THE MARKET FOR SECURITIES	361
Classes of Securities.—The securities offered in the market at any
time may be classified variously. For our present purposes the following
classification appears to be useful:
 1.	High-grade Securities.—The characteristic that distinguishes this class
of securities from others is the relative certainty of payment of its con-
tractual obligations.   Both income and principal installments are quite well
assured.   Such securities are confined to the seasoned issues of corporations
with stabilized earnings in mature industries.  The better classes of bonds
and, less frequently, preferred stocks are included in this group.
 2.	Low-grade Securities.—In contrast with high-grade securities, those
classed as low-grade are characterized by uncertainty.  They represent
ownership equities and, at times, creditors' claims against corporations whose
earnings and future progress cannot be foretold with accuracy.   Several
conditions bring this about: They may be issued by new corporations in new
industrial fields.   They may be issued by corporations, the demand for whose
products is highly irregular.   They may represent ownership and creditor-
ship of corporations that are on the down grade.   The low-grade securities
of today may become high-grade tomorrow.  Also, the high-grade securities
of today may be classed as low-grade tomorrow.
 3.	"Low-down" Securities.—In the definition of low-grade securities,
there was no implication of fraud.  With the best of intentions, their issuers
cannot, in the nature of things, assure their outcome in the future because
there is no means of foretelling it, even approximately.  The chief character-
istic of low-down securities is their "certainty."   In the minds of their
promoters, there can be no uncertainty as to the investment qualities of
the securities offered.   Because such securities are issued with fraudulent
intent, the purchasers are bound to lose.   Their losses are limited by their
commitments.
Sale by Promoters.—Occasionally, with small corporations of a highly
speculative character, the promoter may dispose of his securities directly by
sale to his friends and to their friends. Less frequently he may attempt to
build up a sales organization for direct sale to the general public. Sometimes
he is able to dispose of blocks of stock to other security salesmen. It seems
likely that recently enacted Federal legislation will eliminate much selling
of securities by promoters. It impinges particularly upon the flotation of
securities of new corporations. Since the total volume of securities sold for
new corporations will be definitely decreased, the amount to be sold by
promoters will necessarily decrease also.
Bkect Selling t)y Corporations.—For various reasons, corporations
sometimes undertake the direct sale of their own securities. The issue
to be disposed of may be too small or too speculative to attract the
attention of organized security-sales organizations. Where a corporation
undertakes the sale in order to save itself & sales conamiss.ion, jt may