who become shareholders than would the name of the Director of the Bank of England. board having been got together, and their names in the prospectus, the next step is to publish the document in all or most of the leading London newspapers.

This is an expensive piece of work, and especially hard for the promoter, who rarely has a shilling of his own. But what will not the hope of profit accomplish? An advertising agent is found who will take the matter in hand, and will pay the expenses of advertising, large as they are, on condition of receiving a fifty or sixty per cent bonus out of the first money the promoter can command.

Here, then, the company is fairly launched so far as to make a show before the uninitiated public. Real bond fide City men know perfectly well what value to put upon the whole affair, but it is not for their acceptance that the dainty financial dish has been prepared. It is to the gullibility of the public at large that the document appeals. Let us suppose that the capital required for the concern is £150,000, in shares of £1 each. Matters are made all the more pleasant and easy for the expected victims by the announcement that not more than five shillings is required for each share on application, and a similar sum on allotment; and that the balance will not be required for six months, and even then by instalments of only five shillings each. In this arrangement the promoter shows his wisdom. The share-taking public will always prefer companies that are supposed to have a large capital; and if those who join the concern are allowed to pay their contributions by small instalments, so much the better.

Another thing likely to insure success is to give out that no applications for shares will be received after a certain date. The outside public reading this are convinced that the shares are selling rapidly, and that they had better follow the prudent example set them. In the mean time the oracle is worked in certain papers by means only known to the initiated. and the public is made to believe that shares will soon be at a premium. The Board meet every three or four days, and learn from the promoter that things are going on so well that they could hardly be better. The result of all this is that a certain number of shares are really applied for, and the deposit of five shillings paid on each, so that there are at any rate funds enough in hand for the promoter to pay whatever is owing in the shape of expenses,

A

and to give the chairman and directors the fees which they have earned. After a few weeks of this sailing in calm waters there comes a change. The shares are no longer in demand. shareholder-who is in most cases a creature of the promoter, though not known to be such-petitions the courts that the company be wound up. A solicitor and a liquidator are put in to see that all goes right, or in other words to make all pleasant for themselves and the promoter. The shareholders find themselves obliged to pay up the whole £1 value on each share. The whole affair dies a natural death, and is very soon forgotten, except by the unfortunate shareholders who have been fleeced. The promoter and his friends have not lost anything, they have gained something-not much perhaps, but in any case a few hundreds, just enough to encourage them for next time. The chances are that the promoter will, within a few months, or even weeks, build and launch another financial ship, which is pretty certain to come to the same end. But what of that? If some win, others must lose; and the latter must feel thankful that they have at least learned a practical lesson which they will not quickly forget.

Some persons may believe there must be not a little exaggeration in this account, and that the demon of fraudulent finance is not so black as he is painted. Let those who think so consult any bona fide business man who knows the secrets of such affairs as they are carried on east of St. Paul's; or let them read the revelations of certain newspapers that have the courage of their opinions, and from time to time reveal the workings of a far greater social evil, one that has done far more destruction in society than would be possible by any number of rouge et noir or baccarat tables. Of late years the professional promoter has been joined by a most useful coadjutor. The new regulation which has placed so large a number of military men on half-pay has greatly swelled the ranks of those persons (called in City slang guineapigs") from whom the promoter recruits for his Boards. They are honorable men who, having, as it were, lost their occupation, turn to what they believe to