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STOCK EXCHANGE LAWS




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I

A Handbook
of
Stock Exchange Laws


Affecting members, their customers,
brokers and investors
BY
SAMUEL P. GOLDMAN
OF
THE NEW YORK BAR


GARDEN CITY  NEW YORK
DOUBLEDAY, PAGE & COMPANY
1914




Copyright, 1914, by
DOUBLEDAY, PAGE & COMPANY
All rights reserved, including that of
translation into foreign languages,
including the Scandinavian




' 
ih                     *
A,>r                   FPREFACE
THE present agitation for the compulsory incorporation of the Stock Exchange and the enactment of,   numerous laws having as their object the regulation of the
business of stock brokerage as it is now conducted on
the Stock Exchange in the City of New York has caused
many inquiries to be made of the author of this book for
some general statement of the law which could be used
as a guide by stockbrokers in the pursuit of their occupation.
}i     In response to such inquiries, and to requests both
N~     from members of the Stock Exchange and from lawyers,
N^     this compilation has been made.
It is not the purpose of the book to provide a complete
and exhaustive treatise for lawyers. The book is inj-   tended to be serviceable to stockbrokers, as well as; lawyers. For the brokers, it should provide a ready
i T^.  reference book which they may read understandingly,
and from which they may obtain a fairly safe guide
to their conduct in their ordinary affairs, without necessitating a long course of reading or study or a con8 <   ference with a lawyer to determine their duty in simple
matters. For the members of the legal profession, it
should provide a ready hand-book from which they can
easily get the leading cases and principles applicable to
V265337; s~2633




PREFACE


those matters which are most frequently the subject
of conference with their clients.
In preparing to advise his clients, the author was impressed with the completeness of the machinery provided
by the Exchange for the safeguarding of the public. It
was found that the power of the Governing Committee
of the Exchange for purposes of discipline was almost
without limit, and that the constitution, by-laws, and
rules of the Exchange and its governors prohibited every
pernicious practice that has been so loudly inveighed
against in the public prints, and has made the mad rush
for legislation upon the subject a truly senseless clamor.
To enumerate the more important laws, to explain
them and show their application, and to cite the main
authorities in regard thereto, would hardly be a sufficient
presentation of the subject. This can be accomplished
only by setting forth the constitution and by-laws
of the Exchange, and the rules of the Governing Committee, and showing their coordination with the Statutes,
so that it may be apparent to whomever may be interested that even a slight departure from the standards
set by the Stock Exchange itself will bring double punishment upon the offending member, first, by way of penalty for a violation of the law of the State, and second,
the more drastic consequences that follow an infraction
of the rules of the Stock Exchange.
Before undertaking the work an effort was made to
ascertain whether there was any general need for such
a compilation. Inquiries were made, not only of numerous stockbrokers and of their customers, but also,i




PREFACE


of many lawyers; and in perhaps a half dozen instances
bank officials were questioned. The unanimous verdict seemed to be that if the book could be contained
within reasonable limits, and could be couched in phraseology that would serve bankers, brokers, and customers, as well as lawyers, it would become a handbook
indeed, and would fill a real want.
It is hoped that the book will serve this purpose, and
that its kindly-critics will not fail to recognize that considerable discrimination and choice were necessary to get
so large a subject within so small a space, and to find
words that would prove equally suitable to both lawyer
and layman.
For their valuable assistance in preparing this manuscript, I wish to express my sincere appreciation to my
partners, Mr. M. L. Heidenheimer and Mr. Wm. F.
Unger.
Dated, New York, 19I4.


vii




I




TABLE OF CONTENTS
PART ONE
PAGE
The Exchange and Its Constitution....
PART Two
Summary of Laws and Decisions...       43
PART THREE
The Broker and His Customer..         73
PART FOUR
Constitution, By-laws, and Rules of the New York
Stock Exchange......17
PART FIVE
Laws of the State of New York Relating to Stockbrokers......              I95
Table of Cases Cited...               253
Index............                    267


ix








PART I


THE EXCHANGE AND ITS CONSTITUTION
THE New York Stock Exchange is governed by a
constitution of thirty-eight articles, which has
been amended from time to time to meet exigencies as
they arose, and which has, for its members, the force
of laws. In this Constitution and the rules accompanying it the interests of the public dealing with members
of the Exchange are carefully safeguarded, even to the
minutest detail, and the effort is made so to regulate
the conduct of the members among themselves as to
hold them up to the very highest standards of honesty
and fair dealing. Of necessity the rules are strictly enforced. Sales and purchases are made and contracts
undertaken involving thousands of dollars, without
any written memoranda, a nod of the head or a wave of
the hand being all that is used to bind the bargain. The
infractions of the rules are very few, so few in fact
that it may fairly be said that no more honorable
body of men exists anywhere in the world.
The purposes of the Exchange are denoted in the
words of its first article:
"Its object shall be to furnish exchange rooms and
other facilities for the convenient transaction of their
I




STOCK EXCHANGE LAWS
business by its members, as brokers; to maintain high
standards of commercial honor and integrity among its
members; and to promote and inculcate just and equitable principles of trade and business."
The solicitude of the Exchange to maintain the high
standard set by this article is manifest from, among
others, the disciplinary provisions of the Constitution
which follow, as well as from those creating safeguards
against members deemed insolvent.1
'The rules of a Stock Exchange or Board of Trade, as between the
members, have the force and effect of existing laws. Contracts are
governed by the rules in force at the time the contracts are made.
Hess Malting Co., v. Warren, 15 Ill. App. 507.
Thorne v. Prentiss, 83 Ill. 99.
Paton v. Newman, 51 La. Ann. I428.
Pacaud v. Waite, 218 Ill. I38.
Nat. League of Comn. Merchts. v. Hornung, I48 App. Div. 355.
Haight v. Dickerman, i8 N. Y. Supp. 559.
By becoming members, the members impliedly agree to be bound
by the rules.
People v. Board of Trade, 45 Ill. II2.
Board of Trade v. Nelson, 162 Ill. 431.
The constitution and by-laws constitute a law which the members have
established for themselves. "The very existence of this body depends
upon the faithful observance of its organic law by all its members."
White v. Brownell, 2 Daly, 329, 338.
Weston v. Ives, 97 N. Y. 222.
To the same effect:
Thompson v. Adams, 93 Pa. St. 55 (Philadelphia Board of
Brokers).
The contracts may be made with specific reference to the rules.
Albers Commission Co. v. Spencer, 205 Mo. Io5.
Bassett v. Irons, 8 Mo. App. I27.
In a suit between members of the New York Stock Exchange it was
held that the parties were bound by the constitution and by-laws of the
association, and that by-laws prescribing the mode of performing contracts of the kind in question became part of the contract. Peabody
v. Speyers, 56 N. Y. 230. And parties outside of the board of the Gold
Exchange may agree to be governed, in regard to their contract, by
rules which, by their terms, are expressly confined to contracts made at
the board. Mills v. Gould, 42 N. Y. Super. Ct. 119.
But, while the association may adopt rules obligatory on its own
2




THE EXCHANGE AND ITS CONSTITUTION


The Governing Committee.
The government of the Exchange is vested in a Governing Committee, composed of the President and Treamembers, by which their rights may be summarily determined between
themselves, such determination has no force to injure or impair the
rights of outside persons not voluntarily subject to the jurisdiction of
the tribunal.
Morris v. Grant, 34 Hun. 377.
See also Waugh v. Seaboard Bank, 54 N. Y. Super. Ct. 283
(Petroleum Exchange).
Stock exchanges have power to enact such rules and regulations as are
necessary to carry out their purposes, if not contrary to the law of the land.
Cohen v. Budd, 52 Misc. 217.
By-laws should be strictly construed and should not be extended by
implication so as to effect a forfeiture of membership.
Albers v. Merchants' Exchange, I40 Mo. App. 446.
The Open Board of Stockbrokers, organized in 1864 and consolidated
with the N. Y. Stock Exchange in 1869, was described in White v.
Brownell, 2 Daly, 329, 355, as "an association of persons engaged
in the same kind of business, who have organized together for the purpose of establishing certain rules, by which each agrees to be governed
in the conduct and management of his separate transactions or business."
A member admitted in subordination to existing rules is estopped from
denying their reasonableness.
Bostedo v. Board of Trade, I30 Ill. App. 560.
The courts will construe such rules. In re Fisk & Robinson, i85
Fed. 974.
But they will not interfere to control the enforcement of reasonable
by-laws, which infringe no rule of law or public policy.
Green v. Board of Trade, 174 Ill. 585.
Board of Trade v. Nelson, 162 Ill. 431
Board of Trade v. Weare, 105 Ill. App. 289.
A by-law is not invalid merely because it is different from the common
law rule, if it is not against the policy of the law.
Goddard v. Merchants' Exchange, 9 Mo. App. 290.
A by-law providing for the suspension of a member for dishonorable
conduct has been held valid.
Board of Trade v. Nelson, 162 Ill. 431.
A by-law of an Exchange that if a member fails to comply with a
business contract made with another member he shall be expelled is valid.
People v. Board of Trade, 45 Ill. II2.
Board of Trade v. Nelson, 162 Ill. 431.
A by-law prohibiting the representation of parties by professional
counsel in investigations before committees has been held reasonable
and enforceable.
Green v, Board of Trade, 174 Ill. 585.
3




STOCK EXCHANGE LAWS
surer of the Exchange, and of forty members.1 This
committee is divided into four classes of ten members
each, each class holding office for four years, but the expiration of the term of each class is so arranged that
one class goes out of office each year.2 It has power to
determine the manner and form of its own proceedings;
to appoint and dissolve all committees; define, alter and
regulate their jurisdiction; direct and control their proceedings; try and punish members; control finances; compensate officers; and all other powers necessary or incidental to the proper regulation of business,3 but no
member may participate in the adjudication of any case
in which he is personally interested.4
This committee may also choose an acting President
in the absence of the President and Vice-President; and
it may choose counsel each year.
Officers of the Exchange, Their Powers and Duties.
The President may call special meetings of the Exchange and the Governing Committee, and must call
such special meetings on the written request of one
hundred members and of the Governing Committee
on the written request of ten committee members.5
He may appoint committees ad interim.6
The Vice-President, who is chosen by the GovernlArt. II.
'Art. III, Sec. i.
'Art. III, Sec. 2.
'Art. III, Sec. 4.
'Art IV, Sec. 2.
'Art. IV, Sec. 3.
4




THE EXCHANGE AND ITS CONSTITUTION


ing Committee each year, assumes the powers and duties
of the President in his absence.1
The Treasurer acts under the Finance Committee,
which may appoint one of its members to act, with
either the President or Vice-President, as Treasurer
pro ter.2
The Secretary is appointed by majority vote of the
Governing Committee.3
The Chairman is appointed by the Governing Committee. His duty is to preside over the Exchange during
business hours, maintain order, enforce the rules, impose fines, etc., under the direction of the Committee
of Arrangements.4  He is not allowed personally to buy
or sell securities upon the floor of the Exchange.5
The Assistant Chairman is appointed by and acts
under the direction of the Committee of Arrangements.6
The Governing Committee may for any good cause
remove officers by two-thirds vote of its members.7
Committees.
There are twelve standing Committees:
First: A Committee of Arrangements, consisting
of seven members, to which is entrusted the general
care and supervision of the Exchange, the enforcement,Art. V.
'Art. VI.
'Art. VII.
'Art. VIII, Sec. I.
'Art. VIII, Sec. 2.
'Art. VIII, Sec. 3.
'Art. X, Sec. 3.
S




STOCK EXCHANGE LAWS


of the rules for conduct of business, etc.; the control
and regulation of quotation service and telephone and
telegraph connection with the Exchange, the appointment of employees, etc.1
Second: A Committee on Admissions, consisting of
fifteen members, whose duty it is to consider applications for membership and reinstatements. Re-admission
or reinstatement may be had upon the consent of twothirds of the members of the Governing Committee
present when the application therefor is considered.2
Third: An Arbitration Committee of nine members.
They investigate and decide all claims and differences
arising from contracts subject to the rules of the Exchange, between members or at the instance of a nonmember between members and non-members. Their
decision is final, unless an appeal is taken by a member
of the committee, or the case involves $2,500 or more,
in which case either party may appeal within ten days
to the Governing Committee. A non-member, making
a claim, must execute an agreement to abide by the rules
of the Exchange, and execute a full release of his claims,
the latter to be delivered to the defendant or cancelled
and returned according to the result of the proceedings.3
lArt. XI.
'The Committee on Admissions is a court of special or inferior jurisdiction. Its jurisdiction must be shown. It is not presumed.
Matter of Seymour, Johnson & Co., 37 Misc. 264, 274.
'"All claims" here referred to are only those which invoke Stock
Exchange transactions.
Bernheim v. Keppler, 34 Misc. 321, 325.
The real parties to an arbitration are entitled to notice and hearing.
Morris v. Grant, 34 Hun, 377.
In Heath v. President of Gold Exchange, 7 Abb. Pr. N. S. 25I, it
was held that the most that could possibly he claimed for the arbitra6




THE EXCHANGE AND ITS CONSTITUTION


Fourth: A Committee on Business Conduct, of five
members, whose duty it is to consider matters relating
to the business conduct of members with respect to customers' accounts, and to keep in touch with the course
of prices of securities listed on the Exchange, with the
tion clause was that it should have the same force and effect as an agreement in writing, made by persons, to submit to the decision of one or
more arbitrators any controversy existing between them. Such agreements, until an award has been made, are not binding on the parties.
The N. Y. Rev. St. (2 Rev. St. 544, Sec. 23) permitted a party to revoke
the powers of the arbitrators at any time before the cause is finally submitted to them for their decision. The court, citing cases, said the
section seemed to apply to all cases of submission.
A by-law, providing for arbitration of business disputes, provided for
suspension for refusal to submit them after due notification, and for
expulsion after a hearing, if the gravity of the offense was deemed to
merit it. The by-law was held valid.
Evans v. Chamber of Commerce, 86 Minn. 448.
Where a board provides a tribunal, a member cannot invoke a court
of equity without first having recourse to the tribunal, unless, by fraud
or otherwise, it refuses to move to a determination.
Pacaud v. Waite, 218 Ill. I38.
Aside from the question of validity of such a rule a member who voluntarily submits claims against him to the arbitration committee of an
association and takes two successive appeals from the decision against
him assents to the jurisdiction and cannot afterwards question it in a
court of law.
Nat. League of Corn. Merchts. v. Hornung, 148 App. Div. 355.
The award of arbitrators, within their jurisdiction, is binding upon the
parties. The courts will not disturb it for errors of judgment merely,
though they will for exceeding the jurisdiction.
Bartlett v. Bartlett & Son Co., II6 Wis. 450.
The decision of an arbitration committee composed of interested
persons should not be allowed to stand. In such a case the members
should be sent to the courts to determine the controversy.
Moffatt v. Board of Trade (Mo.) III S. W. 894.
The omission of arbitrators to be sworn (N. Y. Prod. Exch.) may be
waived by appearing before them and arguing the case without interposing objections.
Sonneborn v. Lavarello, 2 Hun, 20I.
An exchange has a right to try and discipline a member for action
inconsistent with just and equitable principles of trade in failing to
comply with a contract made by him outside of and not upon the floor
of the exchange.
7




STOCK EXCHANGE LAWS
view of determining when improper transactions are
being resorted to.1
Fifth: A Committee on Clearing-House, of five
members, which has general charge of the ClearingHouse of the Exchange and its business, and designates
the securities to be cleared.
Sixth: A Committee on Commissions, of five members, which enforces the rules relating to commissions,
partnerships and branch offices, and reports to the
Governing Committee violations thereof or any undesirable partnership or branch office.
Seventh: A Committee on Constitution, of five members, which considers all additions, alterations or amendments to the constitution.
Eighth: A Finance Committee, of seven members,
which acts as a Board of Audit and examines the condition of the Gratuity Fund.
Ninth: A Committee on Insolvencies, of three members selected from the Committee on Admissions, which
investigates every case of insolvency immediately after
In re Haebler v. N. Y. Prod. Exch. I49 N. Y. 414.
The fact that the board of managers of an exchange has power only
to discipline when the member refuses to arbitrate or conciliate does
not make the by-law unreasonable,coercive or contrary to public policy.
In re Haebler v. N. Y. Prod. Exch. I49 N. Y. 414.
An offer to arbitrate before another Exchange or before non-members
is not sufficient to prevent trial and discipline.
In re Haebler v. N. Y. Prod. Exch. I49 N. Y. 414.,Resolution of March 5, I913. This is entirely new and seems to be
the last word in control of members by the Governing Committee of
the Exchange. The most rigid and searching inquiry has been made by
this committee into various transactions of members, with instant
beneficial results. Because of its activities it has been dubbed "The
Police Committee."
8




THE EXCHANGE AND ITS CONSTITUTION
its announcement, and reports to the Committee on
Admissions.
Tenth: A Law Committee, of five members, which
considers all questions of law affecting the interests of
the Exchange, and is empowered to examine into the
dealings of any member.
Eleventh: A Committee on Securities, of five members, which makes rules defining the requirements for
regularity in the delivery of securities dealt in on the
Exchange, and decides all questions relating to the
settlement of contracts, subject to the rules of the Exchange, or to deliveries thereof, and all questions relating to reclamations therefor.'
Twelfth: A Committee on Stock-List, of five members, which considers applications for placing securities
upon the Exchange list and reports to the Governing
Committee, giving a full statement as to the organization, capitalization, resources, and indebtedness of the
applicant. It is empowered to place upon and remove
from the list, without report, Government and State or
City obligations and subscription receipts. It has charge
of the arrangement and revision of the list of securities. It
is one of the most important committees of the Exchange,
LThe committee's jurisdiction of all questions "as to the regularity
of stock certificates, bonds, etc.... dealt in at the Exchange"
embraces questions as to the regularity of the form of bonds; regularity
of issue, which includes genuineness; regularity as to being within
the list of admissions to the board, and questions of that nature; but
the committee has nothing to do with the legality of a tender or delivery
of bonds conceded to be regular in all those respects, but refused or objected to on some ground not available against a bona fide holder for
value.
Morris v. Grant, 34 Hun, 377.
9




STOCK EXCHANGE LAWS
and exercises its power in a most wholesome and beneficial way. It is constantly obtaining details and report
of corporations whose shares find a market on the Exchange and is thus in a position to keep all persons informed as to the general character, conditions and perhaps dealings of any of the companies whose names
appear on the stock list.1
Appeals.
The constitution also provides for appeals from the
decision of standing committees to the Governing
Committee.2
Admission to Membership.
Every applicant for membership in the Exchange must
be twenty-one years of age and a citizen of the United
States.3
There is no constitutional limit as to the number
of members, but it can only be increased by the action
of the Governing Committee, which must prescribe
the number and terms of admission.    This action must
be submitted to the Exchange in the same way as an
amendment to the constitution.4
The initiation fee on a transfer of membership is $2,000,5
payable on the day of applicant's election.6,In England, the Companies (Consolidation) Act of I908 provides by
statute for the collection of the information gathered by this committee.
'Art. XII.
'Art. XIII, Sec. i.
4Art. XIII, Sec. 2.
The present limit of membership is eleven hundred. Of these only
about six hundred are active upon the floor of the Exchange.
'Art. XIII, Sec. 3.
6Art. XIII, Sec. 4.
10




THE EXCHANGE AND ITS CONSTITUTION


Before admission to the privileges of membership,
the person elected must sign the constitution. By such
signature he pledges himself to abide by the same and
by all subsequent amendments.'
Dues and Fines.
The Exchange is supported by dues of $Ioo per year,
payable semi-annually.2
If in arrears for three months a member may be suspended.    If dues are not paid at the end of one year, the
Committee on Admissions is authorized to dispose of
the membership.3
Transfer of Membership.
Transfer of membership is made on approval of twothirds of the Committee on Admissions. Notice of the
proposed transfer must be posted on the bulletin ten
days prior to transfer.4
'Art. XIII, Sec. 5.
'Art. XIV, Sec. i.
'Art. XIV, Sec. 2.
A member of a voluntary unincorporated exchange, who was illegally
expelled for failing to pay dues, is bound, within a reasonable time
after obtaining knowledge of his expulsion, to assert his rights; otherwise, he will be deemed to have assented to the expulsion.
Konta v. St. Louis Stock Exchange, I89 Mo. 26 (where a member of
the St. Louis St. Exch. was expelled when memberships therein were
worthless. He waited over a year, when a membership was worth
$7,500, before attempting to assert his rights).
'Art. XV, Sec. i.
A seat on the N. Y. Stock Exchange is property within the meaning
of the Tax Law (then L. 1896, ch. 908, Art. io), and subject to the inheritance transfer tax prescribed by Article io of the Tax Law, upon the
death of the owner and its devolution to his personal representatives,
Matter of Hellman, 174 N. Y. 254.
II




STOCK EXCHANGE LAWS
All contracts subject to the rules of the Exchange made
by a member proposing to transfer his seat mature on
But it is not personal property within Sec. 2, subd. 4, of that Tax Law,
and is not subject to the annual tax thereunder.
People v. Feitner, I67 N. Y. i.
A seat is not a "personal privilege" merely.
In re Hurlbutt, Hatch & Co., I35 Fed. 504, 507, following Sparhawk v. Yerkes, 142 U. S. i.
The Stock Exchange cannot be compelled to admit to membership
the purchaser of a seat, and a purchaser who is admitted takes the seat
subject to the constitution and rules of the Exchange.
Hyde v. Woods, 94 U. S. 523 (San Francisco St. Exch.); Page v.
Edmunds, I87 U. S. 596; People v. Feitner, I67 N. Y. i; In
re Hayes, 75 N. Y. Supp. 312, 32I.
A membership in the N. Y. Stock Exchange can only be transferred
under the rules of the Exchange and by consent of the Committee on
Admissions.
O'Dell v. Boyden (C. C. A.), I50 Fed. 73I.
A seat cannot be transferred without the consent of the association,
and a forced sale of the seat would not give the purchaser the right to
occupy the seat.
Shannon v. Cheny, I56 Cal. 567.
There can be no sale of a seat except in subordination to the rules of
the Exchange. The privilege of transacting business on the Exchange
has been defined as "a personal privilege of being and remaining a member
of a voluntary association with the assent of the association."
Lowenberg v. Greenbaum, 99 Cal. 162.
Shannon v. Cheney, I56 Cal. 567.
On the insolvency of a firm one of whose partners is a member of the
Exchange, the membership passes to the assignee in bankruptcy. The
fact that the Stock Exchange continues to regard the insolvent member as
a member in no way injures the assignee, and an action by him to restrain the insolvent member from using the seat and to compel him to
assign and transfer it to the plaintiff is unnecessary.
Platt v. Jones, 96 N. Y. 24.
McCabe v. Lawrence, 5I N. Y. Super. Ct. 219.
In re Hurlbutt, Hatch & Co. (C. C. A.), 135 Fed. 504.
Similarly, a purchaser from the trustee is in a position to apply to
the Exchange to have his rights recognized, either in his own person, or
he may apply to have another person accepted as a member. The
recognition of another person by the Exchange as a member entitled to
the seat through transfer by the insolvent member after his assignment
is no bar to his application, which is his first step, and injunctive relief
before wrongful refusal of the Exchange to admit him will be denied him.
McCabe v. Emmons, 5I N. Y. Super. Ct. 2I9.
A right of transfer of the seat of a bankrupt member of the Philadelphia Stock Exchange passes to his trustee in bankruptcy, the bankrupt
12




THE EXCHANGE AND ITS CONSTITUTION
the tenth day of posting of notice; no further contracts may be made by him pending approval by the
committee.     This rule also applies to cases where a
having no unsettled accounts with members of the exchange at the time
of filing his petition in bankruptcy; and the trustee is entitled to sell the
seat as part of the bankrupt's assets. This right is subject to the approval by the proper authorities of the Exchange to the transfer to any
given person.
In re Page (C. C. A.), I07 Fed. 89.
The bankruptcy court may compel the member to execute a transfer
of the seat to his firm's assignee in bankruptcy.
In re Hurlbutt, Hatch & Co. (C. C. A.), I35 Fed. 504.
A membership in the Exchange has a pecuniary value, constituting
property, to which an equitable right may be given by an assignment.
But it cannot in fact be transferred except by the substitution of a
new member in accordance with the rules of the Exchange. Therefore,
on the bankruptcy of a member, his membership passes into the possession of his trustee as assets of his estate, notwithstanding any previous assignment, although it may be subject to the equities of the assignee and its transfer and conversion into money can then only be
effected pursuant to orders of the bankruptcy court.
O'Dell v. Boyden (C. C. A), 150 Fed. 731.
"There may be property belonging to this body, derived from the payment of dues or fines, or consisting of the furniture of the room where the
board meets; but the possession of it is a mere incident, and not the
main purpose or object of the association. A member has no proprietary
interest in it, or a right to any proportionable part of it upon withdrawing. He has merely the enjoyment and use of it while he is a member,
but the property remains with and belongs to the body while it continues
to exist."
White v. Brownell, 2 Daly, 329, 356.
A seat or membership in the N. Y. Stock Exchange undoubtedly is
property for certain purposes, but even then it is property of a peculiar
nature.
McCabe v. Emmons, 51 N. Y. Super. Ct. 219, 225.
A seat in the Philadelphia Board of Brokers is not property in the
eye of the law, and cannot be seized in execution for debts of the members.
Thompson v. Adams, 93 Pa. St. 55.
A membership in the N. Y. Stock Exchange is personal to the holder,
and is evidenced by no certificate.
O'Dell v. Boyden, (C. C. A.) I50 Fed. 731.
A seat on the Boston Stock Exchange may be pledged for indebtedness.
Nashua Savings Bank v. Abbott, I8i Mass. 531.
This is due to a specific rule to that effect, and in this regard the Boston
Stock Exchange differs from the N. Y. Stock Exchange.
13




STOCK EXCHANGE LAWS
membership     is  disposed   of by    the  Committee     on
Admissions. 
Upon transfer voluntarily or by disposition of the
Governing Committee or the Committee on Admissions,
the proceeds thereof are applied in the following order:
I. Payment of all fines, dues, assessments, and charges
of the Exchange against the transferor.
2. Payment of creditors, members of the Exchange,
or firms registered thereon, of all filed claims arising'
from contracts subject to the rules of the Exchange, as
allowed by the Committee on Admissions. If insufficient
to pay claims allowed in full, the proceeds are applied
pro rata.
3. The surplus, if any, is paid to the transferor or
to his legal representatives on the execution of a release.2
All unmatured debts or other obligations, arising out
of contracts subject to the rules of the Exchange, become due and payable, immediately prior to the transfer.3
A Stock Exchange seat is not such a collateral as may be sold by the
pledgee. The way in which it could be accomplished would be to report
the failure of the member to meet his obligations to the Stock Exchange,
whereupon he might be suspended for a year and for such further time
as the governing board in its discretion might give. The seat cannot
be sold by individuals. It is not transferable like a stock or bond;
membership in the Exchange is the right to participate as a member in a
voluntary private organization. The courts cannot force a person
upon the Exchange.
Ketcham v. Provost, I4I N. Y. Supp. 437.
lArt. XV, Sec. 2.
2Art. XV, Sec. 3.
3Art. XV, Sec. 4.
"All contracts, debts, etc., shall become due and payable," means current contracts, debts, or obligations between members, and originating
between them in their membership capacity. Claims long since accrued
would not, first, have to be declared due and payable.
14




THE EXCHANGE AND ITS CONSTITUTION
A member forfeits all right to share in the proceeds
of a membership by failing to file claim prior to the
transfer, subject to his right to be paid out of any surBernheim v. Keppler, 34 Misc. 32I, 324.
Cochran v. Adams, i80 Pa. St. 289, is to the same effect.
Construing this article it was held that the present Article XV, Sec.
7, relating to the disposition by the Committee on Admissions of a seat
on death, and Article XV, Sec. 3, relating to the disposition of the proceeds of a seat whether transferred voluntarily or by the Exchange,
appear to cover the former Section 4 of Article 13.
Claims of members of the Exchange mean claims arising from transactions between members as such, and do not include a claim arising
out of a transaction between the claimant and the deceased member
prior to the latter's admission to membership in the Exchange.
Bernheim v. Keppler, 34 Misc. 321.
See also Cochran v. Adams, I80 Pa. St. 289.
A general assignment by an insolvent member does not affect the
contractual rights of members of the Exchange in the seat. Dividends
paid them out of the sale of the seat are not to be deducted in estimating
their right to dividends out of the assigned estate.
In re Hayes, 75 N. Y. Supp. 3I2.
A member suspended for insolvency transferred his membership
in blank to the Committee on Admissions, who sold it. The proceeds
of the seat, notwithstanding the prior general assignment made by
the member's firm, were primarily liable for the payment of the debts
contracted by him and it to members of the Exchange, and also for such
debts due to the firms of members of the Exchange.
In re Hayes, 75 N. Y. Supp. 312.
The court observed that in respect of the facts of the case, the constitution was ambiguous in not expressly providing for the distribution
of the proceeds of the membership of a member suspended for insolvency, who voluntarily agreed to transfer his membership (p. 316). It
was held that usage might be proven to give the effect intended, where a
debt was due to a member's firm.
In re Hayes, 75 N. Y. Supp. 3I2.
A rule of an Exchange providing that claims due to members from a
defaulting member may be collected by an Exchange and applied to
debts due other members is invalid, as in violation of the bankruptcy
law.
Cohen v. Budd, 52 Misc. 217. (Consol. St. Exch.)
A., not a member, furnished the money with which R. became a
member of the Philadelphia Board of Brokers. R. died. A. claimed
that he was the equitable owner of the seat and entitled to the proceeds
in preference to debts due by R. to other members of the Exchange. A.'s
claim was denied, he being an entire stranger, unknown to the board.
Thompson v. Adams, 93 Pa. St. 55.
I5




STOCK EXCHANGE LAWS
plus after all other claims allowed have been paid in
full. 
Claims between partners, members of the Exchange,
do not share in the proceeds of the membership of one
of the partners until after all other claims allowed are
paid in full.2
The membership of a deceased member is disposed
of by the Committee on Admissions.3
A member suspended for insolvency, who did not settle within one
year, voluntarily transferred his membership, in blank, to the Committee on Admissions, which sold it. Notwithstanding a prior assignment by the member's firm the proceeds were held primarily applicable
to the payment of debts to.members and their firms arising from transactions within the Exchange.
Matter of Seymour, Johnson & Co., 37 Misc. 264.
lArt. XV, Sec. 5.
'Art. XV, Sec. 6.
'Art. XV, Sec. 7.
The claims of members that are to be satisfied out of proceeds of the
sale of a decedent's seat are claims between members arising on the floor
of the Exchange, and do not include a claim arising out of transactions
had with a non-member who afterwards became a member.
Bernheim v. Keppler, 34 Misc. 321.
A creditor member is entitled, besides the receipt of dividends out
of the sale of a membership, to prove, as against mere general creditors,
for the whole of his original claim, provided he does not receive more
than his full claim.
Matter of Seymour, Johnson & Co., 37 Misc. 264.
Persons having claims against a member or ex-member of the Exchange
who might submit the same to the Committee on Admissions pursuant
to the constitution may be precluded from doing so by their own acts
or omissions, and may be enjoined from so doing by a court of competent jurisdiction.
In re Currie (C. C. A.), I85 Fed. 263.
O'Dell v. Boyden (C. C. A.), I50 Fed. 73r.
Bankruptcy proceedings were instituted in Michigan against a member
of the New York Stock Exchange. The bankrupt was indebted to Hayden, Stone & Co. in an amount secured by pledged collateral. How
much of the collateral would be available to them was doubtful. The trustee in bankruptcy took proceedings to compel the Stock
Exchange to pay over to him the proceeds of the sale of the seat. Hayden, Stone & Co. had propounded their demand to as much of the




THE EXCHANGE AND ITS CONSTITUTION


The membership of a member expelled or becoming
ineligible for reinstatement may be disposed of by the
Committee on Admissions.1
The expulsion or suspension of a member does not
affect the rights of creditors who are members of the
Exchange or of firms registered thereon.2
When a member is in debt to another member, the
death of the latter or the transfer of his membership
does not affect his right, or that of his firm or estate to
share in the proceeds of the membership of the debtor
member.3
Insolvency.
A member who fails to comply with his contracts,
or is insolvent, or who is a partner of a registered firm in
such a position, must immediately inform the President
in writing and prompt notice must be given to the Exchange. He thereby becomes suspended until, after
settlement with his creditors, he is reinstated.4
When the President ascertains that a member or his
firm has failed to meet engagements or is insolvent
collateral as they could get in the Michigan courts, and contemporaneously asserted their right to the whole or part of the proceeds of
the sale of the seat before the Committee on Admissions. It was held
that they had a right to do so and the trustee's application was denied.
In re Currie (C. C. A. ), I85 Fed. 263.
lArt. XV, Sec. 8.
'Art. XV, Sec. 9.
3Art. XV, Sec. 0o.
'Art. XVI, Sec. I.
A rule requiring a broker to report his default in complying with his
stock contracts has been held to apply only to contracts for the purchase
or sale of stocks on the board.
Rorke v. San Francisco Stock Exch. Bd. 99 Cal. I96.
I7




STOCK EXCHANGE LAWS


and has neglected to comply with these provisions he
announces to the Exchange the insolvency of such person
or firm. 
On the failure of a suspended member to settle with
his creditors and apply for reinstatement within one year
from the time of suspension, his membership is disposed
of by the Committee on Admissions. The time of settlement may be extended by the Governing Committee,
by a two-thirds vote of members present, for periods not
exceeding one year each.2
When a suspended member applies for reinstatement
he must furnish a list of his creditors, a statement of
the amounts originally owing, and the nature of the
settlement made in each case. After notice of the proposed consideration of his application posted for three
days, and his presenting satisfactory proof of settlement,
the Committee on Admissions ballots for him. Failing
an approving vote of two-thirds of the entire committee,
the applicant is entitled to be balloted for at any five
subsequent meetings within one year of suspension, or
such extended time as is granted by the Governing
Committee. If rejected on the sixth ballot, the applicant may appeal to the Governing Committee, who may
reinstate him on an affirmative vote of not less than
twenty-five members. On a member's failure to make
such applications, or if rejected by the Governing Committee, his membership may be disposed of.3
lArt. XVI, Sec. 2.
2Art. XVI, Sec. 3.
'Art. XVI, Sec. 4.
Under these sections, when a member is suspended, the rights of other




THE EXCHANGE AND ITS CONSTITUTION
Whenever the Governing Committee determines that
a member's or a firm's failure is due to reckless or unbusinesslike dealing, such member or partner or partners may, by two-thirds vote of existing members of the
Governing Committee, be declared ineligible for reinstatement. 1
A complete list of creditors and amounts due must
be filed with the Secretary by every suspended member
within thirty days after suspension.2
Expulsion and Suspension.
The penalty of expulsion may be inflicted, and the
period of suspension determined, by a vote of a majority
of the members of the Governing Committee; and the
penalty of expulsion or of ineligibility of a suspended
members in the proceeds of his seat do not become fixed immediately,
unless the seat is then sold. If the period of settlement is extended for
successive yearly periods until the member's death, the Committee on
Admissions are to determine the rights of creditors in accordance with
the provisions of the constitution relating to the distribution of the
proceeds of sale after the death of a member, and not as these provisions
stood at the time of his suspension.
Haight v. Dickerman, 18 N. Y. Supp. 312.
"Debts" means debts contracted among members as such.
Bernheim v. Keppler, 34 Misc. 321, 324.
'Art. XVI, Sec. 5.
2Art. XVI, Sec. 6.
The right of a voluntary association to provide, in its constitution
or by-laws, expulsion as a penalty for an infraction or disobedience of
its laws is well settled.
Nat. League of Com. Merchts. v. Hornung, I48 App. Div. 355.
Expulsion for indictable offenses can take place only after a conviction
by a jury, but where the offense is against the member's duty as a member
he may be expelled on trial and conviction by the corporation.
Leech v. Harris, 2 Brewst. (Pa.) 57I.
The court will not examine upon the merits the question decided by
the Governing Committee and resulting in a member's expulsion. It
will only reverse the committee's decision when there is a total absence
I9




STOCK EXCHANGE LAWS
member for readmission may be inflicted by a vote of
two-thirds of said members.' A member adjudged
guilty of fraud or of fraudulent acts shall be expelled.2
Expulsion is the penalty for making a misstatement on a
material point upon a member's application either for
membership or reinstatement or extension of time.3
Suspension for not more than one year or expulsion is
the penalty for being connected with any organization
in the city of New York permitting dealings in securities,
etc., dealt in on the Exchange.4 Suspension for not more
than one year is the penalty for making a transaction
with a non-member in the rooms of the Exchange in
such securities, etc.5 Suspension or expulsion is the
penalty for wilful violation of the Constitution or of a
resolution of the Governing Committee regarding conduct or business, or conduct inconsistent with just and
equitable principles of trade.6     The Governing Committee may require production of such portion of a
member's books or papers as are material or relevant
of evidence warranting it, or when the proceedings before the committee were contrary to natural justice.
Young v. Eames, 78 App. Div. 229, affirmed i8i N. Y. 542.
Nat. League v. Hornung, 148 App. Div. 355.
Baum v. N. Y. Cotton Exch., 4 N. Y. Supp. 207.
Neukirch v. Keppler, 56 App. Div. 225, affirmed 174 N. Y. 509.
People v. N. Y. Produce Exch., I49 N. Y. 401
People v. Board of Trade, 80 Ill. I34.
Board of Trade v. Riordan, 94 Ill. App. 298.
'Art. XVII, Sec. i.
'Art. XVII, Sec. 2
'Art. XVII, Sec. 3.
'Art. XVII, Sec. 4.
5Art. XVII, Sec. 5.
SArt. XVII, Sec. 6.
20




THE EXCHANGE AND ITS CONSTITUTION


to any matter under investigation by said Committee
or any Standing or Special Committee. A member
refusing or neglecting to make such production may be
adjudged guilty of an act detrimental to the interest
or welfare of the Exchange.' A member adjudged
guilty of such an act may be suspended for not more
than one year.2 An accusation charging a member
with the commission of an offense or a violation of the
laws or regulations of the Exchange shall be in writing,
specifying the charge or charges with reasonable detail,
and signed by the person or persons making the charge
or charges. A copy thereof shall be served upon the
accused member, who shall have ten days or such further
time as the Governing Committee may deem proper
within which to answer. The answer shall be in writing
signed by the accused member, and filed with the
Secretary. Upon filing or refusal to answer, the Governing Committee shall, at a regular or special meeting,
Pitcher v. Board of Trade, I2I Ill. 412.
Nelson v. Board of Trade, 58 Ill. App. 399.
Ryan v. Lamson, 44 Ill. App. 204.
The principle whereby a court of equity may interfere and restore a
member of a corporation who has been expelled does not apply to a
voluntary unincorporated body like the Stock Exchange. The privilege of membership in the latter is not a franchise. It is derived
exclusively from the body which bestows it, and may be conferred or
withheld at its pleasure.
White v. Brownell, 2 Daly, 329, 357.
The judgment of the Governing Committee, made after regular proceedings, hearing and full investigation, as to certain transactions
alleged to have been fraudulently conducted by the member, cannot be
reviewed on the merits by the courts.
Neukirch v. Keppler, 56 App. Div. 225.
All the member could require was that the investigation should be
'Art. XVII, Sec. 7.
'Art. XVII, Sec. 8.
21




STOCK EXCHANGE LAWS
proceed to consider the charge or charges; if the meeting
be a special meeting, notice of its object shall be sent
to the members of the Committee and to the accused,
who shall be entitled to be personally present and to
examine and cross-examine the witnesses produced and
to present any defense, testimony or explanation. If
the accused member is adjudged guilty the Committee
shall expel or suspend such member, as the case may be;
the President shall announce the result to the Exchange,
and a written notice shall be served upon the member.
The finding of the Committee shall be final and conclusive.l The Committee may proceed summarily in
the case of misconduct, or the commission of an offense
for which the penalty is limited to suspension for a
period not exceeding sixty days. If adjudged guilty,
the accused may be suspended for such period as the
Constitution provides.2    Announcement of suspension
shall be made to the Exchange, and the member deprived of all rights and privileges of membership, except
those pertaining to the Gratuity Fund.3      Professional
conducted bona fide upon notice to him and an opportunity to be heard,
and that the decision made should be within the scope of the iurisdiction conferred on the committee.
id. citing
Bigelow v. Benedict, 70 N. Y. 204.
Lewis v. W ilson, I2I N. Y. 288.
White v. Brownell, 2 Daly, 329.
Lambert v. Addison, 46 L. T. Rep. 20.
Where a member is expelled in conformity with the rules, and the
proceedings are regular and in good faith, it is final, and no judicial
tribunal can interfere.
White v. Brownell, 2 Daly, 329, 359.
'Art. XVII, Sec. 9.
2Art. XVII, Sec. io.
'Art. XVII, Sec. II.
22




THE EXCHANGE AND ITS CONSTITUTION
counsel are excluded from any investigation or hearing
before the Governing Committee or any Standing or
Special Committee. 
Rules for the Conduct of Business.
A large number of rules regulate the conduct of business upon the Exchange. All contracts are subject to
these rules.2
Hours are prescribed within which the Exchange must
remain open, except by order of the Governing Committee,3 and a fine is imposed for dealing in other than
the official hours.4 Dealing upon any other Exchange
But a court of equity may interfere for the purpose of holding the
association to a fair and honest administration of its rules.
Hutchinson v. Lawrence, 67 How. Pr. 38.
The courts will not interfere with the rules on the motion of a nonmember.
Heim v. N. Y. Stock Exch., 64 Misc. 529, aff'd 138 App. Div. 96.
An expulsion, if regularly made, is conclusive, and cannot be inquired
into collaterally, by mandamus or otherwise. The court can give no
relief, except in case of irregularity of the proceedings.
Leech v. Harris, 2 Brewst. (Pa.) 57I.
But a broker cannot be irregularly expelled, and injunction will lie
to restrain an illegal expulsion, even before the report of the committee.
Leech v. Harris, 2 Brewst. (Pa.) 57I.
Moffatt v. Board of Trade (Mo.), in S. W. 894.
Right to expel for "bad faith and dishonorable conduct" does not
give a board the right to expel members at its pleasure, without reference
to the deeds it considers bad faith and dishonorable conduct.
Nelson v. Board of Trade, 58 Ill. 399.
Mandamus will not lie for the reinstatement of an expelled member,
nor suit for an injunction.
Matter of Weidenfeld v. Keppler, 84 App. Din. 235.
Baum v. N. Y. Cotton Exch., 4 N.Y. Supp. 207.
People v. Board of Trade, 80 Ill. 1.4.
lArt. XVII, Sec. 12.
'Art. XXII.
SArt. XX, Secs. I and 2.
'Art. XX, Sec. 3.
23




STOCK EXCHANGE LAWS
in the city of New York or publicly outside the Stock
Exchange in securities listed or quoted on the Exchange
is prohibited.1
The manner of making and accepting bids and offers
for stock is regulated, and these rules must be observed
under penalty of fine and suspension.2 Briefly stated, all
Bostedo v. Board of Trade, 227 Ill. 90.
Baster v. Board of Trade, 83 Ill. 146.
Pitcher v. Board of Trade, 12I Ill. 412.
Board of Trade v. Weare, I05 Ill. 289.
A member in resisting the unlawful authority of the Exchange, commits no offense against his duty as a member.
Leech v. Harris, 2 Brewst. (Pa.) 57I.
Action was brought against the board of managers of an Exchange for
damages for unlawful suspension, after the member had been reinstated by the courts. It was held that in the absence of malice, the
board, acting in a quasi judicial capacity, was not liable for errors of
judgment determining matters within its jurisdiction.
Lurman v. Jarvie, 82 App. Div. 37.
A member of a Board of Trade was under charges for alleged violation of its rules and by-laws. He urged that he had sold his membership
prior to the preferring of the charges. It was held that as the transfer
of the seat had not been consented to by the board he had not ceased
to be a member, and the board did not lose jurisdiction to try him on
the charges.
Bostedo v. Board of Trade, 227 Ill. 90.
In trials of a member by a committee the laws of the association limit
the jurisdiction of the tribunal.
Bartlett v. Bartlett & Son Co., II6 Wis. 450.
Voluntary submission by a member to a trial before a committee
estops him from denying its jurisdiction.
Ryan v. Cudahy, 157 Ill. io8.
A by-law should state the causes of suspension and expulsion with
such reasonable degree of certainty that a member may know the transgressions which will subject him to the penalty.
People v. N. Y. Produce Exch., 149 N. Y. 401.
An accused member is entitled to proper notice of proceedings for
his expulsion, so that he may be heard.
People v. East Buffalo Live Stock Assn., 88 App. Div. 6I9.
State v. Milwaukee Chamber of Commerce, 47 Wis. 670.
A strict compliance with the Constitution and by-laws in this respect
is essential.
lArt. XX, Sec. 4.
'Art. XXIII.
24




THE EXCHANGE AND ITS CONSTITUTION


bids and offers must be made either (a) "Cash," i. e.,
for delivery upon the day of contract; (b) "Regular
Way," i. e., for delivery upon the business day following
the contract; (c) "At three days," i. e., for delivery
upon the third day following the contract; (d) "Buyer's"
or "Seller's" options for not less than four days nor more
than sixty days.l These bids or offers must not be
Quentell v. N. Y. Cotton Exchange, 56 Misc. I50.
"The principle to be deduced from all the cases is that in every proceeding before a club, society or association, having for its object the
expulsion of a member, the member is entitled to be fully and fairly
informed of the charge and to be fully and fairly heard."
Hutchinson v. Lawrence, 67 How. Pr. 38, 55.
Charges against members are not to be tested by the strict rules
of criminal pleading. It is sufficient if the member is notified of what
the alleged violation consists.
Board of Trade v. Nelson, 162 Ill. 431.
The decision of a committee may be avoided on account of its refusal to hear competent evidence.
Ryan v. Cudahy, I57 Ill. io8.
A member of an Exchange like the New York Cotton Exchange,
against whom proceedings are instituted under its by-laws, must first
exhaust his remedies within the association before he may invoke redress
from the courts.
Moyse v. New York Cotton Exchange, 143 App. Div. 265. (Proceedings for expulsion for violation of by-laws.)
Hurst v. N. Y. Produce Exchange, Ioo N. Y. 605.
Lewis v. Wilson, 50 Hun. i66.
The rule that a member must first exhaust his remedy within the
association applies only when the proceedings are conducted in accordance with the constitution and by-laws.
Quentell v. N. Y. Cotton Exch., 56 Misc. I50.
A member is not bound by a judgment of the board if not conducted
in accordance with the by-laws.
Board of Trade v. Riordan, 94 Ill. App. 298.
The law does not require resort to higher authority within the organization when it appears that such action would be futile.
Quentell v. N. Y. Cotton Exchange, 56 Misc. I50, where the highest power, the board of managers, had approved in advance of
the illegal methods pursued by the supervisory committee in
proceeding against the plaintiff.,Art. XXIII, Sec. 3.
25




STOCK EXCHANGE LAWS
made at a less variation than one-eighth of one per
cent.1
Fictitious transactions are forbidden under penalty
of suspension for not more than one year.2
A customer is entitled to the return of the money deposited by him where there has been no genuine transaction. 
By a resolution of February 5, I9I3, no member or
his firm shall give or knowingly execute orders for the
purchase or sale of securities which would involve no
change of ownership, under the same penalty. Dealing in privileges to receive or deliver securities is punishable by a fine.4
By resolution of December 14, 1898, members having
orders to buy and sell the same security must offer it
at one-eighth per cent. higher than their bid before making transactions with themselves.
"Specialists" are forbidden to deal in the stocks entrusted to them, to buy or sell directly or indirectly
for their own account, for account of a partner, or for,Art. XXIII, Sec. 5.
2Art. XXIII, Sec. 8.
See Laws I9I3, ch. 476. Penal Law sec. 951, infra p. 207.
Laws I913, ch. 253. Penal Law sec. 953, infra p. 208.
Laws 1913, ch. 595. Penal Law sec. 957, as to delivery of memoranda of transactions to customer, infra p. 212.
Where a transaction may from one point of view be regarded as a
fictitious sale, and from another as fraudulent sale of stock, the Governing Committee may treat it as a fraudulent one.
Young v. Eames, 78 App. Div. 229.
3Fuller v. Mun. Tel. & St. Co. II7 App. Div. 352.
Haight v. Haight & Freese Co., 46 Misc. 501; I02 App. Div. 475;
aff'd 190 N. Y. 540.
'Art. XXIII, Sec. 9.
26




THE EXCHANGE AND ITS CONSTITUTION
any account in which they have an interest.1 The rule
does not apply where the member, having neglected to
execute an order, is compelled to take or supply the
securities on his own account. In such a case he is not
acting as a broker and can charge no commission.
Members are forbidden to deal in any listed security,
anywhere outside of the Exchange, except at a legitimate
auction. This rule has been emphasized by a resolution
declaring that this practice in any form is detrimental
to the interest and welfare of the Exchange.2
Transactions with or for "bucket-shops" are forbidden,3
as well as speculative transactions for clerks of members
or of banks, trust companies, bankers or insurance companies, without the written consent of their employers.4
Members are required to use diligence to learn the
essential facts relating to all accounts accepted by them,
and to the possible use of a name for the account other
than that of the party interested.5
All wire or other connection with the Consolidated
Stock Exchange or the offices of its members is proNOTE
The prohibition of all wire or other connection with the
Consolidated Stock Exchange, etc., as stated on pages 27
and 28, was rescinded by a resolution of the Governing
Committee of the New York Stock Exchange on June 25,
1913.
'id.
27




'STOCK EXCHANGE LAWS


hibited, as well as the transaction of business, directly
or indirectly, with the members of that Exchange.1
No telephonic or telegraphic connection may be made
between the office of a member or his firm and the office
of any firm or individual not a member without the
approval of the Committee of Arrangements. Where
such connection is allowed, the member making it
is not permitted to pay the expense of telegraph opertors or any other expense connected with it except that
of the wire connection. Only the wires of companies
approved by the Committee of Arrangements may be
used.2
Telephonic communication between the offices of
members and the Exchange is no longer a matter of
right, but is in the discretion of the Committee of Arrangements. A member aggrieved by its decision may
appeal to the Governing Committee. If the privilege
is withdrawn from a member no other member may,
after the decision is posted, furnish the member or his
'Resolution of May I9, I909.
Since the adoption of this Resolution chapter 477, Laws of I913 was
enacted. This Law makes discrimination against other Exchanges
and brokers a misdemeanor. See summary of laws, infra p. 52.
See Heim v N. Y. Stock Ex., 64 Misc. 529, aff'd I38 App. Div. 96.
2Resolution of May 9, 1900.
Outsiders have no status, it appears, to restrain an Exchange from
prohibiting all its members from doing business on the floor for the
outsiders. The Exchange's action appearing to be regular, the outsiders
cannot undertake to regulate its manner of conducting business.
Russell v. N. Y. Produce Exch. 27 Misc. 38I.
The resolution of May 19, I909, prohibiting business with members of
the Consolidated Exchange, not being adopted through any bad motiveh
but to protect its own interests,is not an "illegal combination in restrain 
of trade" in violation of Laws 1890, p. I514, c. 690.
Heim v. N. Y. Stock Exch. 64 Misc. 529, aff'd I38 App. Div. 96.
28




THE EXCHANGE AND ITS CONSTITUTION


firm with any such telephonic facilities under penalty
of suspension for two months.'
A member must report his transactions as promptly
as possible at his office, where opportunity must be
offered for prompt comparison.2 The seller must
compare, or endeavor to compare, each transaction at
the office of the buyer, not later than one hour after the
closing of the Exchange.3 The buyer must investigate,
before I    A. M. of the day after the purchase, each
'Resolution of Nov. 8, 191I.
In Illinois the sending out of quotations to encourage speculation in
futures is held by its Supreme Court to be in violation of the State
statutes. The Federal Court, eighth circuit (Missouri), therefore
holds that the Chicago Board of Trade cannot assert its claimed property right in such quotations in a court of equity.
Christie Grain & Stock Co. v. Board of Trade (C. C. A.), 125 Fed.
i6i, reversing II6 Fed. 944.
But the seventh circuit seems to hold an entirely different opinion.
Even supposing, it holds, that a large proportion of the contracts made
on the Exchange were gambling transactions, that did not deprive the
Board of Trade of its property right in the price quotations. These
quotations were the same for the lawful as for the unlawful transactions,
and the right of property therein was not affected by the fact that they
might be used for unlawful purposes. The court felt unable to concur
in the Christie Grain & Stock Co. case and other cases cited.
Board of Trade of City of Chicago v. L. A. Kinsey Co. (C. C. A.),
I30 Fed. 507.
The U. S. Supreme Court took the view of the seventh circuit.
Board of Trade v. L. A. Kinsey, 198 U. S. 236.
The N. Y. Stock Exchange may, as a condition of furnishing a telegraph company with its quotations, require transmission to approved
persons only; a rejected applicant is not entitled to mandamus to compel
the telegraph company to instal a ticker in his office and furnish him
with quotations.
Matter of Renville, 46 App. Div. 37.
The right is not surrendered by allowing its subscribers to post the
quotations upon blackboards in their places of business for the advantage of the subscribers and not of the public.
McDearmott Commission Co. v. Board of Trade (C. C. A.), I46
Fed. 961.
'Art. XXIV, Sec. i.
'Art. XXIV, Sec. 2.
29




STOCK EXCHANGE LAWS
transaction not compared by the seller.l Neglect of
either to do so is punishable by fine.2
Various rules regulate the mode of making comparisons.3 Comparisons are made by an exchange of an
original and a duplicate comparison ticket. An exchange
of Clearing-House tickets constitutes a comparison.4
When written contracts have been exchanged the signers
thereof only are liable.5
The party delivering securities may require payment
upon delivery; if delivery is made upon transfer, at
the time and place of transfer.6 The receiver has the
option of requiring delivery either in certificates or by
transfer, except where personal liability attaches to
ownership, where the seller has the right to make delivery
by transfer.7 Payment must be made not later than
2:I5 P. M. for all stock tendered in lots of one hundred
shares or multiples thereof; the buyer may buy in the
undelivered portion "under the rule" as hereinafter
described.8
All deliveries must be made before 2:5 P. M., failing
which the contract may be closed "under the rule." (See
page 31.) The party in default is liable for any damage
caused thereby, provided claim for such damage is,Art. XXIV, Sec. 3.
2Art. XXIV, Sec. 4.
'Art. XXIV, Secs. 5-9.
'Art. XXIV, Sec. 5.
'Art. XXIV, Sec. Io.
'Art XXV, Sec. I.
'Art. XXV, Sec. 2.
8Art. XXV, Sec. 4.
30




THE EXCHANGE AND ITS CONSTITUTION
made before 3 P. M. on the business day following the
default.' The neglect or failure of a member or firm to
exchange Clearing-House tickets constitutes a default,
and the contract may then be closed "under the rule,"
except that the time limit for delivery of notice of intention to close is io:30 A. M. of the following business
day and the time for closing is not before io A. M.2 Rules
regulate delivery on half-holidays.3
The Stock Exchange Clearing-House acts as the common agent of the members in receiving and delivering the
securities designated by the Clearing-House Committee.4
To constitute a good delivery all deliveries on sales
of stock must be accompanied by a stamped sales
ticket.5
An important regulation is that governing the closing
of contracts "under the rule."  When the insolvency
of a member or firm is announced, members having contracts subject to the rules of the Exchange with such
member or firm must proceed to close them without
unnecessary delay. If the securities involved are quoted
on the Exchange the closing must be on the Exchange,
either officially by the Chairman, or by personal purchase or sale. If they are not dealt in on the Exchange
lArt. XXVI, Sec. i.
'Art. XXVI, Sec. 2.
"Art. XXVI, Secs. 4, 5.
'Art. XXVII.
'Resolution of November 9, I9Io.
See also Laws I909, Chap. 6i, Penal Law, sec. 270, as amended,
providing for stamp taxes, infra p. 236.
3I




STOCK EXCHANGE LAWS
they must be purchased or sold in the best available
market. If the contract is not so closed, the price of
settlement is the price current when it should have
been closed.1
A contract not fulfilled according to its terms may be
officially closed "under the rule" by the Chairman.2
Written notice of intention must be given the defaulting
party before 2:30 P.M., and the contract cannot be closed
before 2:35 P. M.3 When a loan of money is not paid
before 2:15 P. M. of the day it becomes due, the borrower
is considered as in default, and the lender may sell "under
the rule" so much of the pledged securities as may be
necessary to liquidate the loan.4
Mutual cash deposits not exceeding ten per cent. may
be required by either party to a contract at any time,5
and the holder of a due-bill issued for the dividend on
stock contracted for may require the maker of the duebill to deposit the full amount in a trust company,
payable to the joint order of the parties.6     Failure to,Art. XXVIII, Sec. i.
A brokerage firm sold stock for an undisclosed principal and soon
after notified the Exchange of its insolvency. The buying broker closed
his contracts under the rule, settling by the payment to the receiver of
differences on this and other contracts. The owner of the stock demanded that they take and pay for it.  It was held that the owner
could not recover the purchase price in an action against the purchasing
broker, the announcement of the failure being a request to the defendant
to close his contract. (Kent v. De Coppet, 149 App. Div. 589.)
'Art. XXVIII, Sec. 2.
3Art. XXVIII, Secs. 2, 3.
4Art. XXVIII, Sec. io.
'Art. XXXI, Sec. I.
'Art. XXXI, Sec. 2.
32




THE EXCHANGE AND ITS CONSTITUTION
comply with a demand for a deposit constitutes a default,
and the other party may have the contract reestablished
"under the rule."'
The time when a security becomes "ex-dividend" and
"ex-rights" is regulated.2
A charge of one per cent. may be made for collecting
dividends; but no charge may be made for collecting
dividends accruing on securities deliverable on a contract.3  Offers to buy or sell dividends may not be
made publicly on the Exchange under penalty of a
fine.4
Corporations whose shares are listed must maintain a
transfer agency and a registry office in the Borough of
Manhattan acceptable to the Committee on Stock List.5
Thirty days notice must be given of a proposed increase
of capital stock before it can be listed.6 Shares may be
registered on the conversion of convertible bonds, and
listed on notice to the Exchange.7 The Governing Committee may suspend dealings in any securities quoted
on the Exchange, or summarily remove any securities
from the list.8  After admission of a security no change
lArt. XXXI, Sec. 4.
2Art. XXXII, Secs. i, 2.
3Art. XXXII, Sec. 3.
'Art. XXXII, Sec. 4.
'Art. XXXIII, Sec. i.
Under this article, the transfer and registry offices must be maintained separately. This is insisted upon by the Exchange in order that
every precaution may be taken against fraud.
"Art. XXXIII, Sec. 2.
'Art. XXXIII, Sec. 3.
8Art. XXXIII, Sec. 4.
33




STOCK EXCHANGE LAWS
in the form of certificate, or of the transfer agency or
the registrar of shares or of the trustee of bonds may be
made without the approval of the Committee on Stock
List.'
When the Committee on Stock List is of opinion
that the outstanding amount of any listed security
has become so reduced as to make further dealings
inadvisable it may direct it to be taken from the
list.2
Commissions must be charged on all purchases and
sales of securities. These must be absolutely net, without any rebatement, direct or indirect; and no bonus or
share of commission may be given directly or indirectly
for business procured for a member.3 The employment
of clerks in nominal positions because of the business
obtained by them for their employers is a violation of
this rule.4  The custom of "bunching" orders and not
charging any commission to an associate in the sale is prohibited.' The rates of commission which may be charged
members and non-members are fixed by the rules.'
Transacting business in commodities without commission, or for a nominal commission, for a customer dealing
in securities is a method for rebatement of commissions
'Art. XXXIII, Sec. 5.
'Resolution of March 27, 1895.
'Art. XXXIV, Sec. i.
'Resolution of January 23, I90I.
"Resolution of June 12, 1912.
6Resolutions of November 23, 1881; October 24, 1894; April x3, I9IO;
April 12, I9II; June 12, I907; December 28, I9.I, and January 24,
1912.
34




THE EXCHANGE AND ITS CONSTITUTION
and a violation of the commission rule. And giving
reciprocal business in commodities dependent on the
amount of Stock Exchange business received is also a
violation.  A proposition for the transaction of business
at less than the minimum rates of commission provided
by the rules is a violation of the commission rule.2  A
suspended member is not entitled to have his business
transacted at members' rates of commission, except in
the case of a member suspended by reason of insolvency.3
The penalty for violation of the commission rule is,
for the first offense, suspension for from one to five years;
for the second offense, the penalty is expulsion.4  Arbitrage trading with cities in the United States based
upon quotations from the Exchange, and arbitrage business by joint account, or account designed to produce
the same result, having been found to nullify the commission rule, is forbidden.5
An arrangement with a customer for special or unusual
rates of interest, or money-advances upon unusual terms
to give the customer special advantages is a violation of
the commission rule.6
The Governing Committee is of opinion that a member
who relieves a customer from any part of the Stamp
Tax violates the commission rule.7
Resolution of April I4, I897.
'Art. XXXIV, Sec. 4.
'Art. XXXIV, Sec. 5.
'Art. XXXIV, Sec. 6.
'Resolution of January 26, 1898; resolution of April 20, 1911.
'Resolution of March 26, I902.
'Resolution of May 24, I905.
See Tax Law secs. 270-277 infra p. 236.
3.




STOCK EXCHANGE LAWS


The addresses of members and their partnerships and
dissolutions must be registered with the Secretary.' No
member can be a general or special partner in more than
one registered firm at one time,2 except in the case of
foreign partnerships.3  Members may not form partnerships with suspended or expelled members, nor with
an insolvent person, nor with a former member against
whom a member holds an unsettled claim. A member
who is a special partner does not confer any of the
privileges of the Exchange on his firm.4  A general
partner is liable for the acts and omissions of his firm;
but he may be relieved from liability in the discretion
of the Governing Committee.5  Branch offices may be
established by members, the managing clerk and other
employees of which must be paid by fixed salaries, not
varying with the business; and no agents for the solicitation of business shall be employed on any other basis.6
If the Governing Committee disapproves of any partnership, branch office or interest in a foreign partnership, it may require the dissolution of the partnership,
or the discontinuance of the branch office or the interest
in the foreign partnership.7 The penalty for violation
of the rules as to partnership is suspension for one year.8
"Art. XXXV, Sec. I.
'Art. XXXV, Sec. 2.
'Art. XXXV, Sec. 3.
4Art. XXXV, Sec. 4.
'Art. XXXV. Sec. 5.
6Art. XXXV, Sec. 6.
7Art. XXXV, Sec. 7.
8Art. XXXV, Sec. 8.
36




THE EXCHANGE AND ITS CONSTITUTION
The publication of an advertisement of other than a
strictly legitimate business character is prohibited.1
Rules as to irregularity in securities,2 disagreement
in terms of contracts,3 disorderly conduct,4 minutes,
visitors,the reading of communications to the Exchange,5
responsibility for losses made by comparison,6 will be
found in the Appendix.
Additions, alterations and amendments to the constitution may be made by the Governing Committee
after consideration by the Committee on Constitution.
When adopted by the Governing Committee they are
submitted to the Exchange, and become law if not disapproved within one week by majority vote of the entire
membership.7 No amendment of Article XVIII as to
the gratuity fund may be made impairing the obligation of members to contribute to that fund.8
The payment of interest by a proposing borrower of
money on collateral after 3 P. M., without actually
effecting the loan, is prohibited.9,Resolution of February 9, 1898.
See Laws I913, ch. 475. Penal Law Sec. 952 infra p. 208.
'Art. XXIX.
'Art. XXX.
'Art. XXXVI.
6Art. XXXVII.
"Resolution of November 9, i904.
'Art. XXXVIII.
"id.
An unauthorized amendment of by-laws by the directors of an exchange is not binding on the members.
Moffatt v. Board of Trade (Mo.) iii S.W. 894.
'Resolution of October 25, 1889.
37




STOCK EXCHANGE LAWS
The following important resolutions were passed by
the Governing Committee on February 13, I9I3:
I. Against the carrying of an account either for a
member or non-member, without proper and adequate
margin. Penalty, suspension for one year.
2. Against the improper use of a customer's securities by
a member or his firm. Penalty, suspension or expulsion.'
3. Against reckless or unbusinesslike dealing.2 Penalty, suspension or expulsion, or, if suspended, ineligibility for reinstatement.
Gratuity Fund.
The gratuity fund in connection with the Exchange is
supported by an original assessment of $io from each
member on admission3 and an assessment of $io on
each member upon the death of a member,4 until the
date of transfer of membership.5
The sum of $Io,ooo is paid to the beneficiaries of a
deceased member within one year of his death.6 These
are, in their order,
(a) the widow, if no descendants;
(b) the widow and descendants, one-half to each;
(c) the descendants, if no widow; no adopted child
to share if the member leaves a widow or descendants;,In reference to this see also Chap. 500, Laws 1913, Summary of Laws
infra p. 44.
I1n reference to this see also Laws 1913, ch. 500. Penal Law sec.
956 infra p. 211.
'Art. XVII, Sec. i.
'Art. XVII, Sec. 2.
6Art. XVII, Sec. 3.
'Art. XVII, Sec. 4.
38




THE EXCHANGE AND ITS CONSTITUTION


(d) if no widow or descendants, an adopted child
or children.1
The gratuity cannot be mortgaged or pledged.2
The privilege does not continue after transfer of membership, whether voluntary or involuntary, nor after
expulsion, but is extended to suspended members.3 The
management of the gratuity fund is in the hands of seven
trustees chosen for a term   of five years.4   Various rules
regulate their powers and duties and the election of
officers.5
'Art. XVII, Sec. 5.
2Art. XVII, Sec. 7.
Under a similar by-law of the New York Produce Exchange the interests of beneficiaries are assignable as security for the repayment of such
moneys as may be paid by another to keep alive such interests and
without which they would have been absolutely destroyed. (Holmes v.
Seaman, 184 N. Y. 486, reversing 99 App. Div. 624.)
'Art. XVII, Sec. 9.
'Art. XIX, Sec. i.
6Art. XIX, Secs. 2-I3.
With loss of full membership by failure to pay dues and assessments
for the gratuity fund a member's right to the fund fell during his life,
and he had nothing to transmit to his representatives.
MacDowell v. Ackley, 93 Pa. St. 277 (Phila. St. Exch.).
A rule of a gratuity fund provided that the payment should be deemed
to be an absolute donation to the payee designated by the deceased
member, free from all other claim or control. Such donation formed no
part of the deceased member's estate, and his personal representatives
had no right of action for it.
Swift v. San Francisco St. & Exchange Board, 67 Cal. 567.
The gratuity fund by-laws may be altered by any reasonable amendment, which means one that does not impair the member's vested rights
thereunder.
Parish v. N. Y. Produce Exch., 169 N. Y. 34.
A suspended member cannot question the validity of amendments
of the gratuity fund rules validly made.
MacDowell v. Ackley, 93 Pa. St. 277 (Phila. St. Exch.).
A rule giving the association power to suspend a member, without
notice, for non-payment of his assessment, is not against public policy
nor unreasonable.
People v. Board of Trade, 224 Ill. 370.
39








PART II
SUMMARY OF LAWS AND DECISIONS








PART II


SUMMARY OF LAWS AND DECISIONS
HERE have always been laws upon the statute
books by which the legislature has endeavored
either to control the conduct of stockbrokers or to
throw around the pursuit of their calling such safeguards for the public as would ensure fair dealing.
Some of these laws are of long standing. Quite a few
of them were enacted undoubtedly in response to an
agitation which arose recently. While some of more
recent date are mere declarations, as it were, of the
common law, as it has heretofore existed, a few of them
by supposedly creating new crimes, place upon the
stockbroker additional burdens and responsibilities which
are expected to secure a customer, and the public,
perhaps, against loss in its dealings, not so much with
the stockbrokers themselves, as in the general pursuit
of investment or even speculation in corporate shares.
Whatever view one may have as to the necessity of
this legislation, the merest inquiry will disclose that loss
through misconduct of stockbrokers occurs in a very small
percentage of cases. In five years, during which time
there were on an average eleven hundred members on
the New York Stock Exchange, the small number of
43




STOCK EXCHANGE LAWS


nineteen failures occurred; and in the majority of these
cases the creditors, including the customers, were either
paid in full, or received compromises to their own satisfaction, and so rehabilitated the broker that he was fairly
entitled to reinstatement.
The laws referred to are numerous and some of them
lengthy and couched in such legal phraseology that it
is deemed best that the more important of them should
be summarized so that they may be read by the broker
and his customer. For the purpose of making clear,
if possible, what these laws have been held by the courts
to mean, references have been made to decisions where
same were obtainable.
No scheme or order could be devised for the presentation of these laws; they do not appear here in the order
of their importance; they have been grouped where any
relation existed between them, and the authorities have
been cited wherever possible.
Unauthorized Pledging (Hypothecation) or Other Disposition of Customers' Securities.
Laws 1913, ch. 500. Penal Law, Sec. 956. In effect
May 8, 1913.1
A broker who,
i. Having in his possession, for safekeeping or otherwise, securities belonging to a customer, without having
any lien thereon or any special property therein,
pledges or disposes thereof without the customer's consent; or,
iFor full text see infra p. 2II.
44




SUMMARY OF LAWS AND DECISIONS
2. Having in his possession securities on which he
has a lien for indebtedness, pledges them for more than
the amount due to him thereon, or otherwise disposes of
them without his customer's consent, and without having
in his possession or under his control the equivalent of
such securities, whereby the customer loses such securities
or the value thereof, in whole or in part, is guilty of a
felony, punishable by a fine of not more than $5,000
or imprisonment for not more than two years, or by both.
Every member of a firm of brokers, who either does
or consents or assents to the doing of such an act, is
guilty as above.'
The first clause of this section deals with the unauthorized pledge or other disposition of a customer's
stocks held by the broker on which he has no lien.
The second makes a felony what the law previously regarded as a conversion only,2 i.e., the pledging of margined
stock for more than the amount of the broker's advances.
Even before the enactment of the statute, if the conversion had been made with intent to steal, it would have
constituted larceny. The pledgor is still, of course,
entitled to his civil remedy.3
A broker who has purchased stock on margin for a
customer may pledge the stock for his advances.4   All,See The Exchange and its Constitution, supra p. 37.
'Hardy v. Jaudon, i Rob. 261
Strickland v. Magoun, 119 App. Div. 113'
In re Tracy, I9I Fed. 810
'See infra. p. 46.
'Rothschild v. Allen, 90 App. Div. 233, affirmed 80o N. Y. 561.
45




STOCK EXCHANGE LAWS
that is required of him is to have on hand the equivalent in kind and quantity of the margined stock.l He
may, it has been held, sub-pledge and borrow money on
margined stock en bloc.2
It is not conversion to transfer pledged stock certificates under an arrangement whereby the pledgee retains control over them.3 It is not conversion for the
broker to register in his own name.4
It is conversion if the broker, holding stock certificates as margin for his own benefit, rehypothecates
the customer's securities for a greater amount than the
customer's indebtedness to him, not having in his
possession a like amount of similar securities,5 or if he
rehypothecates them to secure a different or larger debt
than that for which they were pledged.6
An unauthorized pledge may be ratified by the owner
of stock by his approval after the transaction is brought
to his notice.7
A broker holding stock as marginal security pledged
it for his own debt, without his pledgor's knowledge,
and could not.redeem the stock. The broker's pledgee
iRothschild v. Allen, 90 App. Div. 233, aff'd I80 N.Y. 561.
Austin v. Hayden (Mich.) 137 N. W. 317.
2Skiff v. Stoddard, 63 Conn. 198.
Austin v. Hayden (Mich.) 137 N. W. 3I7.
But see infra p. 95.
3Heath v. Griswold, 5 Fed. 573.
'Ritchie v. Burke, o09 Fed. i6.
'Douglas v. Carpenter, 17 App. Div. 329.
"Smith v. Savin, I4I N. Y. 3I5.
Lawrence v. Maxwell, 53 N. Y. I9.
But see Mayer v. Monzo, cited infra p. 97.
'Curtis v. Leavitt, I5 N. Y. 9.
46




SUMMARY OF LAWS AND DECISIONS
was held to have a good title to the stock as against the
owner, though the broker had been guilty of conversion.1
Trading by Brokers Against Customers' Orders.
Laws I913, ch. 592. Penal Law, Sec. 954. In effect
May 17, 1913.2
A broker who trades against the orders of a customer,
who has employed him to buy and carry stocks, bonds,
etc., on margin, is guilty of a felony, punishable by a
fine of not more than $5,000 or imprisonment for not
more than one year. Every member of a firm who
does or consents to such an act is guilty under this
section.3
A custom creating in the broker an interest adverse
to that of his customer has been disapproved.4
It has been held that a broker cannot act as principal
and agent in the same transaction without his customer's consent.5 Such dealings are held to be contrary to
public policy, and the question of fraud or injury to the
customer is immaterial.6
Delivery of Memoranda of Transactions.
Laws I913, ch. 595. Penal Law, Sec. 957. In effect
Sept. I, 1913.7
A broker must deliver to his customer a statement or,Whitlock v. Seaboard Nat. Bank, 29 Misc. 84.
2For full text see infra p. 209.
SSee The Exchange and its Constitution, supra p. 37.
'Day v. Holmes, I03 Mass. 306.
"Porter v. Wormser, 94 N. Y. 43I.
Pickering v. Demerritt, Ioo Mass. 416.
6Mayre v. Strouse, 5 Fed. 483.
'For full text see infra p. 212.
47




STOCK EXCHANGE LAWS
memorandum of each purchase or sale made for him,
containing a description of the securities purchased or
sold, the name of the person, firm or corporation from
whom they were purchased, or to whom they were sold,
and the day, and the hours between which the transaction took place. Refusal to deliver such a statement
or memorandum within twenty-four hours after written
demand therefor by the customer, or delivery of a
statement or memorandum which is false in any material respect, is a misdemeanor, punishable by a fine of
not more than $500 or imprisonment for not more than
one year or both.
This statute is entirely new. It has always been the
custom of brokers to deliver to their customers a memorandum of transactions giving the above required particulars, excepting the time of execution. It is doubtful
whether this provides any added security, though in
case of fraud (bucketing), the burden of proving execution of the order is more easily shifted when it is shown
that the notice erroneously specifies the time.
Manipulation of Prices of Securities.
"Rigging the Market."
Laws I9I3, ch. 253.  Penal Law, Sec. 953. In effect
April io, I9I3.1
Any person who influences or attempts to influence
the market prices of securities by means of fictitious
purchases, sales, or other transactions or devices, is
2For full text see infra p. 208.
48




SUMMARY OF LAWS AND DECISIONS
guilty of a felony punishable by a fine of not more than
$5,000, or imprisonment for not more than two years, or
by both. 
The Anti-Bucket-Shop Law.
Penal Law, Sec. 390.2
(I.) One who makes or assists in making any contract for the purchase or sale of securities with the intention that the contract shall be settled upon the basis
of the market quotations on any exchange, and without
intending a bona fide sale; or
(2.) when such market quotations shall reach a certain figure without intending a bona fide purchase or
sale; or
(3.) based upon the differences in such market quotations at which such securities are bought or sold;
or,
(4.) who, as proprietor or person in charge, conducts
any bucket-shop, or knowingly allows therein any contravention of the preceding three sections, is guilty of
a felony.
Every broker must furnish to a customer upon
written demand therefor, a written statement containing
the names of the persons from whom the securities
have been purchased or to whom they have been sold,
and the time and place of the transaction, and the amount
and price thereof.  Refusal or neglect to do so within
iSee The Exchange and its Constitution supra p. 25.
'For full text see infra p. I99.
49




STOCK EXCHANGE LAWS
forty-eight hours after the demand is prima facie evidence of violation of the statute.l
On conviction of a domestic corporation of a second
offense, the Supreme Court may, upon an action by the
Attorney-General, dissolve the corporation; in the case
of a foreign corporation, it may restrain it from doing
business in this state.2
"Bucket-shop" is defined as "any building, or any
room, apartment, booth, office, or store therein, or any
other place where any contract prohibited by" the
statute "is made or offered to be made."3 Keeping a
bucket-shop has been made an offense by statute in
Illinois,4where it is unnecessary to prove the intention
of the keeper to keep such a place.5
A customer is entitled to the balance of his account
with a "bucket-shop" as shown upon the trial in an
action for accounting.
Printed agreements on the back of bought and sold
notes, for the protection of the broker against his liability to furnish the names of customers whose orders
were offset against the plaintiff's were held to be unreasonable, against public policy, and void.6
1Penal Law, Sec. 392.
2Penal Law, Sec. 393.
3Penal Law, Sec. 394.
See the Exchange and its Constitution supra p. 26.
See also infra p. 179.
'Weare Commission Co. v. People, 209 Ill. 528.
See also Peller v. Leiter, i89 N. Y. 36I.
'Soby v. People, 134 Ill. 66.
Caldwell v. People, 67 Ill. App. 367.
'Haight v. Haight & Freese Co., 46 Misc. SoI.
50




SUMMARY OF LAWS AND DECISIONS


Transactions by Brokers After Insolvency.
Laws 1913, ch. 500. Penal Law, Sec. 955. In effect
May 8, I913.1
A broker who, knowing that he is insolvent, accepts
or receives from a customer ignorant of his insolvency,
money, or securities otherwise than in liquidation of, or
as security for, an existing indebtedness, whereby the
customer loses such money, etc., in whole or in part, is
guilty of a felony punishable by a fine of not more than
$5,000, or imprisonment for not more than two years,
or by both. A person is insolvent within the meaning
of the statute whenever the aggregate of his property
shall not, at a fair valuation, be sufficient in amount
to pay his debts.
This law is new. It is analogous to and was no doubt
adapted from the provisions of the Penal Law which
provide that an officer or employee of a bank or an
individual or private banker who receives a deposit
knowing that such bank or banker is insolvent, is guilty
of a misdemeanor, if the amount or value of the deposit is less than $25; and of a felony if it is $25 or over
that sum.
A broker who knows that another broker is insolvent
and imposing on his customers, and who continues to
cooperate with him and assist him to buy stock on
margin, secured by stocks known to belong to the insolvent broker's customers, is liable equally with the
insolvent broker to his customers for his acts.2
iFor full text see infra p. 2Io.
'Austin v. Hayden (Mich.) I37 N. W. 3I7.
5I:




STOCK EXCHANGE LAWS
For a broker to pledge stock in his hands fully paid
for, left with him for safe-keeping, is without color of
right, fraudulent and criminal. (There is no statute
on this subject in Michigan.)'
Discrimination by Exchange or Members.
Laws 1913, ch. 477. Penal Law, Sec. 444. In effect
Sept. i, I913.2
No exchange shall forbid or prevent its members
from dealing, at the regular rates of commission, with
or for the members of any other exchange, or penalize
or discipline any of its members for so doing. Any
person or corporation violating the statute, and
any member of any exchange refusing to deal with a
member of another exchange, is guilty of a misdemeanor.3
Under this statute, in order to be guilty of a misdemeanor, the member must refuse to trade with a member
of some other exchange on the ground that he is a member
of such exchange.     Presumably he might legally refuse
for any other reason he chose.4,Austin v. Hayden (Mich.) I37 N. W. 317, 323.
'For full text see infra p. 203.
'See The Exchange and its Constitution supra p. 27.
'The question arose before the statute was passed and it was held
that a resolution of the Governing Committee of the Exchange prohibiting business with members of the Consolidated Exchange, not being
adopted through any bad motives, but to protect its own interest, was
not an illegal combination in restraint of trade, in violation of Laws
of I890, p. I514, chap. 690.
Heim v. N. Y. Stock Exchange, 64 Misc. 529, aff'd 138 App. Div.
96,




SUMMARY OF LAWS AND DECISIONS
Validity of Certain Agreements Made Without
Consideration.
Personal Property Law, Sec. 33.1
An agreement for the purchase, sale, transfer or delivery of a certificate of stock or other evidence of
municipal or corporate debt, is not void or voidable for
want of consideration, or because the vendor, at
the time of making the contract, is not the owner or
purchaser of the certificate or other evidence of
debt.2
A contract in futures is not illegal, even if it takes the
form of a short sale or an option contract, except where
there is no intention on either side to deliver or receive
the stock, but the contract is merely one in differences.
Short selling has been held valid in New York in numerous cases, and the statute of 1856 authorizing it is
still in force.3  If it was understood    by both parties
that there was to be no transfer of stock, but a mere
iFor full text see infra p. 2I3.
2(Former Pers. Prop. L. Sec. 22; originally revised from L. I858,
ch. I34.)
'Pers. Prop. Law. Sec. 33.
McIlvaine v. Egerton, 2 Rob. 422.
Tyler v. Barrows, 6 Rob. I04.
Stanton v. Small, 3 Sandf. 230.
Cassard v. Hinman, i Bosw. 207.
Fletcher v. Dold Packing Co., 169 N. Y. 57I.
Kingsbury v. Kirwan, 43 Super. Ct. 451, affirmed 77 N. Y. 612.
Zeller v. Leiter, II4 App. Div. I48.
Springs v. James, I37 App. Div. IIo.
White v. Smith, 54 N. Y. 522.
Barber v. Ellingwood, 144 App. Div. 512.
Campbell v. Wright, 8 N. Y. St. Rep. 47I.
Sterling v. Jaudon, 48 Barb. 459.
Lazare v. Allen, 20 App. Div. 616.
53




STOCK EXCHANGE LAWS
gambling in differences, the transaction is a wager and
invalid. 
Options in futures were held lawful, provided there
was a bona fide intention to make a sale.2
In Illinois and other states there are statutes prohibiting options absolutely.3 Such statutes have been
held valid as an exercise of the police power.4
A broker knowing the transaction to be a gambling
one and illegal, cannot recover for his commissions and
advances;5 and margin deposited on such an illegal
transaction cannot be recovered back,6 although in some
states, as in Illinois, this is permitted by statute.7
In the absence of a statute, unlawful intention on the
part of one only of the parties does not make the transaction illegal.8,Bigelow v. Benedict, 70 N. Y. 202.
West v. Wright, 86 Hun, 436.
Peck v. Doran etc. Co., 46 Hun, 454.
La Gar v. Carey, 12 N. Y. St. Rep. I7I.
Hurd v. Taylor, I8I N. Y. 23I.
Weld v. Cable Co., I99 N. Y. 88.
2Story v. Salomon, 71 N. Y. 420.
Bigelow v. Benedict, 70 N. Y. 202.
Brown v. Hall. 5 Lans. I77.
Kingsbury v. Kirwan, 77 N. Y. 612.
'Minnesota Lumber Co. v. Whitebreast Coal Co., 60o Ill. 85.
Pearce v. Foote, 113 Ill. 228.
'Logan v. Tel. etc. Co., I57 Fed. 570.
5Dwight v. Badgley, 75 Hun, I74.
Fuller v. Tel. etc. Co., 117 App. Div. 352.
'Staples v. Gould, 9 N. Y. 520.
Crummey v. Mills, 40 Hun, 370.
'Kruse v. Kennett, I8I Ill. I99.
8Hentz v. Minor, I8 N. Y. Supp. 880.
Kingsbury v. Kirwan, 43 N. Y. Super. Ct., 451, aff'd 77 N. Y. 612.
54




SUMMARY OF LAWS AND DECISIONS
Dealing in futures where there is no intention on either
side of delivery or acceptance of the stock was made
an offense by Laws 1889, c. 428.1
Prior to that time it was held that though such a contract was one of wager, and not binding upon the parties,
it did not violate the provisions of Sec. 343 (now Sec.
973) of the Penal Law providing that tlhe keeping of a
room, etc., for gambling or any purpose or in any manner
forbidden by the article, was a misdemeanor.2
Brokerage on Loans.
General Business Law, Sec. 38o.3
Brokerage on procuring of loans is limited to the rate
of fifty cents per $Ioo, except loans on real estate security; and to thirty-eight cents for making or renewing any bond, bill, note or other security given for or
concerning the same.
Any excess paid may be sued for and recovered by
the payer within one year after payment, failing which
the overseers of the poor of the city or town where the
offense was committed may, within one year, sue for
and recover the same.4   The repayment and return of
the excess with payment of the costs of such suit is a
bar to further penalties.5
lPeople v. Wade, 59 N. Y. Supp. 846.
'People v. Todd, 51 Hun, 446.
'For full text see infra p. 234.
'Gen. Bus. Law, Sec. 381.
'Gen. Bus. Law, Sec. 382.
Buchanan v. Tilden, i8 App. Div. I23.
Corp. v. Brown, 2 Sand. 293.
55




STOCK EXCHANGE LAWS
The statute is not limited to loan brokers.1  The statute applies to all loans without regard to time.2
Compensation for other services should be separated
from the brokerage fee, so that it may be seen that it is
not merely a cover for demanding unlawful commission.3
Advances on Collateral Security. (Usury.)
Laws 1882, ch. 237. General Business Law, Sec. 379.4
It is lawful to receive or contract for any sum to be
agreed upon in writing by the parties as compensation
for advances of money, payable on demand, of $5,ooo or
more, upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments, pledged
as collateral security.5
A demand note for $5,500, of which $500 was compensation for the loan, secured by the pledge of certificates of stock, was held to be within the statute, and
not void for usury.6
Broad v. Hoffman, 6 Barb. I77.
Cook v. Phillips, 56 N. Y. 3I0.
Brown v. Post, 6 Robt. III.
Vanderpool v. Kearns, 2 E. D. Smith, I70.
Woodward v. Stearns, io Abb. Pr. N. S. 395.,Buchanan v. Tilden, i8 App. Div. I23.
'Cook v. Phillips, 56 N. Y. 3I0.
Broad v. Hoffman, 6 Barb. I77.
3Cook v. Phillips, 56 N. Y. 3I0.
4For full text see infra p. 233.
'In the following cases loans were held not usurious under this statute:
Wright v. Toomey, 137 App. Div. 40I.
Hawley v. Kountze, 6 App. Div. 217.
Frost v. Stokes, 55 N. Y. Super. Ct. 76.
In re Wilde, 133 Fed. 562.
6Wright v. Toomey, 137 App. Div. 401.
56




SUMMARY OF LAWS AND DECISIONS
A borrower gave his demand note for $15,000, with
interest at six per cent. and pledged 14 shares of stock
as collateral, also giving an agreement to sell to the
lender, at the latter's option, 4 shares of the stock at
$2,000 a share, which it was claimed was less than its
actual value. It was held to be within the statute and
not usurious.1
Frauds in Organization of Corporations.
Penal Law, Sec. 660.2
A person who,
(i.) Without authority subscribes the name of another to or inserts the name of another in any prospectus, circular or other advertisement or announcement of any corporation, etc., with intent to permit the
same to be published and so to lead persons to believe
that such person whose name is used is an officer, agent,
member or promoter of such corporation; or,
(2.) Signs the name of a fictitious person to any subscription for or agreement to take stock in any corporation, existing or proposed; or,
(3.) Signs to any such subscription or agreement the
name of any person, knowing that such person does not
intend to comply therewith, or under any understanding
or agreement that its terms are not to be enforced; is
guilty of a misdemeanor.
It has been held in England to be a gross fraud upon the
public for company promoters to induce men of character
'Hawley v. Kountze, 6 App. Div. 217.
'For full text see infra p. 204.
57




STOCK EXCHANGE LAWS
and financial standing to lend the use of their names as
directors on a promise of indemnity from responsibility. 
It has frequently been held that subscriptions privately agreed to be for collateral purposes only, such as
to make up a deficiency to enable the company to obtain its charter, or subscriptions made to induce others
to subscribe or to give credit to the concern, the subscriber to be released from payment, are absolute and
binding subscriptions.2 The reason has been given that
to release the subscription of the particular subscriber
would be a fraud on the other subscribers.3 And for
the very reason that the subscriber is held not released,
such a decoy subscription is held not available as a
defense to any of the other subscribers.4
Fraudulent Issue of Stocks and Bonds.
Penal Law, Sec. 662.5
Any officer or other servant of a corporation, who
wilfully, with intent to defraud,
iRe Life Assn. of England, 34 Beav. 639, 643, II Jur. N. S. 359, 34
L. J. Ch. 278, where Sir John Romilly, M. R. said: " It is obvious that
a more gross misrepresentation can hardly be made than holding out
to the world that responsible persons, who have nothing at all to do
with the company, are directors of it."
'Mangles v. Grand Collier Dock Co., Io Sim. 519, i6 Eng. Ch. 519.
In re Gen. Prov. Assur. Co., L. R. 9 Eq. 74.
Matter of Marylebone Banking Co., 3 De G. & S. 2I.
White Mountains R. Co. v. Eastman, 34 N. H. I24.
Litchfield Bank v. Church, 29 Conn. I37.
Pickering v. Templeton, 2 Mo. App. 424.
Blodgett v. Morrill, 20 Vt. 509.
Downie v. White, 12 Wis. 176.
3LaGrange etc. Plank Road Co. v. Mays, 29 Mo. 64.
'Bach v. Tuch, I26 N. Y. 53.
Armstrong v. Danahy, 75 Hun. 405.
TFor full text see infra p. 204.
58




SUMMARY OF LAWS AND DECISIONS
(i.) sells, pledges or issues, or signs or executes for
such purpose, any certificate of stock, etc., without prior
authority from the corporation, or contrary to its
charter or laws, or in excess of its power; or,
(2.) re-issues, sells, pledges, or disposes of any surrendered or cancelled certificates or other evidence of
transfer or ownership of such shares, is punishable by
imprisonment for not more than seven years, or by a
fine not exceeding $3,000, or by both.
An innocent purchaser of shares which are part of
an over-issue of stock may recover damages from the
directors guilty of the fraud. The rule applies whether
the plaintiff purchased directly from the company or
from the directors or in the open market.1 The corporation itself has remedies, both at law and in equity,
against its officers or agents for damages caused by the
illegal issue or over-issue of stock.2
Reporting or Publishing Fictitious Transactions.
Laws I9I3, ch. 476. Penal Law, Sec. 95I.3
The reporting or publishing of fictitious transactions
in stocks, etc., or causing it to be done, with intent to
deceive, is a felony punishable by a fine of not more than
$5,000, or by imprisonment for not more than two
iBruff v. Mali, 36 N. Y. 200.
Shotwell v. Mali, 38 Barb. 445.
Cazeaux v. Mali, 25 Barb. 578.
'Rutland R. Co. v. Haven, 62 Vt. 39.
Commonwealth Bank v. Schuylkill Bank, I Pars. Eq. Cas. (Pa.) i80.
American Ins. Cc. v. Fisk, i Paige, 9o.
Boyce v. Grundy, 3 Pet. 21o.
8For full text see infra p. 207.
59




STOCK EXCHANGE LAWS


years, or both.1 Brokers who, after receiving money
and securities from a customer as margin, did not
obey his instructions by making actual purchases and
sales, but reported to him fictitious transactions, were
held guilty of fraud and the customer was entitled to
recover his money and securities, regardless of whether
he had suffered any loss. The continuous failure of
the transactions to be either cleared or reported at the
Stock Exchange raised a presumption that the transactions did not occur.2
False Statement or Advertisement as to Securities.
Penal Law, Sec. 952. Laws I913, ch. 475. In effect
May 9th, I913.3
Any person who, with intent to deceive, makes, issues, or publishes, any false statement or advertisement as to the value or as to facts affecting the value
of any securities, or as to the financial condition of any
corporation issuing, or about to issue securities, is guilty
of a felony, punishable by a fine of not more than $5,000,
or by imprisonment for not more than three years, or
both.4
This law is very sweeping, more so than it looks at
first sight. Formerly the well-settled rule of law was,
and of course remains, that if a duly authorized agent
of any corporation induces any person to become a
'SeeThe Exchange and its Constitution, supra p. 28.
2Prout v. Chisholm, 21 App. Div. 54 -'For full text see infra p. 208.
4See The Exchange and its Constitution, supra. p. 36.
6o




SUMMARY OF LAWS AND DECISIONS


subscriber to its stock by fraudulent misrepresentations
or concealments, the person deceived can obtain the
rescission of the contract to take the shares.1 This
is a matter between the person defrauded and the
corporation, and the reasonableness of the rule is apparent. It has various exceptions, chief of which are
that it is not applicable where the rights of innocent
third parties have intervened owing to the negligence
of the subscriber, or where the subscriber could and
ought to have informed himself as to the facts.2   It is
to be noticed that the fraud must have been committed
by an agent of the corporation, and by an authorized
agent, i. e., he must have been at the time acting within
his authority.3 The statute strikes at "any person"
with intent to deceive. The subscriber may waive his
right to rescind the contract.4
Under the statute the making of the statement, or
causing it to be made, is a felony. Action by the subscriber is unnecessary and recourse against the corporation is left to the common law. The fraud, to ground a
rescission, must be material.5  The statute does not extend to the suppression of material facts in an advertisement. Under the statute intent to deceive is
necessary. To obtain rescission it is not necessary.
The statute strikes at making statements; therefore
iWillets v. Poor, 141 App. Div. 743.
Custar v. Titusville Gas etc. Co. 63 Pa. St. 381.
2In re Furniture Co., 170 Fed. 485.
3Robinson v. Pittsburgh etc. R. Co., 32 Pa. St. 334.
4Ruggles v. Brock, 6 Hun, 164.
'Willets v. Poor, I4I App. Div. 743.
6i




STOCK EXCHANGE LAWS
oral statements are included. It has been expressly
decided by several cases that mere puffing or exaggeration as to the value of the company's property or
prospects will not ground a rescission if there is no misstatement of material existing facts.' The statute
covers "any statement or advertisement as to the value
or as to facts affecting the value" of the stock containing any material representation, prediction or promise
knowing or having reasonable ground to believe the
same to be false. The false statement must still be
material.
Inserting advertisements in newspapers for the purpose of depressing the market value of the stock of a
corporation is punishable as a misdemeanor under
Section 435 of the Penal Code.2
Transfers of Certificates and Shares of Stock.
Personal Property Law, Art. VI.
Sec. 162. How title to certificates and shares may be
transferred. (a.) By delivery of the certificate indorsed
either in blank or to a specified person by the person
appearing by the certificate to be the owner of the
shares, or (b) by delivery of the certificate and a separate written assignment by such person.
Sec. 163. The powers of those lacking full legal capacity and of fiduciaries are not enlarged.
lUnion Nat. Bank v. Hunt, 76 Mo. 439.
Denton v. Macneil, L. R., 2 Eq. 352.
Kisch v. Venezuela Cent. R. Co., 34 L. J. Ch. 545.
Thornburgh v. Newcastle etc. R. Co., I4 Ind. 499.
2People v. Goslin, 67 App. Div. i6, affirmed I7I N. Y. 627.
62




SUMMARY OF LAWS AND DECISIONS
Sec. I64. Corporations are not prevented from treating the registered holder of shares as owner in regard
to dividends, voting, calls and assessments.
Sec. 165. The certificate delivered endorsed or with
a separate transfer extinguishes the title of a transferee
under power of attorney or assignment not written on
the certificate.
Sec. I66. The delivery is effectual although by one
having no right of possession or authority from the
owner of the certificate.
Sec. 167. The endorsement is effectual in spite of
fraud, duress, mistake, revocation, death, incapacity,
or lack of consideration or authority.
Sec. I68. Rescission of transfer may be made for
the reasons mentioned in Sec. 167 unless the certificate
has been transferred to a purchaser for value without'
notice, or in the case of waiver or laches by the injured
party.
Sec. I69. Rescission of the transfer of a certificate
does not invalidate subsequent transfer by transferee
in possession to purchaser for value, who takes in good
faith, and the latter obtains good title to the certificates
and the shares represented thereby.
Sec. I70. Delivery of an unendorsed certificate, with
intent to transfer it, imposes an obligation to indorse it
upon the person making the delivery.
Sec. I71. An ineffectual attempt to transfer amounts
to a promise to transfer.
Sec. 172.  Warranties-On the transfer of stock
the law implies certain warranties. They are (a) that
63




STOCK EXCHANGE LAWS
the certificate is genuine, (b) that the transferor has a
legal right to transfer it, and (c) that he does not know
of any fact impairing its validity.
Sec. I73. The holder for security of a certificate
demanding payment of the debt for which it is security
does not warrant its genuineness or value.
Sec. I74. No attachment or levy upon shares shall be
valid unless the certificate is seized or surrendered or
transfer enjoined by the holder.
Sec. I75. A creditor is entitled to the same aid from
the courts in reaching certificate owned by his debtor
as in the case of property not readily attached or levied
upon by ordinary process.
Sec. I76. No corporation shall have a lien upon
shares of stock represented by a certificate, nor restrict
the transfer of its stock by any by-law or otherwise,
unless corporation's right to such lien or restriction is
stated upon the certificate.
Sec. I77. The alteration of the certificate whether
fraudulent or not does not divest the owner's title to the
shares, originally held, and he can transfer good title
to the certificate and the shares originally represented
thereby.
Sec. I78. The court, in a proceeding brought for
that purpose, may order a corporation to issue a new
certificate, in place of one lost or destroyed, upon the
giving of a proper bond.    The corporation is not
released from liability to a purchaser for value and in
good faith of original certificate, who had no notice of
the proceedings.
64




SUMMARY OF LAWS AND DECISIONS


Sees. I79-I80. Unimportant.
Sees. I81-182-183.  Definitions of "endorsement,"
"person appearing to be the owner" of a certificate,
"certificate," "delivery," etc.
Sec. 184. Article applies only to certificates issued
after its taking effect, Sept. I, 1913.
This statute is new. It is substantially in the form
prepared by the commissioners for the promotion of
uniformity of legislation in the United States. It is the
result of the recognized necessity of having uniform laws
affecting the transfer of stocks sold and otherwise disposed of throughout the country and of having uniformity in the warranties to be implied against persons
making transfers and in the presumptions arising in
connection with such transfers.
Stock Transfer Tax Law.
Tax Law, Article XII. 
A tax is imposed on all sales, or agreements to sell,
or memoranda of sales of stock, and upon all deliveries
or transfers of shares, or certificates of stock, whether
made upon the books of the company or by an assignment in blank, or by delivery, or by any paper,
intermediate or final, whether transferring the beneficial or legal title to or merely the possession or use of
the stock, of two cents per $Ioo or fraction thereof.
The transferor must affix the stamps and pay the tax.
Agreements evidencing the deposit of stock certificate
collateral for loans are exempt, as well as the certifiiFor full text see infra p. 236.
65




STOCK EXCHANGE LAWS
cates themselves. If the transaction is shown by the
company's books the stamp must be placed upon the
books by the company, on its being furnished by the
transferor; if made by delivery or transfer of a certificate the surrendered certificate must be stamped; in
cases of agreement to sell, or delivery of the certificate
assigned in blank the seller must deliver to the buyer
a duly stamped bill or memorandum of the sale.
Every bill or memorandum of sale or agreement to sell
must show the date of the transaction, the seller's name,
the stock concerned, and the number of shares.1
Adhesive stamps are prepared and sold by the State
Comptroller.2 Failure to affix or furnish the stamps
by the persons described in Section 270 is a misdemeanor
punishable by a fine of $500 to $I,000, or imprisonment
for not more than six months, or by both.3 The stamp
must be cancelled by the person affixing it by writing
or stamping the initials of his name and the date of
using, and cutting or perforating the stamp so that it
cannot be used again. Failure to cancel the stamp
is a misdemeanor punishable by a fine of $200 to
$500, or imprisonment for not less than six months,
or both.4
The wilful removal or alteration of the cancelling
marks on a stamp, or permitting that to be done, with
intent to use the stamp again, or the buying, preparing,Sec. 270.
2Sec. 271.
3Sec. 272.
'Sec. 273.
66




SUMMARY OF LAWS AND DECISIONS
for use, using, possessing or suffering to be used any
washed, restored or counterfeit stamp, or intentionally
removing, or causing or knowingly permitting to be
removed any affixed stamp is a misdemeanor, punishable by a fine of $500 to $Iooo, or imprisonment for
not more than a year, or both.1
Brokers must keep at some accessible place within
the state a book of account to contain the dates of every
sale, agreement to sell, delivery or transfer of shares or
certificates of stock, the name of the stock, the names of
the transferor and the transferee and the number and
face value of the adhesive stamps affixed. Companies
must keep stock certificate books, books of account, and
transfer ledgers or registers for the entry of similar details of transfers and stamps. They must also retain
all their books of account, transfer ledgers, registers,
and stock certificate books, and all surrendered or
cancelled shares or stock certificates, and all memoranda relating to sales or transfers thereof for at'least
two years. These must be open to examination by the
Comptroller or his representative at all times between
Io A. M. and 3 P. M. except Saturdays, Sundays and
holidays. The Comptroller may bring action for any
unpaid tax and penalties. Failure to keep such records,
or the alteration, cancellation, obliteration or destruction of any part of them, or the making of false
entries therein, or the refusal to allow examination
thereof by the Comptroller, is a misdemeanor, pun'Sec. 277,
67




STOCK EXCHANGE LAWS
ishable by a fine of $500 to $I,ooo, or imprisonment for
from three months to two years, or both.1
Violation of Sections 270 and 272 entails, in addition
to the penalties therein, a civil penalty of $io for each
share sold or transferred. Violation of the other provisions entails a civil penalty of $500 for each violation.2
The Stock Transfer Tax Act (L. I906, Ch. 414, Sec. i)
purported to amend the prior Stock Transfer Tax Act
of I905 by imposing a tax of two cents "on each share
of one hundred dollars of face value or fraction thereof"
instead of "on each hundred dollars of face value or
fraction thereof." It was declared invalid on account
of arbitrary discrimination, all members of the class of
corporate shares not being treated alike. Being void,
it did not repeal the prior statute.3
The Stock Transfer Stamp Tax Law of I905 was held
constitutional.  It was held that the state has power
to tax the sale of stock of foreign corporations by citizens of the state if the sale is made within this state.
Ingraham J., in a dissenting opinion, pointed out (p.
835) that "Shares of stock of incorporated companies
are selected, and upon a sale of such stock there is imposed a tax, not based upon the value of the property
or the amount for which it was actually sold, but
upon what is called the face value of the stock, a
'Sec. 276.
2Sec. 277.
See The Exchange and its Constitution, supra pp. 30, 3I and infra
p. i86.
'People ex. rel. Farrington v. Mensching, I87 N. Y. 8.
68




SUMMARY OF LAWS AND DECISIONS


value which rarely, if ever, represents its true selling
value." 
The tax is payable where shares of stock covered by a
mortgage issued to secure bonds are sold on foreclosure.2
The act does not impose a tax on the original issuance of stock.3
A provision authorizing the Comptroller to secure
evidence of violation of the statute from private books
and papers of the party under investigation violates
Sec. 6 of Art. I of the State Constitution, providing that
no person shall be compelled "in any criminal case to be
a witness against himself."4   The effect of the section is
that any sale or gift of stock cannot be enforced, whenever
the defense is properly pleaded that no tax stamp was
affixed at the time of delivery of the certificate of stock.5
The section does not deprive the vendor of his property,
therefore is not unconstitutional.6
Trust certificates issued by a voting trustee are taxable under Section 270.7
Failure by a vendor to pay the tax at the time of the
transfer by placing stamps upon the stock certificates
will preclude him from recovering from the vendee the
purchase price, even if his failure to pay it was inadiPeople ex rel. Hatch v. Reardon, IIo App. Div. 821, affirmed 184
N. Y. 431, affirmed 204 U. S. 152.
2Glynn v. Conklin, 127 App. Div. 473.
'People v. Duffy-McInnerney Co., 122 App. Div. 336.
'People v. Reardon, I97 N. Y. 236.
'Matter of Raleigh, 75 Misc. 55.
'Sheridan v. Tucker, 145 App. Div. I45.
7U. S. Radiator Corp. v. State of N. Y., I5I App. Div. 367, aff'd 208
N. Y. I44.
69




STOCK EXCHANGE LAWS
vertent, if the vendee, when sued, properly pleads the
failure to pay the tax as a defense.1
iBean v. Flint, 204 N. Y. I53, affirming 138 App. Div. 846.
Sheridan v. Tucker, 145 App. Div. I45.


70




PART III
THE BROKER AND HIS CUSTOMER








PART III


THE BROKER AND HIS CUSTOMER
THE relation between the broker and his customer
has been the subject of numerous decisions by the
Courts in this country and in England. The cases that
have arisen deal largely with either the effort on the part
of the broker to recover the balance of his account for
stock-brokerage as against his customer, or with the
effort on the part of the customer either to recover from
the broker securities purchased or deposited for margin,
or to obtain their value, upon the theory that the broker
dealt with them without complying with the law in
regard to notice and time and place of sale.
In reading these decisions, it is apparent, that while a
considerable measure of natural justice entered largely
in determining the issues that arose, the laws seemed
to lean altogether in the direction of protecting the
customer.  This is accomplished by holding the broker
to the strictest performance of his duties to his customer and visiting upon him a full measure of responsibility for any dereliction.
Most of the cases arrange themselves under the head
of pledgor and pledgee, in which is included those decisions dealing with the right to hypothecation and what
73




STOCK EXCHANGE LAWS
amounts to conversion. They are presented here as
nearly as possible in the sequence in which the ideas
arise when the relation of stockbroker and customer is
thought of, and the whole is preceded by definitions of
those terms most likely to be encountered in a reading
of the reported cases.
Definitions.
Some judicial definitions of terms commonly used
by those who deal on the Stock Exchange follow.
" MARGIN" DEFINED.
"Margin" is security nothing more.l
"SHORT SALE    DEFINED.
A "short sale" is a sale of stock which the seller does
not possess, but which he hopes to buy in at a lower
price than that for which he sells.2
" BULL" DEFINED.
A "bull" is one who buys stock with the expectation
of making a profit through a rise of price; he is then said
to be "long of stock."3
"OPTION" DEFINED.
An "option" in one sense denotes a future contract,
lHopkins v. O'Kane, 167 Pa. St. 478.
2Baldwin v. Flagg, 36 N. J. Eq. 57.
White v. Smith, 54 N. Y. 522.
Knowlton v. Fitch, 52 N. Y. 288.
Hess v. Rau, 95 N. Y. 359.
35 Am. & Eng. Enc. Law 2nd Ed. I8.
Baldwin v. Flagg, 36 N. J. Eq. 56.
74




THE BROKER AND HIS CUSTOMER


in which one side has a right to insist upon compliance
with the contract at any time within a given period.
In another sense it means where one side has a right
to insist upon such compliance as to cancel the contract at his election, such as a "put" or a "call."'
"PUT" DEFINED.
A "put" is judicially defined as the "privilege of
delivering or not delivering" the thing sold.2
"CALL" DEFINED.
A "call" is defined as the "privilege of calling for
or not calling for" the stock bought, or an option to
claim stock at a fixed price on a certain day.3
" FLY-POWER" DEFINED.
A " fly-power " is a written assignment in the form
generally used on the reverse of stock certificates, which
when signed and attached to such certificate, is sufficient
to transfer the same in like manner as an endorsement
thereon.4
Good Faith and Care.
The stockbroker is bound to exercise good faith in
iJackson v. Foote, 12 Fed. 37.
Bigelow v. Benedict, 70 N. Y. 202
Story v. Salomon, 7I N. Y. 420.
'Bigelow v. Benedict, 70 N. Y. 202.
Asgood v. Bander, 75 Iowa, 550.
'Pixley v. Boynton, 79 Ill. 353.
Muller v. Bensley, 20 Ill. App. 530.
4Carlisle v. Norris, 142 N. Y. Supp. 393, 396.
75




STOCK EXCHANGE LAWS
his dealings with his customer,L and reasonable skill
and diligence,2 but he is liable only for the reasonable
care and diligence which an ordinarily prudent purchaser
would exercise.3
Secret Profits.
He may not make secret profits for himself out of the
transaction.4  But as the broker is not obliged to retain
the identical stock purchased, the purchaser cannot, if
he orders a subsequent delivery of the stock, and pays
for it at the contract price, recover a profit the brokers
have made through being able to secure the stock actually
delivered at a lower figure owing to a fall in the market.5
Notice of Transactions.
He must notify his customer of the transactions made.6
Broker Bound by Manager's Acts.
A manager of a stockbroker's office, as between the
stockbroker and a customer, is a general agent of the
lHoffman v. Livingston, 46 N. Y. Super. Ct., 552.
Levy v. Loeb, 85 N. Y. 365.
Bate v. McDowell, 49 N. Y. Super. Ct. io6.
2Boyle v. Henning, 121 Fed. 376.
Harris v. Turnbridge, 83 N. Y. 92.
3Peckham v. Ketchum, 5 Bosw. 506.
Gheen v. Johnson, 90 Pa. St. 38.
'Illingworth v. De Mott, 59 N. J. Eq. 8.
The customer may ratify the taking of secret profits by failing to
object.
Sprague v. Currie, I33 App. Div. I8.
6Helm v. Ennis, o09 App. Div. 42.
'Hoffman v. Livingston, 46 N. Y. Super. Ct. 552.
Tuell v. Paine, 39 Misc. 712.
76




THE BROKER AND HIS CUSTOMER
broker, who is bound by the manager's acts done in
the course of business though he violates some private
instruction not known to the customer.1
Payment before Delivery.
A customer cannot demand delivery of stock purchased by his order until he has paid or tendered the
price paid.2
Prior Indebtedness.
A broker cannot apply the margin put up on a transaction upon a prior indebtedness which is disputed by
the customer. If he does so, and exhaustion of margin
results in a sale, the sale is unauthorized.3
Broker Must Obey Definite Order.
A broker who fails to carry out a definite order by
his customer to buy or sell is, in ordinary circumstances,
liable for any consequent loss.4 Brokers who have been
told that a special account in a customer's name is
for another, are not entitled to sell the stock to make up
'Newman v. Lee, 87 App. Div. 116.
For liability of broker for acts of employee of lower grade see Reichard
v Hutton, 158 App. Div. 122.
SWeir v. Dwyer, II4 N. Y. Supp. 528, 532.
8Hurt v. Miller, 120 App. Div. 833.
4Zimmerman v. Heil, i56 N. Y. 703.
Allen v. McConihe, 124 N. Y. 342.
Taylor v. Ketchum, 5 Rob. 507.
Galigher v. Jones, 129 U. S. I93.
Kilmer v. Hutton, I3I App. Div. 625.
Picard v. Beers, 195 Mass. 419.
King v. Zell, 105 Ind. 435.
Cochran v. Ellis, 107 Ill. 4I3.
Silence on receiving a communication is not a direction to sell.
Lynch v. Simmonds, 87 N. Y. Supp. 420.
77




STOCK EXCHANGE LAWS
deficiency in the customer's own account.' A "stop
order" does not impose an obligation upon the broker to
hold the stock until it reaches the price named in the
order. It is a measure of protection which the purchaser
provides for himself against loss beyond a certain point
in a fluctuating market.2
Broker May Buy Smaller Quantity than Ordered.
An ordinary order to purchase mining stock is not
an entire contract. The broker may buy a smaller
quantity than is ordered.3
Keeping Proper Accounts.
It is a broker's duty to keep proper accounts showing
the names of the persons with whom he deals for his
customer.4 Failing this, presumptions of value will
be against him.5
Authorization to Sell Distinguished from Order.
A customer in New York dealt with brokers in Chicago,
but the transactions were all made by their representatives in New York, V. &. A., on the plaintiff's direct
orders. The customer telegraphed the brokers, "I will
have to let my stocks go," whereupon they instructed
V. &. A. to sell the stocks. The customer also instructed
V. &. A. to do so, so that the order was duplicated. It
iConklin v. Raymond, 127 App. Div. 663.
2Richter v. Poe (Md.), 71 Atl. 420, 424.
3Marye v. Strouse, 5 Fed. 483.
4Prout v. Chisholm, 89 Hun, io8.
5Bate v. McDowell, 49 N. Y. Super. Ct. io6.
78




THE BROKER AND HIS CUSTOMER


was held that the customer's telegram was an authorization to sell, not an order, and until the broker had notified him of their election to exercise the authority, the
customer was at liberty to instruct V. &. A. directly;
and the brokers' order was held for their own account.1
Manner of Sale.
A customer gave a stop order containing no directions
as to the manner of sale of the bonds his brokers were
carrying for him. They were sold between the calls
at the Stock Exchange at private sale as government
bonds usually are. It was held that the manner of sale
was not open to objection in the absence of evidence to
impeach its fairness.2
Proof of Receipt of Order.
A customer's evidence that he mailed a letter
ordering a purchase at the opening market price is insufficient without proof that the broker received it in
time to execute the order.3
Pooled Stock.
In a suit against brokers for refusing to sell certain
stocks purchased for the plaintiff as a member of a pool,
the plaintiff testified to an agreement that as a member of
the pool he might sell his stock at any time on order, but
he admitted that the right of members of the pool to sell
would render it ineffective. It was shown that he was a
financial writer and perfectly familiar with the operation
LEvans v. Wrenn, 93 App. Div. 346.
'Porter v. Wormser, 94 N. Y. 43I.
'Birnbaum v. May, 58 App. Div. 76.
79




STOCK EXCHANGE LAWS


of pools and syndicates. It was held that his testimony
that his contract entitled him to sell his holdings was
so inconsistent with the necessities of a successful pool
agreement that a verdict in his favor was against the
weight of evidence.1 A pool member who causes the
pool account to be transferred to an account of his own,
acts as agent of the other members, closes the pool
account, and becomes individually liable thereon.2
Order to Sell at Discretion.
A broker may have authority from his customer to sell
at his discretion. In such a case the customer cannot,
without showing fraud, hold him liable for selling at a
lower price than the stock touches at other times.3
When Broker Not Compelled to Sell.
When the customer is a speculator, in debt to the
broker and in poor credit, the broker is not liable for
refusing to obey his order to sell and buy with the
proceeds other stocks which the broker thinks less safe
even though these go up afterwards.4 Where discretionary authority is given a broker to sell he has a
reasonable time within which to do so. Seven or eight
days has been held reasonable.5
Brokers are not obliged to sell stock on the exhaustion
of margin. They may hold it and depend upon the custolRidgely v. Taylor & Co., II8 App. Div. Io.
'Post v. Thomas, 153 App. Div. 865.
'Wronkow v. Clews, 52 N. Y. Super. Ct. I76.
'Jones v. Gallagher, 3 Utah 54.
6Davis v. Gwynne, 57 N. Y. 676.
80




THE BROKER AND HIS CUSTOMER
mer's liability without security, if there is no agreement
that it is to be sold when the margin is exhausted.'
Ratification of Unauthorized Transaction.
An unauthorized purchase or sale may be ratified
by the customer.2 But where the customer was not
apprized of all the facts, such as omitting to state the
selling price, a delay of twelve days in repudiating the
transaction did not amount to a ratification.3 A purchaser may ratify an unauthorized purchase by agreeing
to pay the balance shown by statements to be due by
him, by depositing stock to secure the indebtedness,
and by actually paying it.4 A customer may ratify
acts of his brokers amounting to a taking of secret profits by accepting their account stated and paying the
balance shown, without objection.5
If a customer ratifies a sale in ignorance of the facts
and the brokers send him a second statement to the effect
that the price mentioned in the first is due to a clerical
error, the customer may disaffirm his ratification, but if
he elects to continue the ratification he can only recover
the price actually received.6
iLittle v. McClain, I34 App. Div. I97.
'Ramsay v. Miller, 202 N. Y. 72.
Burhorn v. Lockwood, 71 App. Div. 301, affirmed 177 N. Y. 539,
554.
Rock v. Carpenter, IIo N. Y. Supp. 261.
3Burnham v. Lawson, II8 App. Div. 389.
4Buck v. Houghtaling, IIo App. Div. 52.
5Sprague v. Currie, 133 App. Div. i8.
'Stewart v. Harris, IOI App. Div. I8I.
8I




STOCK EXCHANGE LAWS
Failure to Execute Orders.
The customer's acceptance of a check in settlement of
the stockbroker's account stated will not ratify the
broker's unauthorized failure to purchase where the
broker represented he had done so. 
Waiver or Revocation of Order.
Circumstances may show a waiver or revocation of
the order. The question whether a telegram to the
broker, two or three months after an order to sell, which
he had not executed, "Have you sold? Will they go
lower?" was a waiver, has been held to be one of fact
for the jury.2
Customs and Usages and Rules of Stock Exchange.
Customers are presumed to have authorized the broker
to carry through the transaction in accordance with the
usages and customs of the particular Exchange, so far as
these concern the manner of performing the contract,
although these are not known to the customer; and
this applies to the rules of the Stock Exchange themselves.3 This has been held to apply to the following
customs; to sell stocks deposited as collateral security
for call loans at the board on the borrower's failure to
pay on the day demand is made,4 of brokers to purchase
iDes Jardins v. Hotchkin, 142 App. Div. 845.
2Stone v. Lothrop, o09 Mass. 63.
'Horton v. Morgan, I9 N. Y. I70.
Spring v. James, I37 App. Div. IIo.
'Colket v. Ellis, io Phila. (Pa.) 375.
82




THE BROKER AND HIS CUSTOMER
stock in their own names, without disclosing their
principals,' to close out a transaction on the customer's
default,2 to settle claims against defaulting customers,3
to accept certain stocks as collateral for additional margin, imposing upon the broker the duty to accept them.4
But apparently the transaction must have been on the
Exchange.5
Customs Disapproved.
The following customs have been disapproved: to
make fictitious transactions;6 to sell stock deposited
with them   as collateral;7 to disregard statutory enactments as to the manner of conducting transactions;8
a custom altering, contradicting or adding to the express
contract;9 a custom creating in the broker an interest
adverse to that of the customer.10
A customer is of course bound where the contract is
expressly made subject to the customs prevailing on th3
iHorton v. Morgan, 19 N.. Y 70.
'Greely v. Doran-Wright Co., 148 Mass. 1i6.
Van Dusen-Harrington Co., v. Jungeblut, 75 Minn. 298.
"There is a well-established custom that, if a stock touches margin,
it is to be sold for the highest it will bring."
Potter v. Malcolm (1907), I04 N. Y. Supp. 760.
Lehman v. Feld, 37 Fed. 852.
'Ling v. Malcolm, 77 Conn. 5I7.
'Ayer v. Mead, I3 Ill. App. 625.
'Rosenstock v. Tormey, 32 Md. 169.
'Lawrence v. Maxwell, 53 N. Y. I9.
8Neilson v. James, 9 Q. B. D. 546.
9Markham v. Jaudon, 41 N. Y. 235.
Spear v. Hart, 3 Robt. 420.
"Day v. Holmes, Io3 Mass. 306.
83




STOCK EXCHANGE LAWS
Exchange.1   The customer is entitled to presume that
the broker will act within the rules of the Exchange.2
The Broker Cannot Act for Buyer and Seller.
A broker cannot act for both buyer and seller.3
The Broker Cannot Buy Customer's Stocks.
He cannot act as principal and agent in the same transaction without his customer's consent.4 But headings
of notices of sale indicating that he has done so do not
prevent him showing that the sales were actually made
to others.5 The question of actual fraud or injury
done his customer is immaterial if he so acts, such dealings being held contrary to public policy.6
Buying on Margin.
A speculative contract for the purchase and sale of
stocks on margin is valid.7
Broker Must Purchase Margined Stock, and Cannot
Purchase It on Margin Himself.
A broker must purchase, obtain possession of, and hold
margined stocks, subject to his right to pledge them for
lBaker v. Drake, 66 N. Y. 518.
2Newman v. Lee, 87 App. Div. II6.
'Levy v. Loeb, 85 N. Y. 365.
Rice v. Davis, 136 Pa. St. 439.
4Porter v. Wormser, 94 N. Y. 431.
Pickering v. Demeritt, Ioo Mass. 416.
'Porter v. Wormser, 94 N. Y. 431.
6Marye v. Strouse, 5 Fed. 483.
'Richter v. Poe (Md.) 71 Atl. 420.
84




THE BROKER AND HIS CUSTOMER


his advances in excess of the customer's margin. He
cannot buy them on margin from another broker, because
in such a case the securities would be subject to that
broker's right to pledge them for advances to him.' A
broker who has bought on margin for a customer cannot
sell without the customer's authority while he holds sufficient margin.2
A contract between broker and customer with reference to margined transactions authorized the broker to
close when the margin was "exhausted." It was held
that this meant "depleted" or "impaired," and the
broker was not required to wait for a loss before closing.
"A margin," the court said, "is intended for the protection of the broker, but if he be compelled to postpone the
sale of the property which he is carrying for the customer
until he has no margin left, it is difficult to perceive upon what theory any adequate protection is
afforded."3
A cotton broker was instructed, when the customer had
$9,600 to his credit on his books, "to hedge when margin
about exhausted." The customer subsequently drew
down $6,000, and the broker allowed cotton to go down
until the remaining margin of $3,600 was exhausted,
and $4,00o in addition. It was held that his instructions
covered, not only the particular margin at the time, but,Des Jardins v. Hotchkin, 142 App. Div. 845.
Mayer v. Monzo, 151 App. Div. 866.
2Taylor vs. Ketchum, 35 How. Pr. 289, holding such an unauthorized sale to be a conversion, regardless of whether or not notice
of it is given to the customer.
See also Denton v. Jackson, o06 Ill. 433.
3Foster v. Murphy & Co. (C. C. A.), 135 Fed. 47.
85




STOCK EXCHANGE LAWS
any margin in the hands of the brokers at any time before
the close of the trades. 
Demand for Margin.
Before closing a transaction on failure of margin,
either where stock has been bought or sold short, the
broker must first make a demand on his customer for
additional margin.2
Demand Must Be Specific.
Such demands for margin must be specific, definite,
and certain. To constitute a sufficiently specific demand it must either mention a particular sum or state
facts from which a particular sum may be ascertained
with certainty.3 An alternative demand calling for an
answer from the customer has been held insufficient.4
Notice of Exhaustion.
The New York rule as to notice of exhaustion of
margin in the case of stocks bought is different from that
held in Massachusetts and possibly in some other jurisdictions. In New York notice of the sale must be
given to the customer, notwithstanding that the broker
may have already demanded additional margin and
the customer has not complied with the demand.',Winston v. F. A. Longshore & Co., II6 La. 21.
2Markham v. Jaudon, 41 N. Y. 235.
Stenton v. Jerome, 54 N. Y. 480.
Ritter v. Cushman, 35 How. Pr. 284.
Rogers v. Wiley, 14 N. Y. Supp. 622, affirmed I3I N. Y. 527.
'Boyle v. Henning, 121 Fed. 376.
LEsser v. Linderman, 71 Pa. St. 76.
5Gruman v. Smith, 8I N. Y. 25.
See also,
86




THE BROKER AND HIS CUSTOMER


"The object to be attained by giving the notice is to
afford the debtor an opportunity to redeem, and to be
present at the sale to see and know that it is fairly conducted and the property disposed of to the best advantage."' In other words, the notice must be reasonable in time, and definite as to the place and manner of
the sale.
But the rule is a general one which must be applied
to an infinite variety of circumstances. In a very recent case2 the conditions were exceptional.  "It was
a time of tense excitement, of sudden and violent fluctuations in prices, of veritable panic in which individual
judgment was torn from its moorings by the impact
of popular frenzy. Notwithstanding these conditions,
it was still the duty of the defendants to give the plaintiff reasonable notice."3
Brokers called, for margin, at the office of a customer
who was away on his vacation. They did not attempt
to get his address, which they could have gotten from
his partner. An employee of the brokers, through whom
the customer did business with them, had told the customer before he started that his account was all right,
and that if anything happened the employee would take
care of it. The brokers closed out the stocks without
Taylor v. Ketchum, 35 How. Pr. 289.
Baker v. Drake, 66 N. Y. 518.
Fairchild v. Flowerfelt, 79 Misc. 42.
lWheeler v. Newbould, i6 N. Y. 392, 40I..2Small v. Housman, 208 N. Y. II5.
'id. p. 125.
87




STOCK EXCHANGE LAWS
notice to the customer of the sale. They were held
liable for conversion.1
Reasonable Time to Make Good.
The customer is entitled to reasonable time to furnish
the additional margin demanded.2 One hour's notice
is not ordinarily sufficient;3 one day's notice has been
held sufficient,4 and two days' notice has been held
sufficient.5 Where the customer was in Texas and the
broker in New York deposit of margin within two hours
after notice was held good, even though made after 12
noon on Saturday.6
Before selling for lack of margin a broker must give
notice of time of sale.7
If brokers exercise ordinary care and reasonable
efforts to give the customer notice and are unable to do
so through the customer's neglect, they are not obliged
at their peril to find him and give him actual notice and
a reasonable time to make the margins good before
selling the contracts.8
Actual notice of the time and place of sale is only necessary when the broker holds property in pledge for the
customer.9
'Rosenbaum v. Stiebel (I9I0), I22 N. Y. Supp. I3I.
2Boyle v. Henning, 12I Fed. 376.
'Lazare v. Allen, 20 App. Div. 616.
'Harris v. Pryor, I8 N. Y. Supp. 128.
'Stewart v. Drake, 46 N. Y. 449.
'Langer v. Price, I14 App. Div. 78. (Cotton Exchange case.)
7Fairchild v. Flowerfelt, 79 Misc. 4a.
8Smith v. Craig, 151 App. Div. 648.
'Smith v. Craig, I51 App. Div. 648, 654.
Leiter v. Thomas, iio App. Div. 879.
88




THE BROKER AND HIS CUSTOMER
A contract provided that the customer should keep a
margin of five per cent. and reserved to the brokers the
right to sell at their discretion at any time when in their
opinion the condition of the account warranted it. The
customer's margin dropped below one per cent. to his
knowledge. It was held that the brokers were entitled
to sell without notice.'
A broker may waive a provision in his contract reserving the right to close transactions without further
notice whenever margins were running out, either in
express terms or by a course of dealing giving the customer the right to believe that this would not be done.2
Sufficiency of Notice of Time and Place of Sale.
Where the broker advanced the whole amount instead
of requiring margin a written notice to take up the securities or supply sufficient margin to carry them stated that
unless the customer made suitable arrangements "before Wednesday next (August 13) we shall sell this stock
and hold you responsible for the loss." It was held the
notice was defective because it contained no statement
as to the time or place of sale; and, in the absence of
any agreement dispensing with such notice, a sale "on
the curb," the customer having failed to respond on the
day specified, constituted a conversion.3
On a purchaser's failure to pay for a stock purchased,,Estes v. Perkins, 137 App. Div. 367.
'Miller & Co. v. Lyons (Va.), 74 S. E. I94, where the broker was
held estopped from closing without notice by failing to exercise
or claim the right during a period of four years.
'Content v. Banner, 184 N. Y. I2I.
89




STOCK EXCHANGE LAWS
"the sale should be made at some place where all the
parties interested may have an opportunity to attend
and see that it is fairly conducted."  Ordinarily it is
the place where transactions of the same description
are customarily made, and by employing a stockbroker
a customer impliedly authorizes him to perform the
business in the manner and at the place established by
custom. So, where the customer has requested the
stock to be bought on the curb it is a fair inference that
it was the intention of the parties that the stock, if
sold, should be sold on the curb.1
A pledged stock was sold upon the curb and the
pledgees purchased it themselves. The agreement for
pledge gave them the right to become purchasers only
in case the sale was made "at brokers' board or at public
auction." The sale was held to be at neither, the curb
not constituting a "brokers' board."2
In another case the jury, on conflicting evidence,
was held warranted in finding that brokers had assented
to their customer having the whole day in which to put
up margin or arrange for taking care of the shares, but
they sold the customer out before one o'clock and thus
violated the agreement they had made. They were
therefore held liable for damages for the unauthorized
sale.3
A sale of stock took place at two o'clock in the afternoon of October 24th, following two conversations on the
iWeir v. Dwyer, II4 N.Y. Supp. 528, 53I. (Chicago Subwaystock.)
'Manning v. Heidelbach, I53 App. Div. 790.
'Blaine v. Thomas, I03 App. Div. 6o0, I53 App. Div. 790,
90




THE BROKER AND HIS CUSTOMER
same day between the customer's agent and a member
of the firm of brokers. Sales took place on October
25th, apparently immediately after a similar conversation between the same persons at Io o'clock in the
forenoon of that day. The New York Court of Appeals
held that the sufficiency of these notices should have
been submitted to the jury, and was not a question of
law for the court.'
Special Agreement.
A defense to an action for damages for the alleged
unauthorized sale of stock was that the stock was purchased under a special agreement by which the customer was to keep on deposit with the brokers at all
times a margin of $25,000, and that in the event that
the market price depreciated and the customer failed
to keep such margin unimpaired they were to be at
liberty to sell the stock "without other notice than
notice that said margin had been reduced," and that
they gave the customer every notice to which he was
entitled by virtue of the special agreement or by custom.
The principal question was whether such a special
agreement had been made. The jury found for the
customer, but the Appellate Division held that their
verdict was against the weight of evidence, and reversed the judgment.2
In a very recent case it was contended for the customer that after certain transfers of stock had been.Small v. Housman, 208 N.Y. II5.
2Leiter v. Thomas, IIo App. Div. 879.
9I




STOCK EXCHANGE LAWS


made, the brokers gave a promise to the agent of the
customer (the latter being abroad) that what remained
of the customer's account would be carried by the
brokers until the customer's return. It was held that
though this promise, if made, was probably not an irrevocable contract, it could not be ignored to the
prejudice of the customer.  If the brokers by their
promise did lead the customer's agent to believe that
he had nothing further to fear until his principal's return, they were bound at least to give reasonable notice
of their intention to retract this promise. Whether
such an arrangement was really made was not a question of law for the court, but one of fact for the jury.1
Brokers may agree to buy and carry stock on a nominal margin.2
Notice to Customer's Agent.
Notice given to the customer's agent may be sufficient.
A customer's son was employed by the stockbrokers
who handled her account, which was entirely operated
by the son; the customer never came in contact with
the brokers. The customer went to Europe, leaving her
account in charge of her son, and her securities in a safe
deposit box, in charge of a friend, who from time to time
took securities from the box and gave them to the customer's son, who delivered them to the brokers in response to calls for margins. In an action for damages for
the conversion of certain of the stocks and bonds by the
brokers, it was held that the son was his mother's
'Small v. Housman, 208 N. Y. 115.
'Keller v. Halsey, 202 N. Y. 588
92




THE BROKER AND HIS CUSTOMER
general agent to transact business with reference to the
account, and that a demand on the son for further
margins was notice to him and to the customer that, if
they were not furnished, securities already pledged with
the brokers would be sold.1
Waiver of Customer's Default in Complying with Demand
for Additional Margin.
The broker's waiver of his customer's default in complying with a demand for additional margin will prevent him from being entitled to close the transaction
until a new demand is made.2
Tender of Stock.
In addition to demand for additional margin and
notice of intention to sell, it appears that the broker
must also, before sale, tender the certificates of the stock
and demand payment of the balance due, if there has
been no waiver by the customer of one or other of these
requirements.3
Sale Without Demand and Notice a Conversion.
The relation between the broker and his customer in a
transaction where stock is bought for the latter on margin
is that of pledgee and pledgor, and the sale by a broker
'Small v. Housman, 208 N. Y. 215.
'McGinnis v. Smythe, IOI N. Y. 646.
Rogers v. Wiley, 14 N. Y. Supp. 622, affirmed I31 N. Y. 527.
Morgan v. Jaudon, 40 How. Pr. 366.
In Harris v. Pryor, I8 N. Y. Supp. 128, it was held that the default
there was not waived.
'Stenton v. Jerome, 54 N. Y. 480.
Quell v. Paine, 39 Misc. 712.
93




STOCK EXCHANGE LAWS


of pledged stock without demand and notice is a conversion. 1
"Under the contract, arising by operation of law, out
of the relation between the parties, a sale of the stock
by the brokers without notice of the time and place of
sale, constituted a conversion, in the absence of an agreement dispensing with such notice or providing for otherwise disposing of the pledged property."2
Notice Not Necessary When Direct Authorization to Sell.
On a request for margin over the telephone the customer replied, "If you have to sell, sell out." It was
held that this authorization relieved the broker from
the necessity of giving further or written notice to put
up more margin or of the time and place of sale.3
Duty as to Retaining Stock Purchased.
Brokers need not keep on hand the identical securities
purchased for their customer. Their duty is to keep
on hand, or under their control, either these securities
or a like kind and amount of securities.4
lClappe v. Taylor, 125 App. Div. 605.
Markham v. Jaudon, 41 N. Y. 235.
Baker v. Drake, 66 N. Y. 518.
Gruman v. Smith, 8i N. Y. 25.
Gillett v. Whiting, 120 N. Y. 402.
Austin v. Hayden (Mich.), I37 N. W. 3I7.
Tomkins v. Morton Trust Co., 91 App. Div. 274.
2Content v. Banner, 184 N. Y. 121, I24.
3Pierson v. Frenkel, 103 N. Y. Supp. 49.
'Sprague v. Currie, I33 App. Div. I8.
Shiel v. Stoneham, 77 Misc. I25.
Tomkins v. Morton Trust Co., 91 App. Div. 274.
Austin v. Hayden (Mich.), I37 N. W. 317.
Carlisle v. Norris, 142 N. Y. Supp. 393.
94




THE BROKER AND HIS CUSTOMER


Broker's Right to Pledge Margined Stock.
A stockbroker who has purchased stocks on margin for
a customer may pledge the stock, and his pledgee will
obtain a good lien thereon, which he may enforce by a
sale of the stock without notice to the customer, and
without incurring liability to him or to the broker. A
broker who so pledges the stock is bound at all times to
keep himself in readiness to deliver the particular shares
or an equivalent number of similar shares to the customer
whenever the latter offers to pay the unpaid portion of
the purchase price of the stock. If the pledge made by
the broker secures to the customer the right to obtain
the stock from the pledgee upon payment of the balance
of the purchase price, the pledge by the broker does
not operate as a conversion of the stock, although he
neglects to keep on hand an equivalent number of shares
of similar stock. But if the broker's pledgee sells the
stock without giving the customer notice of the time or
place of the sale, or an opportunity to protect his interest
by depositing more margin (to which he was entitled under
his contract with the broker) and thereafter the broker
refuses to comply with the customer's demand for delivery of the stock upon payment of the balance of the
purchase price, the broker is guilty of a conversion.'
Right to Pledge Stocks En Bloc.
In other jurisdictions it has been held that a broker
iRothschild v. Allen, 90 App. Div. 233, affirmed i8o N. Y. 56I.
See Summary of laws, supra p. 44.
95




STOCK EXCHANGE LAWS


may sub-pledge and borrow money on margined stocks
en bloc.l
In New York it has been held that a broker cannot
mingle his customer's margined stock with other securities and pledge the whole for a larger amount than the
customer's indebtedness on that stock, and that to do
so is a conversion. The basis of this decision is shown
in the words of the opinion: "It would not do to say
that the plaintiffs (the brokers) might go into the market
and buy other securities of a like kind and amount on
payment or tender being made by defendant, because
the plaintiffs might not have the funds to purchase the
new securities," and all the customer would have to rely
upon would be the personal financial responsibility of
the brokers.2
This doctrine has been much criticised. In a concurring
opinion in the same case, Patterson J. says that all the
broker is required to do is to have shares under his control, so that when, in due course of business, he is called
upon, he can deliver without going into the market to
buy. But he continues that the broker may pledge and
repledge even in bulk so long as he has shares under
his control.3 The Appellate Division has recently
refused to adopt the doctrine that it is a conversion
ipso facto to commingle stocks belonging to different
iSkiff v. Stoddard, 63 Conn. I98.
Austin v. Hayden (Mich.), 137 N. W. 3I7.
2Douglas v. Carpenter, 17 App. Div. 328, 332.
This case was followed in Strickland v. Magoun, I9 App. Div. I I3.
See also Rothschild v. Allen, 90 App. Div. 233.
'Douglas v. Carpenter, I7 App. Div. 335.
96




THE BROKER AND HIS CUSTOMER
customers and to obtain a loan on all, in excess of the
amount due from any one of the customers whose stocks
are thus commingled.' It has been pointed out by
legal writers that if the decision in Douglas v. Carpenter
were strictly followed it would be difficult for brokers to
conduct their business conveniently, if at all.2
Pledging Stock.
A pledgor of collateral security has not a right, without tender of payment, to demand a return of the
collateral. The holder of the collateral has an election.
He may sue without regard to the collateral upon the
original indebtedness,or he may apply the collateral without attempt to collect from the original debtor. The
pledgor must dispose of the debt before he can dispose
of the lien and get back his collateral.3
The unauthorized rehypothecation of a customer's
stock purchased upon margin as collateral for a loan to
the broker is a conversion for which he is liable.4
A claim was made against a pledgee of a certificate
of stock with the right to rehypothecate it for not more
than the indebtedness of the pledgor. The claim was
based on the pledgee's rehypothecating the stock for an
amount in excess of the pledgor's indebtedness a month
before the pledgee was adjudged a bankrupt, and refusing
to deliver the certificate in possession of the receiver
iMayer v. Monzo, I5I App. Div. 866, Clarke J. dis.
2"The right to pledge securities carried on a margin," byE. Norton
in "The American Lawyer," Vol. 5, p. 573.
SKetcham v. Provost, 156 App. Div. 477
'Strickland v. Magoun, II9 App. Div. I 3.
97




STOCK EXCHANGE LAWS
in bankruptcy to the pledgor on tender of his debt. It
was held that it was predicated on the pledgee's breach
of contract and not for conversion and was provable in
bankruptcy. 1
A pledgee of stock who gives up possession to the
pledgor without any qualification waives his lien. And
if he accepts in return, as security, certificates standing in
the name of a third person as trustee for the pledgor, he
holds the stock subject to the trust.2
Certificates of stock are not the stock itself, and the
latter may be validly pledged without delivery of the
scrip. Stock pledged with delivery of the scrip may be
subsequently pledged to another party subject to the
prior lien. The possession of the first pledgee will be
regarded as that of the second through the agency of the
former.3
A pledgor of stock with a broker did not sign the blank
power of attorney on the assignment attached to the
certificate, but only wrote his name as owner in the first
blank space. He therefore did not part with the title.
The broker sold it, without notice, at private sale. It
was larceny and conferred no title on the transferee.
The pledgee was entitled to sell the stock only at public
auction on notice.4 Had the assignment been executed
in blank it would have been payable to bearer and
an innocent purchaser for value without notice, at a
iWood v. Fisk, I4I N. Y. Supp. 342.
'Hickok v. Cowperthwait, 137 App. Div. 94.
'First Nat. Bank of Waterloo v. Bacon, I3 App. Div. 6i 2.
'Treadwell v. Clark, II4 App. Div. 493, affirmed I90 N. Y. 5I.
98




THE BROKER AND HIS CUSTOMER
private sale without notice to the owner would have
obtained a good title.'
In an action for conversion of securities (here pledged
with the defendant) the plaintiff must show an existing right to immediate possession at the time of the
alleged conversion.2
Pledge of securities deposited as margin is a wrongful
conversion where the broker's transactions are purely
fictitious and he is never liable to a loss on the customer's
account.3
Bonds were purchased by brokers for various customers
whom they treated as the common owners thereof. On
the insolvency of the brokers the customers were held
entitled to the surplus proceeds of the bonds which had
been, without authority, pledged as collateral and sold
by the pledgee for the debt of the brokers.4
Unauthorized rehypothecation as collateral is conversion for which the broker is liable, but the pledgee may
obtain a good title to the stock if he acts in good faith
upon present and valuable considerations and without
knowledge of the true owner's claims.5
Right of Pledgee from Broker.
The rights of a bona fide purchaser or pledgee from a
broker are based upon the estoppel of the owner of the
stock in so acting as to preclude him from disputing,
iTreadwell v. Clark, II4 App. Div. 493, affirmed I90 N. Y. 5I.
'Byrne v. Weinfeld, II3 App. Div. 45I.
'In re Tracy, I9I Fed. 8Io.
'Hunt v. Marquand, o09 App. Div. 729.
'Strickland v. Magoun, II9 App. Div. 1I3.
99




STOCK EXCHANGE LAWS
as against the pledgee, the existence or the powers of
his bailee, the broker.'
Agreement to Carry Customer's Account for a Definite
Period.
A broker may agree to carry a customer's account for
a certain period or until the happening of a certain event
without calling for additional margin. The closing of
the transaction before the expiration of the time or happening of the event renders him liable in damages.2
A court will not readily infer an agreement by a broker
to carry stock until it should decline to a certain price.3
Stockbrokers had sold a stock short for a customer. It
began to rise and the customer wished to cover the sale
and go long of the stock. The stockbrokers advised him
not to do so. The customer took the advice on the
stockbrokers' promise to carry the account without additional margin until the customer could get out without
loss, if the stock went up to a price specified, which would
have exhausted the margin. The stock continued to
advance, but did not go above the price named. The
stockbrokers bought in at a price which about exhausted
the margin, without notice to the customer. Upon receiving notice of the purchase the latter repudiated it.
The market subsequently declined and the customer directed the stockbrokers to buy to cover the short sale,
iMatter of Mills, 125 App. Div. 730.
2Michael v. Hart (I90I), 2 K. B. 867, 85 L. T. Rep. (N. S.) 548.
In Harris v. Pryor, i8 N. Y. Supp. 128, it was found that there was no
agreement to hold the stock.
'Richter v. Poe (Md.), 7i Atl. 420, 424,
I00




THE BROKER AND HIS CUSTOMER
to sell the securities he had desposited as margin, and to
account. This they declined to do. In an action by
the customer to recover damages, it was held that the
defendant's promise to carry the account without further
margin gave a right to recover, whether considered as
an agreement with a sufficient consideration or as a
waiver of notice to furnish more margin, or as an estoppel.
In either case the purchase was unauthorized and the
customer was entitled to recover the difference between the
amount paid on such purchase and what the stock might
have been bought for when he gave directions to purchase. 1
A broker who purchased July wheat on margin for a
customer agreed to carry the wheat until July ist without additional margin, and that the deal should not be
closed until the customer so ordered. This agreement
was held to mean that the deal should not be closed
before July ist unless so ordered.2
A contract to carry stock does not oblige the broker
to carry it indefinitely where it does not prescribe a
period. Where a stock was carried more than five years,
it was held a reasonable time had elapsed before tender.3
Sale at the Market.
In an action for the balance of an account due to a
loss on Ioo shares of Steel common which the plaintiffs,Rogers v. Wiley, I3I N. Y. 527, affirming 14 N. Y. Supp. 622.
2Amsden v. Jacobs, 75 Hun, 3II.
See Gould v. Trask, o1 N. Y. Supp. 6I9, as to the effect of the deposit of a note as " temporary collateral."
3Kridel v. Bloomingdale, I49 App. Div. 605.
IOI




STOCK EXCHANGE LAWS
were carrying for their customer the plaintiffs alleged
that the customer, on being asked for additional margin,
directed them to sell at the market. The defendant
alleged that she directed them to sell at 45, and at that
time the stock stood at 45~. The case turned on the
question of fact as to the directions given by the purchaser. The market, it was held, meant the best price that
could be obtained for the stock at the time the sale was
made, not the price at which the stock was quoted at
that time. (The market was panicky, and the stock
was sold at 28.)1
An order to sell at the market means at the best price
obtainable at the time the order is executed, and not at
the price quoted at the time the order is given.2
Customer's Death.
A broker had sold stock short for a customer, borrowing the stock for delivery according to custom, from time
to time as required. While the transaction was so kept
alive the customer died. The broker continued to keep
the speculation alive until the appointment of an executrix, upon whom the proper notice could be served in
order to close it. It was held that the broker was authorized to do so, provided he acted in good faith. Being
himself obligated for the return of the borrowed stock,
he had such an interest in the transaction on account of
this personal obligation.as entitled him to continue it
until a representative should be appointed. But it was
iFairbairn v. Rausch, I04 App. Div. 259.
2Fairbairn v. Rausch, I04 App. Div. 259.
102




THE BROKER AND HIS CUSTOMER
not meant that a broker might not be justified in closing a stock transaction immediately after the death of
the principal. 
Broker's Correspondent His Agent.
A broker's correspondent is the agent of the broker,
and not of the customer, even though the latter instructs
him directly.2
Short Sales.
Short selling (sale for future delivery) is valid, as distinguished from gambling in differences.3
A broker is bound to carry the customer's account to
sell short for a reasonable time as long as the margin
deposited remains good.4    Without demand for additional margin he cannot cover the sale without instructions from the customer.5 On an unauthorized buying
in of stock to cover the sale the customer may repudiate the transaction and recover the margin deposited.6
If the margin is not kept good, the broker may, on
demand and notice, close the transaction by buying to
cover the sale.7 He must show that there was occasion
to call for further margin, and that the customer failed
iHess v. Rau, 95 N. Y. 359.
2Evans v. Wrenn, 93 App. Div. 346.
Gheen v. Johnson, 90 Pa. St. 38.
'Richter v. Poe (Md.), 7I Atl. 420.
'White v. Smith, 54 N. Y. 522.
'Barber v. Ellingwood, I44 App. Div. 512.
"Campbell v. Wright, 8 N. Y. St. Rep. 47I.
'White v. Smith, 54 N. Y. 522.
Sterling v. Jaudon, 48 Barb. 459.
I03




STOCK EXCHANGE LAWS


to furnish it after receiving reasonable notice prior to the
purchase. 1
In closing out a short sale account the broker is not
required to give notice to the customer of the time and
place at which he proposes to purchase. Such a notice
is only required where stocks are pledged for the payment of a debt.2 But if the broker elects to close the
transaction for reasons other than a shortage of security
he must give the customer reasonable notice.3
Where a broker has "sold short" for a customer he
may, in a rapidly rising market, and after the customer
has refused to put up more margin, buy in the stock and
charge the loss to the customer's account. He is not
obliged to take into consideration rumors communicated
by the customer that the stock may be bought lower
next day; nor to hunt him up and repeat to him every
rumor or piece of information before protecting himself.'
Cooperating with Insolvent Broker.
A broker who knows that another broker is insolvent
and imposing on his customers, and who continues to
cooperate with him and assist him to buy stock on margin, secured by stocks known to belong to the insolvent
broker's customers, is liable equally with the insolvent
broker to his customers for his acts.5
lLazare v. Allen, 20 App. Div. 616.
See Boyle v. Henning, I2I Fed. 376.
2Sterling v. Jaudon, 48 Barb. 459.
'Barber v. Ellingwood, I44 App. Div. 512.
4Armstrong v. Bickel, 2I7 Pa. 173 (where Northern Pac. shares rose
from $60 to $600).
'Austin v. Hayden (Mich.), I37 N. W. 3I7.
104




THE BROKER AND HIS CUSTOMER


Conversion of Stock.
Every unauthorized taking of personal property, and
all intermeddling with it, beyond the extent of the authority conferred, in case a limited authority is given,
with intent so to apply and dispose of it as to alter
its condition or interfere with the owner's dominion, is a
conversion. 1
So, where stock certificates were endorsed and delivered to a broker's clerk for transfer to the transferee
on the corporate books, and he dealt with the stock as
his own through a speculative account with the brokers
in his brother's name, resulting in the transfer of the
certificates to the brokers, it was held that the brokers
had constructive notice of the clerk's conversion of the
certificate, and were themselves guilty of constructive
conversion.2  A transfer of stock may be a conversion,
although it is not a strict sale, the effect being the same.3
Where it is not the custom of brokers to sell their
customers' stock, purchased on margin, without notice,
and they have made no call for margins and given no
notice of intention to sell, or of the time and place of
sale, the sale of the stock by the broker is a conversion,4
in the absence of an agreement dispensing with such
notice, or a provision that otherwise disposes of the
pledged property.5
'Kilmer v. Hutton, 131 App. Div. 625
'Kilmer v. Hutton, I3i App. Div. 625
'Reichland v. Hutton, 148 App. Div. 813.
4Gillett v. Whiting, I20 N.Y. 402; rev'g 55 N. Y. Super. Ct. 187.
6Moore v, f9oPewald, 142 App. Div. 741, 749.
I05




STOCK EXCHANGE LAWS
An unauthorized sale by the broker while he holds
sufficient margin has been held a conversion, whether he
has given notice of the sale to the customer or not.'
An unauthorized sale of pledgedstockataplacenotpublic, which is not ratified by the pledgor, is a conversion.2
A mere allegation in an action that brokers sold or
converted to their own use certain securities which they
had bought on margin for their customer is too vague
and indefinite.3
Collateral stock was transferred on the books to the
names of the broker's employee, who knew the facts.
There was no conversion until a tender of the amount of
the debt had been made and a demand for the collateral
made and refused.4
A claim for conversion of a certificate of stock is
predicated on a wrongful assumption of ownership or
interference with the owner's right to possession, and a
tender by a pledgor of the amount due, and a demand of
the return of the pledge, made when the pledgor knows
that the law renders it impossible for the pledgee to
accept the tender or comply with the demand do not
show a conversion.)
When Hypothecation Is Larceny.
The hypothecation by brokers for their own obligations
of stock entrusted to them for safekeeping is larceny.6,Taylor v. Ketchum, 35 How. Pr. 289; 5 Rob. 507.
'Manning v. Heidelbach, 153 App. Div. 790
'Sprague v. Currie, I33 App. Div. i8.
'Jones v. Seaman, I33 App. Div. I27.
6Wood v. Fisk, I4I N. Y. Supp. 342.
6Matter of Mills, I25 App. Div. 730.
Io6




THE BROKER AND HIS CUSTOMER
As to every one except a pledgee from the broker, who
has actually in good faith advanced money upon the
apparent title conferred by the owner of the securities
upon the broker as his bailee or agent, the owner is
entitled to stock deposited with a broker for safekeeping. 1
Measure of Damages - Sale of Stock.
If a broker unjustifiaLly closes out a short sale transaction, the customer may recover the profit he would
have made had the broker given him reasonable notice
of his intention,2 i. e., the difference between the price
at which the short stock was bought in and the lowest
market price of the stock, within a reasonable time,
not from the date of the sale, but from the time the
customer learns of the conversion of the stock.3
The highest market prices, varying from a few days to
within two months of the conversion have been held
within the rule.4
All the customer is entitled to is a reasonable time
necessary to enable him to determine upon his line of
action. He cannot speculate at the expense of his
brokers.)
Brokers made an unauthorized sale of a customer's
stocks while he was away in the country. The "rea'Matter of Mills, 125 App. Div. 730.
2Barber v. Ellingwood, I44 App. Div. 512.
'Barber v. Ellingwood, No. 2, 137 App. Div. 704, I44App. Div. 512.
Burnham v. Lawson, 118 App. Div. 389.
But see Wolff v. Lockwood, 70 App. Div. 569.
'Mullen v. Quinlan & Co., I95 N. Y. Iog.
Hurt 'r. Miller, 120 App. Div. 833.
I07




STOCK EXCHANGE LAWS
sonable time" in computing damages was not when he
threatened them with criminal proceedings, while still
away, on receiving notice of the sale, but two weeks
later, when he returned and spent a full day in the
city and wrote them threatening proceedings. 
Broker's Insolvency —Stock Goes to Customer.
On a broker's insolvency, stock which he has been
carrying for a customer goes to the customer, not to the
broker's assignee.2
Rights of the Defrauded Customer of an Insolvent Broker.
The conflict between various claimants against an
insolvent broker arises when various customers have
delivered money or securities to the broker either for
or upon the execution of orders or for safekeeping or
otherwise. Assuming that the relation of customer and
broker has arisen, the broker becoming insolvent throws
upon the court the burden of deciding how the moneys
in bank or elsewhere, the securities in actual possession of the broker and the securities hypothecated with
the banks or bankers shall be distributed. Ordinarily
all creditors of the bankrupt broker would share on an
equal basis, pro rata, in the latter's estate, but circumstances sometimes give one customer a superior claim
or equity over other customers. The most common
instance is where the customer has given the broker the
money in full to purchase outright the securities ordered.
iRosenbaum v. Stiebel, 122 N. Y. Supp. I3I.
Willard v. White, 56 Hun, 581.
Le Marchant v. Moore, 79 Hun, 352.
Io8




THE BROKER AND HIS CUSTOMER


If the securities have been purchased and the certificate is in the hands of the broker at the time of failure,
the customer is entitled to its immediate delivery to
him, upon its being properly identified. If the securities
have not been purchased, and it can be shown that the
funds were deposited in bank and there remained at
the time of failure, the customer is entitled to have such
fund repaid to him; that is, he is entitled to the bank
account itself.1 The same is true where the customer
has given securities to the broker and the latter has
appropriated them and put the proceeds of the unauthorized sale in his bank account. Following a leading
English case,2 if the broker mingles the customer's funds
with his own, the court will presume that the money
he withdraws is his own and that the remaining funds
belong to his customer.3 This upon the familiar doctrine of tracing trust funds.
The situation here prescribed is of course entirely
independent of the criminality involved in the broker's
conduct either in misappropriating moneys given to
him by his customer for the purchase of stock or in
misappropriating stock delivered to him for a specific
purpose. In such cases he is guilty of embezzlement.4
This became material in deciding the superiority of
equities that arises when the broker mingles stock and
hypothecates them all en bloc, some rightfully and,In re Mulligan, II6 Fed. 715.
2In re Halletts Estate, L. R. 13 Ch. D. 696.
'In re Mulligan, 116 Fed. 715.
'People v. Meadows 199 N. Y. i.
I09




STOCK EXCHANGE LAWS
some wrongfully, when it is held that the customer whose
stock is wrongfully hypothecated has the superior equity
and is entitled to have prior payment to make good his
losses, providing his stock or its proceeds can be traced.'
Briefly, therefore, it is necessary first to trace the
property of the customer, either money or securities.
But having done so, another difficulty arises, namely,
other customers may have been similarly defrauded and
their securities or money similarly misappropriated or
converted. Those whose property or money cannot be
traced under the circumstances remain the unfortunates,
and the conflict of equities lies only between those who
have been successful in so doing. As between the latter
the court will divide the claimants into two classes,
those whose money has been misappropriated or "whose
securities have been wrongfully hypothecated" and
"those whose securities have been rightfully pledged."
"Superior rights" are granted the first class of claimants,
and the securities of the second class, whose rights are
"clearly inferior," can secure satisfaction of their claims
only after those in the first class are made whole so far
as the specific securities or money traced will allow.2
iWest v. McLaughlin, I62 Fed. 124.
In re Ennis, Ex parte Bramford, 187 Fed. 720.
In re Brown, Ex parte Horrocks, i85 Fed. 766.
In re Brown, Ex parte Bank of Princeton, 175 Fed. 769.
2In re Ennis, Ex parte Bramford, I87 Fed. 720, 722.
In re McIntyre, Ex parte Pippey, Ex parte Hudson, 181 Fed. 955.
In Matter of Mills, 125 App. Div. 730, claimants were denied the
right to participate in the superior class. The case is interesting as
illustrating the distinctions indulged in determining to which class a
claimant belongs. A very interesting article covering numerous phases
of this branch of the subject will be found in the Columbia Law Review
for May 19I2.
IIO




THE BROKER AND HIS CUSTOMER
Cornering the Market Illegal.
It is well settled that it is illegal to attempt to corner
the market. As it is the intention to force the parties
who may sell to those making the attempt to settle
differences, it is a gambling transaction, and the contracts are unenforceable. Some courts hold corners to
be illegal as in restraint of trade.'
Guaranteeing Stock.
A broker does not guarantee the genuineness of the
stock purchased for a customer.2  Nor has he any implied
authority to warrant stock sold for his customer.3
Unauthorized Sale - Right to Advances, etc.
Whether an action is for conversion of securities bought
on margin or on the contract, the broker is entitled to
counterclaim for advances, interest, and commissions,
if these have not been covered by the proceeds of the
unauthorized sale.4
In an action for the balance of the customer's account
after selling his stock, the brokers must show a sale in
good faith and to a person authorized to purchase.5
Broker's Lien.
A wife allowed her husband to pledge her securities
as margin on his own stock transactions. Although the
lArnott v. Pittston etc. Coal Co., 68 N. Y. 558.
Livermore v. Bushnell, 5 Hun, 285.
'Peckham v. Ketchum, 5 Bosw. 506.
'Smith v. Tracy, 36 N. Y. 79.
4Barber v. Ellingwood, No. 2, 137 App. Div. 704.
McIntyre v. Whitney, I39 App. Div. 557.
'Camman v. Huntington, 89 App. Div. 99.
III




STOCK EXCHANGE LAWS
brokers knew that these securities belonged to the wife,
they had nevertheless a valid lien on them, and could
sell them to satisfy it, after notice to the wife.'
In an action by exchange brokers against curb brokers
the defense was that the owners were guilty of fraud in
inducing the sale. It was held that the defense was
available, the relationship between Stock Exchange
broker and customer not being exempt from the ordinary rules of principal and agent.2  But if the broker
was not a party to his principal's fraud, he had a lien on
the stock to the amount of his advances thereon.3
An Account Stated.
An account stated requires the acts of two parties, the
debtor and the creditor. Stockbrokers cannot recover
upon an account stated where it is shown that the customer repudiated the account rendered.4
When a customer retained an account rendered to him
by his brokers' assignee for more than a month without
objection, it was a question for the jury whether he
assented to it so as to make it an account stated.5
Broker's Clerk as Customer's Agent.
The clerk of a broker may be constituted the agent of
a customer to receive from the broker the return of
iMoore v. Rodewald, 142 App. Div. 74I.
2Leo v. McCormack, I86 N. Y. 330.
3id.
4Schultheis v. Caughey, 146 App. Div. 102.
'Little v. McClain, I34 App. Div. I97.
112




THE BROKER AND HIS CUSTOMER
stock certificates given as security for a margin account, or their equivalent.'
Stock Certificate Not a Negotiable Instrument.
A certificate of stock is not a negotiable instrument.
An assignment of a certificate of stock with a P/A endorsed on the certificate, although in blank, except as to
signatures and witness, presents such indicia of title
that an innocent holder obtains a good title.2
Undisclosed Principal.
A broker who sells stock though acting for another
without disclosing his principal is himself liable as principal.3 A broker selling worthless bonds in this way
is personally liable to the purchaser.4
Joint Account.
When two parties open a joint account the broker is
not obliged at the request of one of them to cancel the
joint account and accept in lieu thereof the separate
liability of each for one-half of the joint liability.5
Demand for Money Deposited.
A customer must make a demand for money deposited
with his broker before bringing an action.6,Carlisle v. Norris, 142 N. Y. Supp. 393.
'Talcott v. Standard Oil Co., I49 App. Div. 694.
'Bassett v. Perkins, 65 Misc. I03.
4Pugh v. Moore, 44 La. Ann. 209.
"Levy v. Potter, I04 App. Div. 457.
6Ennis v. Ross, 37 Misc. i60.
II3








PART IV
CONSTITUTION, BY-LAWS AND RULES OF THE
NEW YORK STOCK EXCHANGE








PART IV


Constitution, By-laws and Rules of the New York
Stock Exchange
Constitution- Rules for the Government of the Exchange as amended to January 1, 1914
ARTICLE I.
Title - Objects.
The title of this Association shall be the "NEW
YORK STOCK EXCHANGE."
Its object shall be to furnish exchange rooms and
other facilities for the convenient transaction of their
business by its members, as brokers; to maintain high
standards of commercial honor and integrity among its
members; and to promote and inculcate just and equitable principles of trade and business.
ARTICLE II.
Government.
The government of the Exchange shall be vested in
a Governing Committee, composed of the President and
the Treasurer of the Exchange, and of forty Members,
elected in the manner hereinafter provided. The memI 17




STOCK EXCHANGE LAWS
bers of the Governing Committee, and the Secretary,
shall be the officers of the Exchange.
ARTICLE III.
Governing Committee.
SEC. i. The Members of the Governing Committee
shall be divided into four classes, each class consisting
of ten members, as follows: first class, to hold office for
one year; second class, for two years; third class for
three years; fourth class, for four years.
SEC. 2. The Governing Committee shall determine the manner and form by which its proceedings
shall be conducted; appoint and dissolve all Standing or other Committees, define, alter and regulate
their jurisdiction as stated in this instrument; have
original and supervisory jurisdiction over any and all
subjects and matters referred to said Committees;
it may direct and control their actions or proceedings
at any stage thereof, and shall try all charges against
members of the Exchange and punish such as may be
found guilty.  It shall have entire control of the
finances of the Exchange and fix the amount of fees
and compensation to be paid to members of Committees, to Officers of the Exchange and to appointees of
the Governing Committee. It may require of all officers
or appointees of the Exchange a good and sufficient
bond to secure the faithful performance of their duties.
The Governing Committee shall be vested with all
other powers necessary for the government of the Ex118




CONSTITUTION, BY-LAWS AND RULES
change, the regulation of the business conduct of its
members, and the promotion of its welfare, objects and
purposes.
SEC. 3. A Member, who shall be absent from three
consecutive regular meetings of the Governing Committee, without having been excused by the President,
may be declared by a two-thirds vote of the existing
members of the Committee to be no longer a Member.
SEC. 4. All vacancies occurring in the Governing Committee shall be filled by said Committee until
the ensuing annual election.
SEC. 5. No member of the Governing Committee
shall be disqualified from participating in any meeting,
action or proceeding of any kind whatever of said Committee, by reason of being or having been a member of a
Standing Committee or Special Committee which has
made prior inquiry, examination or investigation of the
subject under consideration. Nor shall any member
of any Standing or Special Committee be disqualified,
by reason of such membership, from acting as a member
of the Governing Committee upon any appeal from any
decision of such Standing or Special Committee. But
no member shall participate in the adjudication of
any case in which he is personally interested.
SEC. 6. A majority of all the existing members of
the Governing Committee shall be necessary to constitute a quorum.
SEC. 7. Any hearing or trial may be adjourned,
from time to time, by the Governing Committee in
its discretion; but no member thereof, who shall not
II9




STOCK EXCHANGE LAWS
have been present at every meeting of said Committee
at which evidence is taken, or at which an accused
member, or a member whose conduct is involved in the
hearing, is heard, shall participate in the final decision.
SEC. 8. In the absence of both the President and
Vice-President, any ten members of the Governing Committee may call a meeting thereof by written announcement from the rostrum.
SEC. 9. In the case of the temporary absence, or inability to act, of both the President and Vice-President,
the Governing Committee may choose an Acting President of the Exchange pro tern.
SEC. io. The Governing Committee shall at its
first regular meeting in June of each year, designate
counsel for the Exchange; such counsel to be employed
at the pleasure of said Committee.
ARTICLE IV.
President.
SEC. i. The executive power of the Exchange shall
be vested in the President, who shall direct the enforcement of the rules and regulations and have the care of
all its interests. He may preside over the Exchange
whenever he shall so elect, and shall be the presiding
officer of the Governing Committee.
SEC. 2. The President may call special meetings of
the Exchange, and of the Governing Committee. He
shall call special meetings of the Exchange, upon the
written request of one hundred members, and special
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CONSTITUTION, BY-LAWS AND RULES
meetings of the Governing Committee, upon the written
request of ten members of said Committee.
SEC. 3. Should special exigencies require, the President may appoint committees ad interim, to act until
the regular appointments are made.
ARTICLE V.
Vice-President.
SEC. i. The Governing Committee, at its first
meeting after every annual election, shall choose from its
Members a Vice-President of the Exchange.
SEC. 2. The Vice-President shall, in the absence of
the President, assume all the functions and powers, and
discharge all the duties of the President.
ARTICLE VI.
Treasurer.
SEC. I. It shall be the duty of the Treasurer to
receive and, acting under instructions from the Finance
Committee, to take charge of and disburse moneys of the
Exchange. He shall present to the Governing Committee
at its first regular meeting in May of each year a report
of the finances of the Exchange for the twelve months
ending April 30 preceding. He shall be a member of
the Finance Committee, and a Trustee of the Gratuity
Fund.
SEC. 2. In the event of failure, neglect or inability
of the Treasurer, for any reason, to execute the duties of
his office the Finance Committee shall appoint one Qf
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STOCK EXCHANGE LAWS
its members, who, together with either the President or
Vice-President, shall act as Treasurer pro tern.
ARTICLE VII.
Secretary.
SEC. i. The Secretary shall be appointed by a majority vote of the Governing Committee and shall hold his
position subject to the pleasure of the Governing Committee. It shall be the duty of the Secretary to record
in a book of minutes the proceedings of the Exchange
and take charge of the books and papers of the association. He shall be the Secretary of the Governing
Committee and of the Standing Committees. He shall
conduct the correspondence of the Exchange and shall
keep a ledger containing the names of all the members,
with dates of their admission and transfer of membership.
He shall be the accountant of the Exchange, and shall
perform such other duties as the Governing Committee
may direct.
ARTICLE VIII.
Chairman and Assistant Chairman.
SEC. i. The Governing Committee may appoint a
Chairman, who shall hold his position subject to the
pleasure of said Committee. It shall be his duty to
preside over the Exchange during business hours, maintain order, enforce the rules, impose fines, and perform
such other duties as the Committee of Arrangements may
direct.
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CONSTITUTION, BY-LAWS AND RULES
SEC. 2. The Chairman shall not be permitted personally to buy or sell securities upon the floor of the
Exchange.
SEC. 3. The Committee of Arrangements may appoint
an Assistant Chairman, who shall hold his position subject to the pleasure of said Committee, and perform
such duties as said Committee may direct.
ARTICLE IX
Elections.
SEC. i. The annual election of the Exchange shall
be held on the second Monday of May; at which time
there shall be elected by ballot a President, and a Treasurer, each for the term of one year; a Trustee of the
Gratuity Fund for the term of five years; and ten Members of the Governing Committee for the term of four
years; also members to fill any vacancies which may have
occurred during the preceding year either in the Trustees
of the Gratuity Fund or in the Governing Committee.
In each case the member receiving the highest number
of votes for any office or position shall be declared elected
thereto.
SEC. 2. An annual election of the Exchange shall
also be held on the second Monday in January, at which
time there shall be elected by ballot a Nominating Committee to consist of five members (not officers of the
Exchange) who shall serve for a period of one year.
Any vacancy during said term shall be filled by the
remaining members. The Nominating Committee shall
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STOCK EXCHANGE LAWS


hold at least three meetings in the month of March, due
notice of which shall be posted on the bulletin board, and
sent to each member of the Exchange, inviting members
of the Exchange to attend said meetings for the purpose of suggesting nominees for the offices and positions
which are to be filled at the annual election on the second
Monday in May following. Said Committee shall
report to the Exchange on the second Monday in April,
nominees for such offices and positions.
The Nominating Committee shall also hold at least
three meetings in the month of November, due notice
of which shall be posted on the bulletin board, and sent
to each member of the Exchange, inviting members of
the Exchange to attend said meetings for the purpose
of suggesting nominees for the Nominating Committee
for the ensuing year. Said Committee shall report to
the Secretary of the Exchange at or before two o'clock
P. M. on the third Monday in December, nominations
for a Nominating Committee to be balloted for at said
annual election on the second Monday in January
following.
In addition to the above method, members of the
Exchange at large may propose nominees for members
of the Nominating Committee by petition; a nominee
thus nominated must be endorsed by not less than forty
members of the Exchange and no member shall endorse
more than one nominee. Such petitions shall be filed
with the Secretary of the Exchange in sealed envelopes
at or before two o'clock P. M. on the third Monday in
December. The Nominating Committee and the SecreI24




CONSTITUTION, BY-LAWS AND RULES
tary of the Exchange shall open said envelopes on said
day and the names of the nominees therein proposed shall
be arranged alphabetically with those of the five nominees
of the Nominating Committee and reported to the
Exchange on the following day. The five nominees
in this combined list receiving the highest number of
votes at the annual election on the second Monday in
January, shall constitute the Nominating Committee for
the ensuing year. In case of a tie the names of the
members involved shall be referred to the retiring
Nominating Committee who shall make selection by lot.
SEC. 3. Any member of the Exchange, in good
standing, shall be entitled to vote at any election or
meeting of the Exchange.
SEC. 4. When the Exchange shall be assembled for
the transaction of business other than dealing in securities, a majority of all the members shall constitute a
quorum.
ARTICLE X.
Eligibility - Vacancy in Office.
SEC. i. No person shall be eligible to the office of
President, Treasurer, Trustee of the Gratuity Fund, or
Member of the Governing Committee, who shall not be,
at the time of his election, a member in good standing.
SEC. 2. The expulsion, suspension or transfer of
membership of a member holding any office or position,
to which he has been either elected or appointed, shall
create a vacancy therein which shall be filled as provided
in these rules.
I25




STOCK EXCHANGE LAWS


SEC. 3. In the event of the refusal, failure, neglect
or inability of an officer of the Exchange to discharge
the duties of his office, or for any good cause, of the
sufficiency of which the Governing Committee shall be
the sole judge, said Committee shall have power, by
a two-thirds vote of all its existing members, to remove
said officer and declare the position held by him to be
vacant.
SEC. 4. In case a vacancy shall occur in the office
either of President or Treasurer, a new election by
ballot shall be held forthwith to fill such vacancy for
the unexpired term.
SEC. 5. In case of vacancy in the office of VicePresident, the same shall be filled by the Governing
Committee at its next meeting after the vacancy occurs.
SEC. 6. Every appointee, clerk or employee of the
Exchange shall hold his office, place or position only
during the pleasure of the authority by which he was
appointed; and he may be, at any time, removed, dismissed or discharged by a majority vote of the Committee by which he was appointed, or by a like vote of
the Governing Committee.
ARTICLE XI.
Standing Committees.
SEC. I.  Promptly after each annual election the
Governing Committee shall appoint from its Members
the following Standing Committees:
First. -A Committee of Arrangements, to consist
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CONSTITUTION, BY-LAWS AND RULES
of seven members. It shall have the general care and
supervision of the Exchange, enforce all rules and regulations necessary to the conduct of business, to good
order and the comfort of the members, and consider
all complaints of violation of said rules. It shall control and regulate the quotation service and all telegraph
or telephone connection with the Exchange. It shall,
except as herein otherwise expressly provided, appoint,
dismiss and determine the number, duty and pay of all
employees, and provide all supplies for the Exchange
and make all necessary repairs to its building.
Second.- A Committee on Admissions, to consist
of fifteen members. All applications for membership,
and all applications of suspended members for reinstatement to their privileges, shall be referred to this
Committee.
The affirmative vote of two-thirds of the entire Committee shall be necessary to elect to membership, or to
reinstate a suspended member.
No application for readmission of a person who has
ceased to be a member of the Exchange through violation of its Constitution, or for the reinstatement of a
member who has been suspended under Sec. 2, Article
XVI, shall be considered by this Committee, unless
said person has obtained the consent of two-thirds of the
members of the Governing Committee present, when
such application is considered.
Third. - An Arbitration Committee to consist of
nine members. It shall investigate and decide, when
properly brought before it, all claims and matters of
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STOCK EXCHANGE LAWS
difference arising from contracts subject to the rules of
the Exchange, between members of the Exchange, or
at the instance of a non-member between members and
non-members. The Committee may dismiss any case
and refer the parties to their remedies at law, and it
shall so refer them upon the joint request of the contestants. The decision of this Committee shall be final
in all cases, unless an appeal be taken by a member of
the Committee as in these rules provided, or in cases
involving a sum of $2,500 or over, when either party
may appeal within ten days to the Governing Committee; said appeal shall be submitted to the Governing
Committee by the Secretary of the Exchange upon a
printed transcript of the records of the case, together
with such printed arguments as the parties to the appeal
may desire to make; upon such appeal, the Governing
Committee may finally adjudicate the case, relegate the
parties to their remedies at law, or direct a rehearing by
the Arbitration Committee.
A non-member making a claim shall execute an agreement to abide by the rules of the Exchange, and also a
full release of said claim, and shall deliver them to the
Chairman of the Arbitration Committee, who shall keep
them in trust to abide the result of said arbitration and deliver them to the defendant in any of the following cases:
(a) In case the plaintiff shall fail to appear before
the Arbitration Committee within such time as said
Committee shall designate.
(b) In case judgment shall be rendered for said
defendant by the Arbitration Committee.
128




CONSTITUTION, BY-LAWS AND RULES
(c) In case the defendant shall pay, or offer to pay,
to the claimant the amount of judgment rendered in
his favor, and shall have filed with the Chairman satisfactory evidence of such payment or proffered payment.
In case judgment shall be rendered against any member of the Exchange, which he neglects to pay, or if the
case be dismissed, then such release shall be canceled
and returned to the plaintiff.
Fourth. - A Committee on Business Conduct, to consist of five members.
It shall be the duty of this Committee to consider
matters relating to the business conduct of members
with respect to customers' accounts.
It shall also be the duty of this Committee to keep
in touch with the course of prices of securities listed on
the Exchange, with the view of determining when improper transactions are being resorted to.
It shall have power to examine into the dealings of
any members, with respect to the above subjects, and
report its finding to the Governing Committee.
Fifth.- A Committee on Clearing-House, to consist
of five members. It shall have general charge of the
Clearing-House of the Exchange and the business thereof, and shall from time to time designate the securities
to be cleared. It may determine the amount of salary
or compensation to be paid to officers and employees
of the Clearing-House and make expenditures from its
funds for the conduct of its business. It shall make
monthly financial reports to the Finance Committee.
Sixth.- A Committee on Commissions, to consist of
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STOCK EXCHANGE LAWS
five members. It shall enforce the rules relating to
commissions, partnerships and branch offices, and
shall report to the Governing Committee any undesirable partnership or branch office or any violation of
said rules.
Seventh. - A Committee on Constitution to consist of
five members, to which shall be referred all additions,
alterations, or amendments to the Constitution. It shall
report them back to the Governing Committee, but only
at regular meetings or at special meetings called solely
for the purpose of considering them.
Eighth. -A Finance Committee to consist of seven
members. It shall meet prior to the first regular meeting of the Governing Committee in each month and examine the various accounts and vouchers; and, acting
as a Board of Audit, the Committee shall report its examination to the Governing Committee. It shall also
make examinations of the condition of the Gratuity Fund
as provided in Article XIX hereof.
Ninth. - A Committee on Insolvencies to consist of
three members selected from the Committee on Admissions. It shall investigate every case of insolvency
immediately after the announcement thereof to the
Exchange. It shall ascertain the cause of failure and
promptly report the result of its examination to the
Committee on Admissions.
Tenth. - A Law Committee to consist of five members,
to which shall be referred all questions of law affecting
the interests of the Exchange.
It shall act in an advisory capacity to the President
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CONSTITUTION, BY-LAWS AND RULES
when requested, shall represent the Exchange in conferences with other interests, and is authorized and
empowered, whenever the Committee shall deem it to
be for the interest of the Exchange, to examine into the
dealings of any member of the Exchange.
Eleventh. - A Committee on Securities to consist of
five members. It shall make rules defining the requirements for regularity in delivery of securities dealt in
at the Exchange; and decide all questions relating to
the settlement of contracts subject to the rules of the
Exchange, of due bills, of irregularities in securities, or
in deliveries thereof, and all questions relating to reclamations therefor.
Twelfth. - A Committee on Stock-List to consist of
five members. It shall receive and consider all applications for placing securities upon the list of the Exchange, and make report and recommendation thereon
to the Governing Committee, giving full statement
concerning organization, capitalization, resources and
indebtedness.
It shall have power to place upon the list, without
report and recommendation to the Governing Committee, any obligations of the Government of the United
States or of any state or city thereof, or of a foreign
state or city, also temporary receipts issued by any
corporation or firm for part or full payment of subscription to bonds, stocks, or other obligations; and it shall
have power to direct that any such securities or temporary receipts be taken from the list, and further
dealings therein prohibited.
I3I




STOCK EXCHANGE LAWS


It shall have charge of the arrangement and revision
of the list of securities.
SEC. 2. The Standing Committees of the Exchange,
and all Special Committees, shall determine the manner
and form by which their proceedings shall be conducted;
shall make such regulations for their government as
they shall deem proper, and may fill any vacancies
occurring in their membership, subject always to the
control and supervision of the Governing Committee.
SEC. 3. A majority of the members of any Committee shall be necessary to constitute a quorum.
ARTICLE XII.
Appeals.
SEC. i. An appeal to the Governing Committee,
from any decision of a Standing Committee may be
taken by a member of the Exchange, interested therein,
if made in writing to the President within two days
after said decision has been rendered; but nothing
herein contained shall authorize an appeal from a decision of the Committee on Admissions, except as provided in Section 4, Article XVI of these Rules, nor from
a decision of the Arbitration Committee, except as
provided in the third sub-division of Section i, Article
XI, of these Rules.
SEC. 2. A member of a Standing Committee, present
at a hearing of a case, may, within two days after the decision has been made thereon, appeal therefrom to the Governing Committee by writing, addressed to the President.
132




CONSTITUTION, BY-LAWS AND RULES
ARTICLE XIII.
Applications for Membership - Eligibility - Initiation
Fee.
SEC. i. Every applicant for membership must be
at least twenty-one years of age, and a citizen of the
United States.
SEC. 2. The membership of the Exchange shall not be
increased except by action of the Governing Committee,
which shall prescribe the number of increase and the
terms of admission. Such action shall be submitted
to the Exchange on the same conditions as those prescribed for amendments to the Constitution.
SEC. 3. Members admitted by transfer shall pay
to the Exchange an initiation fee of Two Thousand
Dollars.
SEC. 4. If the initiation fee of an applicant for admission to membership is not paid on the day of his
election and notification by the Secretary, such election
shall be void.
SEC. 5. No person, elected to membership, shall be
admitted to the privileges thereof until he shall have
signed the Constitution of the Exchange. By such
signature he pledges himself to abide by the same and
by all subsequent amendments thereto.
ARTICLE XIV.
Dues and Fines - Penalty for Non-Payment.
SEC. i. The dues of all members of the Exchange
shall be payable on May ist and November:st of each
year, and shall be fifty dollars semi-annually, exclusive
I33




STOCK EXCHANGE LAWS
of fines, and of assessments under Article XVIII of the
Constitution.
SEC. 2. Any member who shall neglect to pay his
fines, dues or any assessment for the Gratuity Fund
for three months after they become payable, shall be
reported by the Treasurer to the President, who shall,
after due notice to the delinquent, suspend said delinquent until said dues are paid.
If the fines, dues or assessments of any suspended
member are not paid at the end of one year after they
become payable, the membership of said suspended
member may be disposed of by the Committee on Admissions.
ARTICLE XV.
Transfer of Membership.
SEC. i. A transfer of membership may be made
upon submission of the name of the candidate to the
Committee on Admissions, and the approval of the transfer by two-thirds of the entire Committee. Notice
of the proposed transfer shall be posted on the bulletin
in the Exchange for at least ten days prior to transfer.
SEC. 2. All contracts subject to the rules of the
Exchange, made by a member proposing to transfer
his membership, shall mature on the tenth day of the
posting of notice of the proposed transfer; and said
member shall not be permitted thereafter to make
any contracts subject to the rules of the Exchange, pending the approval of the proposed transfer by the Committee on Admissions.
I34




CONSTITUTION, BY-LAWS AND RULES
This rule shall also apply in cases where a membership is disposed of by the Committee on Admissions.
SEC. 3. Upon any transfer of membership, whether
made by a member voluntarily, or by the Governing
Committee or the Committee on Admissions in pursuance of the provisions of the Constitution, the proceeds
thereof shall be applied to the following purposes and
in the following order of priority, viz.:
First. - The payment of all fines, dues, assessments
and charges of the Exchange, or any department thereof,
against a member whose membership is transferred.
Second. - The payment of creditors, members of
the Exchange, or firms registered thereon, of all filed
claims arising from contracts subject to the rules of the
Exchange, if, and to the extent that, the same shall be
allowed by the Committee on Admissions. If said
proceeds shall be insufficient to pay said claims, as so
allowed, in full, the same shall be applied to the payment
thereof pro rata.
Third. - The surplus, if any, of said proceeds shall
be paid to the person whose membership is transferred,
or to his legal representatives, upon the execution by
him or them of a release or releases satisfactory to the
Committee on Admissions.
The Committee on Admissions shall have power, by
rule or otherwise, to secure the observance of the provisions of this Article.
SEC. 4. All unmatured debts or other obligations
of a member, arising out of contracts subject to the rules
of the Exchange, shall become due and payable immeI35




STOCK EXCHANGE LAWS
diately prior to the transfer of his membership; and all
claims filed with the Committee on Admissions, founded
upon contracts subject to the rules of the Exchange,
shall, if, and to the extent that the same are allowed by
said Committee, be liquidated, and paid, pro rata, out
of the proceeds of said membership upon consummation
of the transfer.
SEC. 5. A member shall forfeit all right to share in
the proceeds of a membership, unless he file a statement
of his claim with the Committee on Admissions prior
to the transfer of such membership; but such claim, as
allowed by the Committee on Admissions, may be paid
out of any surplus remaining after all other claims,
allowed by said Committee, have been paid in full.
SEC. 6. Claims growing out of transactions between
partners, who are members of the Exchange, shall not
share in the proceeds of the membership of one of such
partners, until after all other claims, as allowed by the
Committee on Admissions, have been paid in full.
SEC. 7. When a member dies, his membership may
be disposed of by the Committee on Admissions.
SEC. 8. When a member is expelled, or becomes ineligible for reinstatement, his membership may be disposed of forthwith by the Committee on Admissions.
SEC. 9. The expulsion or suspension of a member
shall not affect the rights of creditors, members of the
Exchange or of firms registered thereon.
SEC. IO. When a member is in debt to another
member, the death of the creditor member or the transfer of his membership, either by himself voluntarily, or
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CONSTITUTION, BY-LAWS AND RULES
by the Governing Committee, or the Committee on
Admissions, shall not affect the rights of said creditor
member, his firm, or estate, to share in the proceeds of
the membership of the debtor member under this Article,
in the same manner and to the same extent as if such
creditor member had not died or his membership had
not been transferred.
ARTICLE XVI.
Insolvent Members - Suspension - Reinstatement.
SEC. i. A member who fails to comply with his
contracts, or is insolvent, or who is a partner in a firm,
registered upon the Exchange, which fails to comply
with its contracts, or is insolvent, shall immediately
inform the President, in writing, that he or his firm, is
unable to meet their engagements, and prompt notice
thereof shall be given to the Exchange. He shall thereby
become suspended from membership until, after having
settled with his creditors, or the creditors of his firm,
he has been reinstated by the Committee on Admissions.
SEC. 2. Whenever the President shall ascertain that
a member has failed to meet his engagements, or is insolvent, or that a firm registered upon the Exchange
has failed to meet its engagements, or is insolvent, and
that such member, or such firm, has neglected to comply with the requirements of the preceding section, he
shall announce to the Exchange the insolvency and suspension of such member or such firm.
SEC. 3. If a member, suspended under this Article,
I37




STOCK EXCHANGE LAWS


fails to settle with his creditors and apply for reinstatement, within one year from the time of his suspension, his membership shall be disposed of by the
Committee on Admissions.
The Governing Committee may, by a two-thirds vote
of the members present, extend the time of settlement
for periods not exceeding one year each. At the expiration of the time granted, the membership of said
suspended member shall be disposed of as above provided.
SEC. 4. When a suspended member applies for reinstatement he shall furnish to the Chairman of the
Committee on Admissions a list of his creditors, a statement of the amounts originally owing, and the nature
of the settlement in each case. Notice of the proposed
consideration of the application shall be given through
the Chairman of the Exchange on three consecutive
days, and said notice shall also be posted upon the
bulletin. Upon the applicant presenting satisfactory
proof of settlement with all his creditors, the Committee
shall proceed to ballot for him in accordance with its
rules and regulations. Failing to receive the approving
vote of two-thirds of the entire Committee, the applicant shall be entitled to be balloted for at any five
subsequent regular meetings of the Committee, to be
designated by himself: provided, however, that the six
ballotings to which the applicant shall be entitled shall
be within one year from the date of his suspension, or
within such further extended time for settlement as
may have been granted by the Governing Committee.
I38




CONSTITUTION, BY-LAWS AND RULES
If on the sixth ballot the applicant be rejected, he
may appeal within ten days thereafter to the Governing
Committee, who may by an affirmative vote of not less
than twenty-five of its members reinstate the applicant.
If he fails to make application to the Committee on
Admissions, to be balloted for as above provided, or if
rejected by the Governing Committee, his membership
shall be disposed of by the Committee on Admissions.
SEC. 5. Whenever the Governing Committee shall
determine, upon the report of the Committee on Admissions, that the failure of a member or of a firm registered upon the Exchange has been caused by reckless or unbusinesslike dealing, said member, or the partner or partners in such firm who are members of the
Exchange, may, by a two-thirds vote of the existing
members of the Governing Committee, be declared ineligible for reinstatement.
SEC. 6. Every suspended member shall file with the
secretary of the Exchange, within thirty days after his
suspension, a written statement containing a complete
list of his creditors and of the amount owing to each.
ARTICLE XVII.
Expulsion and Suspension from Membership.
SEC. i. Unless otherwise specially provided, the penalty of suspension from membership may be inflicted,
and the period of suspension determined, by the vote
of a majority of the existing members of the Governing
Committee; and the penalty of expulsion from memberI39




STOCK EXCHANGE LAWS
ship or of ineligibility of a suspended member for readmission may be inflicted by the vote of two-thirds of
the existing members of said Committee.
SEC. 2. A member who shall be adjudged, by a
two-thirds vote of all the existing members of the Governing Committee, to be guilty of fraud or of fraudulent acts, shall be expelled and the President shall so
declare; public announcement of the expulsion shall be
made to the Exchange and the membership shall be
forthwith disposed of by the Committee on Admissions.
SEC. 3. Whenever it shall appear to a majority of
the Committee on Admissions that a misstatement upon
a material point has been made to it by a member, upon
his application either for membership or reinstatement
or extension of time, it shall report the case to the
Governing Committee, who by a two-thirds vote of all
the existing members of the Committee may expel the
member.
SEC. 4. Any member who shall be connected directly, or by a partner, or otherwise, with any organization in the City of New York which permits dealings
in any securities or other property admitted to dealing
in any department of this Exchange, shall be liable to
suspension for a period not exceeding one year, or to
expulsion, as the Governing Committee may determine.
SEC. 5. A member making a transaction with a nonmember in the, rooms of the Exchange, either purchase,
sale or loan, in any security or property admitted to
dealings in any department of the Exchange, or in money,
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CONSTITUTION, BY-LAWS AND RULES
shall be subject to suspension for such period not exceeding one year as the Governing Committee may
deem proper.
SEC. 6. A member who shall have been adjudged, by
a majority vote of all the existing members of the Governing Committee, guilty of wilful violation of the Constitution of the Exchange, or of any resolution of the
Governing Committee regulating the conduct or business of members, or of any conduct or proceeding inconsistent with just and equitable principles of trade, may
be suspended or expelled as the said Committee may
determine, unless some other penalty is expressly provided for such offense.
SEC. 7. The Governing Committee may, by a twothirds vote of its members present, require that a member
of the Exchange shall submit to the Governing Committee or any Standing or Special Committee, for examination, such portion of his books or papers as are
material and relevant to any matter under investigation by said Committee or by any Standing or Special
Committee. Any member who shall refuse or neglect
to comply with such requirement, or shall wilfully
destroy any such required evidence, or who, being duly
summoned, shall refuse or neglect to appear before the
Governing Committee or any Standing or Special Committee, as a witness, or refuse to testify before any such
Committee, may be adjudged guilty of an act detrimental to the interest or welfare of the Exchange.
SEC. 8. The Governing Committee may, by a vote
of a majority of all its existing members, suspend from
14I




STOCK EXCHANGE LAWS
the Exchange for a period not exceeding one year, any
member who may be adjudged guilty of any act which
may be determined by said Committee to be detrimental
to the interest or welfare of the Exchange.
SEC. 9. An accusation, charging a member before
the Governing Committee with having committed an
offense, or having violated the laws or regulations of
the Exchange, shall be in writing; it shall specify the
charge or charges against such member with reasonable detail, and shall be signed by the person or persons
making the charge or charges. A copy of such charge
or charges shall be served upon the accused member
either personally, or by leaving the same at his office
address during business hours, or by mailing it to him at
his place of residence. He shall have ten days from the
date of such service to answer the same, or such further
time as the Governing Committee in its discretion may
deem proper. The answer shall be in writing, signed
by the accused member, and filed with the Secretary of
the Exchange. Upon the answer being filed, or if the
accused shall refuse or neglect to make answer as hereinbefore required, the Governing Committee shall, at a
regular or special meeting thereafter, proceed to consider the charge or charges; if such meeting be a special
meeting, notice of the object thereof shall be sent to the
members of the Committee. Notice of such meeting
shall be sent to the accused; he shall be entitled to be
personally present thereat, and shall be permitted in
person to examine and cross-examine all the witnesses
produced before the Committee, and also to present
142




CONSTITUTION, BY-LAWS AND RULES
such testimony, defense or explanation as he may deem
proper. After hearing all the witnesses and the member accused, if he desires to be heard, the Governing
Committee shall determine whether said member is
guilty of the offense or offenses charged. If it determines
that the accused is guilty, the Governing Committee
shall expel such member, or may suspend him, as the
case may be; the result shall be announced to the Exchange by the President, and a written notice thereof
served upon said member in the manner hereinbefore
provided. The finding of the Governing Committee
shall be final and conclusive.
SEC. IO. Should a member be accused before the Governing Committee of misconduct, or of having committed an offense the penalty for which is limited to
suspension for a period not exceeding sixty days, said
Committee may proceed summarily, and the method
of procedure required by the preceding Section shall not
apply. The accused shall be summoned before the
Committee, informed of the nature of the accusation
against him and afforded an opportunity for explanation by personal or other testimony. If the Committee
shall determine by a majority vote of all its existing
members that the accused is guilty, it may, by a similar
vote, suspend him from membership for such period as
the Constitution provides.
SEC. II. Whenever a member is suspended by the
Governing Committee, announcement thereof shall be
made to the Exchange, and such member shall be deprived
during the term of his suspension of all rights and privI43




STOCK EXCHANGE LAWS
ileges of membership, except those pertaining to the
Gratuity Fund.
SEC. 12. No member of the Exchange shall be allowed to be represented by professional counsel in any
investigation or hearing before the Governing Committee
or any Standing or Special Committee.
The Gratuity Fund and Its Trustees
ARTICLE XVIII.
The Gratuity Fund.
Every member of the Exchange shall be subject to
the conditions and entitled to partake of the benefits
of the plan providing for the families of deceased members as hereinafter set forth.
SEC. i. Every person who shall become a member
of the Exchange shall pay to the Trustees of the Gratuity
Fund the sum of Ten dollars before he shall be admitted
to the privilege of membership.
SEC. 2. Upon the death of a member of the Exchange
there shall be levied and assessed against every other
member the sum of Ten dollars, which shall thereupon
become a due from him to the Exchange, and which shall
be charged and collected as other dues and fines are or
may be then charged and collected.
SEC. 3. Assessments under the provisions of this
Article shall be made equally against all members,
either living or deceased, until the date of the transfer
of their memberships.
SEC. 4. The faith of the Exchange is hereby pledged
144




CONSTITUTION, BY-LAWS AND RULES
to pay, within one year after proof of death of any
member, out of the money collected under the provisions of this Article, the sum of Ten thousand dollars,
or so much thereof as may have been collected, to the
persons named in the next Section, as therein provided,
which money shall be paid as a gratuity from the other
members of the Exchange, free from all debts, charges
or demands whatever.
SEC. 5. Should the member die leaving a widow and
no descendant, then the whole sum shall be paid to such
widow for her own use.
Should the member die leaving a widow and descendants, then one-half shall be paid to the widow for her
separate use and one-half to the children for their use,
share and share alike, provided that the share of minor
children shall be paid to their guardian, and that the
issue of any deceased child shall be entitled to receive
the share which said child would have received if
living, if of age directly, or if minors, through his, her
or their guardian or guardians.
Should the member die leaving descendants and no
widow, then the whole sum shall be paid to the children
as directed in the preceding paragraph to be done with
the moiety; but no adopted child shall share in the gratuity if the member leaves a widow or descendants.
Should the member die leaving neither widow nor
descendant, but an adopted child or children, then the
whole sum shall be paid to such adopted child or children, the issue of any deceased adopted child to take the
share which the parent would have taken if living; proI45




STOCK EXCHANGE LAWS
vided that such adoption shall have been in such manner and form as to be valid under the laws of the State
of New York.
Should the member die leaving neither widow, descendant, adopted child nor issue of a deceased adopted
child, then the whole sum shall be paid to the same persons who would, under the laws of the State of New
York, take the same by reason of relationship to the
deceased member had he owned the same at the time
of his death; and if there be no such person, then the
assessment levied in such case shall be credited to those
members of the Exchange against whom it shall have
been charged, in reduction of their payments under this
Article.
In all cases a certified copy of the proceedings before a
Surrogate or Judge of Probate shall be accepted as proof
of the rights of the claimants, be deemed ample authority
to the Exchange to pay over the money, shall protect the
Exchange in so doing, and shall release the Exchange
forever from all further claim or liability whatsoever.
SEC. 6. Nothing herein contained shall ever be taken
or construed as a joint liability of the Exchange or its
members for the payment of any sum whatever; the
liability of each member, at law or in equity, being limited
to the payment of ten dollars only on the death of any
other member, and the liability of the Exchange being
limited to the payment of the sum of ten thousand
dollars, or such part thereof as may be collected, after
it shall have been collected from the members, and not
otherwise.
I46




CONSTITUTION, BY-LAWS AND RULES
SEC. 7. Nothing herein contained shall be construed
as constituting any estate in esse which can be mortgaged or pledged for the payment of any debts; but it
shall be construed as the solemn agreement of every
member of the Exchange to make a voluntary gift to
the family of each deceased member, and of the Exchange, to the best of its ability, to collect and pay over
to such family the said voluntary gift.
SEC. 8. There shall be credited annually to each
member of the Exchange, in reduction of his payments
under this Article, his proportion of the surplus income
of the Exchange, after setting apart such sum as the
Governing Committee shall determine to be necessary
for conducting the business of the Exchange.
Whenever the number of deaths of members of the
Exchange shall exceed fifteen in any one year, the
Trustees of the Gratuity Fund shall pay over to the
Treasurer of the Exchange the net income which has
been received as interest on the Fund during said year,
less the necessary expenses of management and distribution, and each member of the Exchange shall be
credited with his proportion of the amount, in reduction
of his payments under this Article.
SEC. 9. The provisions of this Article shall not extend to any member whose connection with the Exchange shall have been severed by the transfer of his
membership, whether the same is made voluntarily or
involuntarily, nor to any member who now is or hereafter may be expelled by the Governing Committee,
but shall extend to suspended members.
I47




STOCK EXCHANGE LAWS


ARTICLE XIX.
The Trustees of the Gratuity Fund.
SEC. i. The execution of the provisions of the
preceding Article, and the management and distribution of the Fund created thereunder shall be under the
charge of a Board of Trustees, to be known as "The
Trustees of the Gratuity Fund," and to consist of the
President and the Treasurer of the Exchange, and of
five other Trustees chosen for the term of five years.
In case of a vacancy occurring among the five chosen
Trustees, the Governing Committee, at its next regular
meeting thereafter, shall proceed to fill the same until
the next annual election of the Exchange.
SEC. 2. It shall be the duty of the Trustees to invest and keep securely invested, in accordance with the
laws of the State of New York regulating Trust Funds,
all moneys paid to them for the Fund, together with the
interest and accretions arising therefrom.
All stock shall be registered in the name of "The
Trustees of the Gratuity Fund of the New York Stock
Exchange," but without specifying the individual names
of such trustees, and may be disposed of and assigned
by any four of said Trustees.
SEC. 3. On the first Monday after the annual election of the Exchange, or as soon thereafter as may be
practicable, the Trustees of the Gratuity Fund shall
organize by electing a Chairman, and a Secretary and
Treasurer of the Gratuity Fund, who shall serve for one
year or until their successors shall be chosen. The
148




CONSTITUTION, BY-LAWS AND RULES
offices of Secretary and Treasurer may be held by the
same person.
SEC. 4. There shall be a regular meeting of the
Trustees on the third Monday in each month. The
Chairman may call a special meeting at any time; he
shall call a meeting at the request of two Trustees. At
a meeting four Trustees shall constitute a quorum.
SEC. 5. It shall be the duty of the Chairman to
preside at meetings; he shall vote on all questions; he
shall, on the Monday preceding the annual election of
the Exchange, make a report to the President of the
Exchange of the condition of the Fund, with a statement by the Treasurer of receipts and disbursements.
SEC. 6. It shall be the duty of the Secretary to keep
regular minutes of the proceedings of the Trustees, and
to give notice of meetings.
SEC. 7. It shall be the duty of the Treasurer to
receive and sign vouchers for all moneys paid to the
Trustees, which he shall deposit in such institutions as
they may direct, to his credit as "Treasurer of the Gratuity Fund of the New York Stock Exchange."
He shall have the custody of all securities belonging
to the Fund, subject to the examination and control of
the Trustees.
He shall keep, or cause to be kept, proper books of
account.
He shall receive and keep a record of all claims for
payment under Article XVIII of the Constitution of
the Exchange, and present the same to the Trustees for
their action; when allowed and approved by the TrusI49




STOCK EXCHANGE LAWS
tees, he shall pay the same; but no such payment shall be
made until directed by the Trustees.
He shall make such investments for the Fund as may
be ordered by the Trustees.
His books shall always be open to the inspection of
any Trustee, and he shall make to the Chairman an
annual statement of receipts and disbursements.
He shall receive out of the Fund such compensation
per annum as may be fixed by the Trustees and approved
by the Governing Committee of the Exchange.
SEC. 8. In case any person entitled to any gratuity
shall be under age and have no guardian entitled to
receive payment at the maturity thereof, the Trustees
may, in their discretion, deposit such money with the
New York Life Insurance and Trust Company or the
United States Trust Company, as the property of, and
in trust for, such minor; and in like manner if any
person apparently entitled to any payment fails to
claim, or has disappeared or cannot be found after reasonable inquiry, the Trustees may deposit the presumptive
share of such person in either of said Trust Companies
to the credit of "The Trustees of the Gratuity Fund of
the New York Stock Exchange, in trust," to the end
that it may be paid to such person, if afterwards found,
or otherwise to the parties who may subsequently establish their right thereto; a similar discretion shall apply in
the case of any dispute between claimants for a gratuity or a portion thereof.
SEC. 9. The Trustees shall have power at their discretion to consult and employ legal counsel; they shall
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CONSTITUTION, BY-LAWS AND RULES
be authorized to make disbursements out of the Fund
to defray necessary expenses, but no such disbursements shall be allowed without a resolution specifying
the nature and amount of the same, being entered at
large upon the Book of Minutes of the Secretary. Each
Trustee shall receive from the Fund five dollars for
every meeting at which he shall be present.
SEC. IO. In case of a vacancy occurring in the office
of Chairman, or Secretary and Treasurer, the Trustees
shall forthwith proceed to fill the same for the unexpired term. In case of the temporary absence or inability to act of either the Chairman, or Secretary and
Treasurer, the Trustees shall have power to appoint
one of their number to act in his stead pro tern.
SEC. I. The Governing Committee of the Exchange
shall, at all times, have the right to direct the production
before it of the securities belonging to the Fund, the
Secretary's Book of Minutes and the Treasurer's books
of account.
It shall be the duty of the Finance Committee of
the Exchange to make an annual examination of the
condition of the Fund; and it shall have the right at
any time to make such additional examination thereof
as it may deem proper.
SEC. I2. The Governing Committee of the Exchange shall have power to try charges against any
Trustee for malfeasance or negligence in office, and by
a vote of two-thirds of all its existing members, to suspend him from his functions or to remove him and declare the office vacant.
I5I




STOCK EXCHANGE LAWS
SEC. 13. It shall be the duty of the Treasurer of
the Exchange to pay over, semi-monthly, all assessments
collected under Article XVIII of the Constitution, to
the Treasurer of the Gratuity Fund.
Rules for Transaction or Conduct of Business
ARTICLE XX.
Hours of Business.
SEC. i. The Exchange shall be opened for the entrance of members upon every business day at thirty
minutes after nine o'clock A. M.
At ten o'clock the Chairman shall announce that the
Exchange is open for the transaction of business, and
it shall so remain until three o'clock P. M., when he shall
announce it to be closed. On half-holidays the closing
shall be at twelve o'clock, noon.
SEC. 2. The Exchange shall not be closed at any
time between the hours named in the preceding Section,
except by order of the Governing Committee.
SEC. 3. Dealings upon the Exchange shall be limited to the interval between the hours above named;
and a fine of fifty dollars for each offense shall be imposed by the Chairman, upon any member who shall
make any bid, offer or transaction before or after those
hours. Loans of money or securities may be made
after the official closing of the Exchange.
SEC. 4. Dealing upon any other Exchange in the
City of New York or publicly outside of the Exchange,
either directly or indirectly, in securities listed or quoted
152




CONSTITUTION, BY-LAWS AND RULES
on the Exchange, is forbidden; any violation of this
rule shall be deemed to be an act detrimental to the interest or welfare of the Exchange.
ARTICLE XXI.
Calls.
The appointment and arrangement of Calls of Stocks
or Bonds shall be under the control and direction of
the Committee of Arrangements.
ARTICLE XXII.
Contracts Subject to the Rules of the Exchange.
All contracts of a member of the Exchange, or of a
firm having a member of the Exchange as a general
partner, with any other member of the Exchange, or
with any other firm having a member of the Exchange as
a general partner, for the purchase, sale, borrowing,
loaning or hypothecation of securities, or for the borrowing, loaning, or payment of money, whether occurring upon the floor of the Exchange or elsewhere, are
contracts subject to the rules of the Exchange.
ARTICLE XXIII.
Bids and Offers.
SEC. i. All bids and offers made and accepted in
accordance with these rules shall be binding.
SEC. 2. All offers to buy or sell securities shall be
for Ioo shares of stock or for $Io,ooo par value of bonds,
unless otherwise stated.
Offers to buy or sell specific amounts, other than as
I53




STOCK EXCHANGE LAWS
above stated may be made at the same time and may
be independently accepted.
SEC. 3. Bids and offers may be made only as follows:
(a) "Cash," i. e., for delivery upon the day of
contract;
(b) "Regular Way," i. e., for delivery upon the
business day following the contract;
(c) "At three days," i. e., for delivery upon the
third day following the contract;
(d) "Buyer's" or "Seller's" options for not less than
four days nor more than sixty days.
Bids and offers under each of these specifications may
be made simultaneously, as being essentially different
propositions, and may be separately accepted without
precedence of one over another.
Bids and offers made without stated conditions shall
be considered to be in the "Regular Way."
On transactions for more than three days written
contracts shall be exchanged on the day following the
transaction, and shall carry interest at the legal rate,
unless otherwise agreed; on such contracts one day's
notice shall be given, at or before 2:15 P. M., before the
securities shall be delivered prior to the maturity of
the contract.
On offers to buy "Seller's Option" or to sell "Buyer's
Option," the longest option shall have precedence. On
offers to buy "Buyer's Option" or to sell "Seller's
Option," the shortest option shall have precedence.
SEC. 4. All contracts falling due on holidays or
half-holidays observed by the Exchange shall be settled
I54




CONSTITUTION, BY-LAWS AND RULES
on the preceding business day, except that when two
or more consecutive days are holidays or half-holidays,
contracts falling due on other than the first of such days
shall be settled on the next business day.
Loans of money or securities made on the day preceding a holiday or half-holiday observed by the Exchange shall mature on the succeeding business day,
unless otherwise specified.
SEC. 5. Bids or offers shall not be made at a less
variation than one-eighth of one per cent.
SEC. 6. Bids and offers shall be made on the basis
of a percentage of the par value of the securities dealt
in, unless otherwise ordered by the Governing Committee.
SEC. 7. Any member violating any of the above
provisions of this Article shall be fined by the Chairman
in an amount not exceeding twenty dollars; for a repetition of the offense, he shall be liable to suspension
for a period not exceeding ten days.
SEC. 8. Fictitious transactions are forbidden. Any
member violating this rule shall be liable to suspension
for a period not exceeding twelve months.
SEC. 9. No offers to buy or sell privileges to receive
or deliver securities shall be made publicly at the Exchange, under penalty of a fine of twenty-five dollars
for each offense.
ARTICLE XXIV.
Comparisons - Liability on Contracts.
SEC. I. It shall be the duty of every member to
report each of his transactions as promptly as possible
I55




ISTOCK EXCHANGE LAWS
at his office, where he shall furnish opportunity for
prompt comparison.
SEC. 2. It shall be the duty of the SELLER to compare, or to endeavor to compare, each transaction at
the office of the Buyer, not later than one hour after the
closing of the Exchange. Nothing in this Article shall
be construed to justify a refusal to compare before the
closing of the Exchange.
SEC. 3. It shall be the duty of the BUYER to investigate, before io o'clock A. M. of the day after the
purchase, each transaction which has not been compared
by the Seller.
SEC. 4. Neglect of a member to comply with the
provisions of Section i or 2 hereof shall render him
liable to a fine not exceeding fifty dollars, to be imposed
by the Committee of Arrangements.
SEC. 5. Comparison shall be made by an exchange
of an original and a duplicate comparison ticket; the
party to whom the comparison ticket is presented shall
retain the original, if it be correct, and immediately
return the duplicate duly signed.
An exchange of Clearing-House tickets shall constitute a comparison.
SEC. 6. Should a difference be discovered in an attempt to compare, the exact liability of the disputants
shall be promptly established by purchase, sale or
mutual agreement.
SEC. 7. If an original party to a transaction gives
up his principal, the latter shall have the same duties
in the matter of comparison as the original party.
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CONSTITUTION, BY-LAWS AND RULES
SEC. 8. No comparison or failure to compare, and
no notification or acceptance of notification, shall have
the effect of creating or of canceling a contract, or of
changing the terms thereof, or of releasing the original
parties from liability.
SEC. 9. No party to a contract shall be compelled
to accept a substitute principal, unless the name proposed to be substituted shall be declared in making the
offer and as a part thereof.
Orders for the receipt or delivery of securities, issued
by the Clearing-House, shall, however, be binding and
enforceable upon members or firms using the facilities
of the Clearing-House.
SEC. IO. When written contracts shall have been
exchanged the signers thereof only are liable.
ARTICLE XXV.
Payment and Delivery.
SEC. I. In all deliveries of securities, the party
delivering shall have the right to require the purchase
money to be paid upon delivery; if delivery is made by
transfer, payment may be required at time and place
of transfer.
SEC. 2. The Receiver of shares of stock shall have
the option of requiring the delivery to be made either
in certificates therefor or by transfer thereof; except that
in cases where personal liability attaches to ownership,
the Seller shall have the right to make delivery by
transfer.
I57




STOCK EXCHANGE LAWS
The right to require receipt or delivery by transfer
shall not obtain while the transfer books are closed.
SEC. 3. Deliveries of securities on contracts subject
to the rules of the Exchange shall in all cases conform
to the requirements for regularity which may be
made, from time to time, by the Committee on Securities.
SEC. 4. The Buyer must, not later than two-fifteen
o'clock p. M., accept and pay for all, or any portion of a
lot of stock contracted for, which may be tendered
in lots of one hundred shares or multiples thereof;
and he may buy in "under the rule" the undelivered
portion, in accordance with the provisions of Article
XXVIII.
This rule shall also apply to contracts for bonds when
tender is made in lots of ten thousand dollars or multiples thereof.
ARTICLE XXVI.
Settlement of Contracts.
SEC. i. All deliveries of securities must be made
before quarter after two o'clock P. M., and when deliveries are not made by that time the contract may be
closed "under the rule" in the manner provided in
Article XXVIII of these Rules. In the absence of
any notice or agreement the contract shall continue
without interest until the following business day; but
in every case of non-delivery of securities the party in
default shall be liable for any damages which may accrue thereby; and all claims for such damages must be
I58




CONSTITUTION, BY-LAWS AND RULES
made before three o'clock p. M., on the business day
following the default.
SEC. 2. The neglect or failure of a member or firm
to exchange Clearing-House tickets on a contract, in
conformity with the "Rules for Clearing," shall constitute a default; and such defaulted contract may be
closed as provided in Article XXVIII; except that the
limit of time for delivery of notice of intention to close
such contract shall be ten-thirty o'clock A. M. of the
following business day, and the time for closing shall not
be before eleven o'clock A. M.
SEC. 3. Parties receiving securities shall not deduct, from the purchase price, any damages claimed for
non-delivery, except by the consent of the party delivering the same.
SEC. 4. Notice for the return of loans of money, or
of securities not admitted to the Clearing-House, must
be given before one o'clock P. M. Notice for the return
of loans of securities admitted to the Clearing-House
must be given before three-thirty o'clock P. M., except
on half-holidays observed by the Exchange, when such
notice must be given before twelve-thirty o'clock p. M.
All such notices shall be considered as in full force until
delivery is made.
SEC. 5. On half-holidays observed by the Exchange,
securities sold specifically for "Cash" must be delivered
and received at or before eleven-thirty o'clock A. M.
In case of default the contract may be closed after
eleven-forty o'clock A. M. "under the rule," in manner
provided in Article XXVIII.
I59




STOCK EXCHANGE LAWS
ARTICLE XXVII.
Clearing-House.
SEC. I. There shall be a Clearing-House for the purpose of acting as the common agent of the members
of the Exchange in receiving and delivering such securities as may from time to time be designated by the
Clearing-House Committee.
SEC. 2. Nothing in the conduct of the business of
clearing shall attach any liability to the Exchange, or to
any member of the Clearing-House Committee, and delays on the part of the Clearing-House shall not attach
any liability to members who are clearing.
SEC. 3. The Clearing-House Committee shall designate from time to time the securities which shall be
cleared, and, in all transactions in such securities, the
deliveries shall be made through the Clearing-House,
unless otherwise specially stipulated in the bid or offer
or otherwise agreed upon.
SEC. 4. The "Rules for Clearing" and the "Rules
for Dealing" adopted by the Governing Committee, and
all amendments thereto, shall be binding upon the members of the Exchange equally with the laws included in
the Constitution.
Amendments to "Rules for Clearing" or to "Rules
for Dealing" may be adopted by a vote of two-thirds
of all the existing members of the Governing Committee
and need not be submitted to the members of the Exchange for approval.


i6o




CONSTITUTION, BY-LAWS AND RULES


ARTICLE XXVIII.
Closing Contracts " Under the Rule.'
SEC. I. When the insolvency of a member or firm
is announced to the Exchange, members having contracts subject to the rules of the Exchange with the
member or firm, shall without unnecessary delay proceed to close the same. If the contracts involve securities admitted to quotation upon the Exchange the
closing must be in the Exchange, either officially by the
Chairman, or by personal purchase or sale. If the contracts involve securities not dealt in on the Exchange,
the purchase or sale of such securities must be promptly
made in the best available market. Should a contract
not be closed, as above provided, the price of settlement shall be fixed by the price current at the time
when such contract should have been closed under this
rule.
SEC. 2. A contract which has not been fulfilled
according to the terms thereof may be officially closed
"under the rule" by the Chairman, as herein provided.
Notice of intention to make such closing of a contract must be delivered, at or before two-thirty o'clock
P. M., at the registered office address of the member or
firm in default. And the Chairman shall not close such
contract before two thirty-five o'clock P. M.
SEC. 3. Every notice of intention to close a contract "under the rule," because of non-delivery, shall
be in writing; and shall state the name of the member or
firm by whom the order is given, also for whose account
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STOCK EXCHANGE LAWS
-all of which shall be announced by the Chairman before closing the contract.
The closing of a contract "under the rule," made in
conformity with such notice, shall be also for the account and liability of each succeeding party in interest.
SEC. 4. Notice of intention to close a contract
"under the rule" may be given upon the entire amount
in default or upon any portion thereof, but in this latter
case for not less than one hundred shares of stock or
ten thousand dollars of bonds.
SEC. 5. When notice that a contract will be closed
"under the rule" is received too late for transmission
to other members or firms interested in such contract,
within the times stated therefor, the notified member or
firm who is unable to so transmit said notice may, immediately after the official closing "under the rule," reestablish
such contract by a new purchase or sale in the "regular
way"; and any loss arising therefrom shall be a valid
claim against the successive party or parties in interest.
SEC. 6. When a member has issued a notice of intention to close a contract "under the rule," for default in delivery, he must receive and pay for securities due upon such contract if tendered at his office
within five minutes of the official time for closing; or
thereafter, if tendered at the rostrum of the Exchange,
before the Chairman has closed the contract.
SEC. 7. When a contract has been closed "under
the rule," the member or firm who gave the order must
give prompt notice of such closing to the member or
firm in default.
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CONSTITUTION, BY-LAWS AND RULES
Notification to successive parties in interest must be
transmitted without delay, and claims for damages,
arising therefrom, must be made prior to three o'clock
P. M. of the business day following the closing of the
contract.
SEC. 8. When a contract has been closed "under the
rule" the Chairman shall endorse upon the order therefor the name of the purchaser or seller, the price and the
hour at which such contract is closed, and deliver the
order to the Secretary of the Exchange, who shall ascertain whether the money difference, if any, has been
paid. If such difference shall not be paid within twentyfour hours after the closing of the contract, the Secretary
shall report such default to the President.
SEC. 9. When a contract is closed "under the
rule," any member or firm accepting the bid or offer, as
made by the Chairman, and not complying promptly
therewith, shall be liable for any damages resulting therefrom.
The member or firm, for whose account a contract is
being closed "under the rule," shall not be permitted
to accept the bid or offer made by the Chairman.
SEC. IO. When a loan of money is not paid at or
before two-fifteen o'clock P. M. of the day upon which
it becomes due, the borrower shall be considered as
in default, and the lender may sell "under the rule"
the securities pledged therefor, or so much thereof
as may be necessary to liquidate the loan, in the manner prescribed in the foregoing Sections of this Article.
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STOCK EXCHANGE LAWS
ARTICLE XXIX.
Irregularity in Securities.
Reclamation for irregularity in a security, when such
irregularity affects only its currency in the market, must
be made within ten days from day of delivery of the
security.
ARTICLE XXX.
Disagreement on Terms of Contract.
When a disagreement arising from a transaction in
securities shall be discovered, the money difference shall
forthwith be established by purchase or sale by the
Chairman, or by mutual agreement.
ARTICLE XXXI.
Deposits on Contracts.
SEC. I. Mutual cash deposits of not exceeding ten
per cent. may be required at any time by either party
to a contract. Whenever the margin of either party
becomes reduced to five per cent. by reason of changes
in the market value of the securities, further deposits
may be called, from time to time, sufficient to restore
the impaired margin.
SEC. 2. The holder of a due-bill issued for the dividend on stock contracted for, may require the maker
of the due-bill to deposit the full amount due thereon,
in a Trust Company, payable to the joint order of both
parties.
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CONSTITUTION, BY-LAWS AND RULES
SEC. 3. When deposits are called before two o'clock
P. M., they must be made at or before two-thirty o'clock
of the same day; if called after two o'clock p. M. they
must be made at or before ten-thirty o'clock A. M. of
the following business day.
On half-holidays observed by the Exchange, deposits
called before eleven o'clock A. M. must be made at or
before eleven-thirty o'clock A. M.; if called after eleven
o'clock A. M. they must be made at or before ten-thirty
o'clock A. M. of the next business day.
SEC. 4. Failure of either party to a contract to comply with a demand for a deposit shall constitute a default; and the other party to the contract may report
such default to the Chairman, and instruct him to reestablish the contract forthwith, by a new purchase or
sale "under the rule," and any difference arising therefrom shall be paid to the party entitled thereto.
Written notice of intention to reestablish the contract shall be sent to the office of the party in default.
SEC. 5. Unless otherwise mutually agreed, deposits
on contracts shall be made in the New York Life Insurance and Trust Company.
ARTICLE XXXII.
Dividends - Interest - Premium.
SEC. I. On the day of closing of the transfer books
of a corporation for a dividend upon its shares all transactions therein for "Cash" shall be "dividend on" up
to the time officially designated for the closing of transi65




STOCK EXCHANGE LAWS
fers; all transactions on that day other than for "Cash"
shall be "ex-dividend."
Should the closing of transfers occur upon a holiday
or half-holiday, observed by the Exchange, transactions
on the preceding business day, other than for "Cash,"
shall be "ex-dividend."
SEC. 2. The buyer shall be entitled to receive all
interest, dividends, rights and privileges, except voting
power, which may pertain to the securities contracted
for, and for which the transfer books shall close during
the pendency of the contract.
When such contract shall mature before the official
date for payment of interest or dividend, the seller shall
deliver a due-bill therefor signed or endorsed by him.
When a security is sold before the day of closing books
for "Rights" (and is quoted "ex-Rights" on that day),
and is delivered thereafter, the buyer shall on its delivery pay only the market price of the security "exRights." He shall pay the balance due on the contract,
when the seller delivers the "Rights," at any time on
or before the day set by the Committee on Securities for
settlement of contracts in "Rights."
When a security is loaned before the day of closing
books for "Rights" (and is quoted "ex-Rights" on that
day), and is returned thereafter, the lender shall on its
return pay only the market price of the security "exRights." He shall pay the balance due on the contract,
when the borrower delivers the "Rights," at any time
on or before the day set by the Committee on Securities
for settlement of contracts in "Rights."
i66




CONSTITUTION, BY-LAWS AND RULES
SEC. 3. A charge of one per cent. may be made for
collecting dividends. For scrip or stock dividends the
charge shall be computed upon the market value of
such scrip or stock.
No charge shall be made for collecting dividends accruing on securities deliverable on a contract.
SEC. 4. Offers to buy or sell dividends shall not be
made publicly on the Exchange. The Chairman shall
impose a fine of twenty-five dollars for each violation of
this rule.
SEC. 5. When securities are borrowed or loaned the
sum agreed upon, either as interest for carrying or as
premium for use, shall be paid whether such securities
are delivered or not.
SEC. 6. When money or securities are loaned at a
premium said premium shall apply to the day for which
the loan is made.
ARTICLE XXXIII.
Transfer and Registry.
SEC. I. Corporations whose shares are admitted to
dealings upon the Exchange will be required to maintain
a Transfer Agency and a Registry office in the City of
New York, Borough of Manhattan. Both the Transfer Agency and the Registrar must be acceptable to the
Committee on Stock List, and the Registrar must file
with the Secretary of the Exchange an agreement to
comply with the requirements of the Exchange in regard
to registration.
SEC. 2. When a corporation purposes to increase its
167




STOCK EXCHANGE LAWS
authorized capital stock, thirty days' notice of such proposed increase must be officially given to the Exchange,
before such increase may be admitted to dealings.
SEC. 3. When the capital stock of a corporation is
increased through conversion of convertible bonds,
already listed, the issuing corporation shall give immediate notice to the Exchange and the Committee on
Stock List may, thereupon, authorize the registration
of such shares and add them to the list.
SEC. 4. The Governing Committee may suspend
dealings in the securities of any corporation previously
admitted to quotation upon the Exchange, or it may
summarily remove any securities from the list.
SEC. 5. After the admission of a security to dealings
upon the Exchange no change in the form of certificate,
or of the Transfer Agency or the Registrar of Shares, or
of the Trustee of Bonds shall be made without the approval of the Committee on Stock List.
ARTICLE XXXIV.
Commissions.
SEC. I. Commissions shall be charged and paid,
under all circumstances, upon all purchases or sales
of securities dealt in upon the Exchange; and shall be
absolutely net, and free from all or any rebatement, return, discount or allowance in any shape or manner
whatsoever, or by any method or arrangement, direct
or indirect; and no bonus, nor any percentage or portion
of the commission, shall be given, paid or allowed,
i68




CONSTITUTION, BY-LAWS AND RULES
directly or indirectly, or as a salary, or portion of a salary,
to any clerk or person, for business sought or procured
for any member of the Exchange.
SEC. 2. All commissions shall be calculated upon the
par value of securities and the rates shall be as follows:
(a) On business for parties not members of the
Exchange, including joint-account transactions in which
a non-member is interested, transactions for partners
not members of the Exchange, and for firms of which
the Exchange member or members are special partners
only, the commission shall be not less than one-eighth
of one per cent.
(b) On business for members of the Exchange, the
commission shall be not less than one-thirty-second of
one per cent., except when a principal is given up, in
which case the commission shall be not less than onefiftieth of one per cent.
(c) On Mining Shares, Subscription Rights, and
Notes of Corporations, such rates, to members and nonmembers, as may be determined, from time to time, by
the Committee on Commissions, with the approval of
the Governing Committee.
(d) Government and Municipal Securities are exempted from the provisions of this Article.
SEc. 3. A firm having as a general partner a member of the Exchange, shall be entitled to have its business
transacted at the rates of commission hereinbefore prescribed for members. A member of the Exchange cannot confer this privilege upon more than one firm at
gny one time.
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STOCK EXCHANGE LAWS
The privileges provided for under this Section can
only be conferred upon a Branch House in this country
when established under the same name as the parent
firm and in which the partners and their respective
interests are identical with those of the parent firm.
SEC. 4. A proposition for the transaction of business,
at less than the minimum rates of commission herein
provided, shall constitute a violation of this article.
SEC. 5. A member suspended by the Governing Committee shall not, during the time of his suspension, be
entitled to have his business transacted at member's
rates of commission.
A member who is in suspension by reason of insolvency
may have his business transacted at member's rates.
SEC. 6. If the Governing Committee shall, by a
majority vote of all its existing members, determine that
a member of the Exchange has violated the provisions
of this Article, it shall suspend such member, for the
first offense, for such period not less than one year nor
more than five years, as a majority of the members of
said Committee present may determine. A member
adjudged guilty of a second offense, by a majority vote
of all the existing members of the Governing Committee,
shall be expelled by a like vote.
ARTICLE XXXV.
Office Address- Partnerships -Branch Offices.
SEC. i. Every member shall register with the Secretary an address, and subsequent changes thereof, where
170




CONSTITUTION, BY-LAWS AND RULES
notices may be served. The registered address of every
member transacting business upon the Exchange must
be in its vicinity.
SEC. 2. Whenamembershall forma partnershiphe shall
immediately register the same with the Secretary; official announcement thereof shall be made to the Exchange
and notice posted upon the bulletin for ten days. Notice
of dissolution of partnership must be given in like manner.
SEC. 3. No person shall be eligible to either general
or special partnership in more than one registered firm
at the same time.
This law shall not obtain, however, when a member
of a registered firm forms a partnership in a foreign
country under the same or different name from that of
his firm in this country; provided, however, that the
firm in said foreign country shall not derive any benefit
from the privileges which attach to members of firms
registered at the Stock Exchange.
Sec. 4. A member shall not form a partnership with
a suspended member of the Exchange, nor with any person who has been expelled therefrom; nor with any
insolvent person, or with any person who may have previously been a member of the Exchange, and against
whom any member holds a claim, arising out of transactions made during the time of such membership, and
which has not been released, or settled in accordance
with the laws of the Exchange.
A member, who is a special partner in a firm, does not
thereby confer any of the privileges of the Exchange
on such firm.
171




STOCK EXCHANGE LAWS
SEC. 5. A member of the Exchange who is a general
partner in a firm represented thereon is liable to the
same discipline and penalties for any act or omission of
said firm as if the same were committed by him personally; but the Governing Committee may in its discretion by a vote of not less than thirty members relieve
him from the penalty therefor.
SEC. 6. Members may, by the consent and approval of
the Committee on Commissions, establish Branch Offices.
Such offices must be in charge of either a partner, or of a
manager or clerk acceptable to said Committee.
The member or firm establishing a Branch Office shall
register it with the Secretary of the Exchange, and shall
be directly responsible for the conduct of its business.
The managing clerk and all other employees must be
paid fixed salaries, not varying with the business.
No agents for the solicitation of business, shall be
employed on any other than the foregoing basis.
SEC. 7. Whenever it shall appear to the Governing
Committee that a member has formed a partnership, or
established a branch office, or is individually or through
any member of his firm, interested in a partnership in a
foreign country, whereby the interest or good repute of
the Exchange may suffer, the Committee may require
the dissolution of such partnership, the discontinuance
of the interest in said foreign partnership, or of such
branch office, as the case may be.
SEC. 8. Any member failing to comply with any
requirement of this Article, or with any requirement of
the Governing Committee in regard thereto, shall be
172




CONSTITUTION, BY-LAWS AND RULES
liable to suspension for a period not exceeding one
vear.
ARTICLE XXXVI.
Disorderly Conduct.
SEC. I. Indecorous language, or an act subversive of
good order and decorum, or serious interference with the
personal comfort or safety of another person is forbidden.
Any member who shall violate this rule, within the limits of any department of the Exchange, may be fined by
the Chairman, or by the Committee of Arrangements,
in a sum not exceeding fifty dollars; or upon complaint
made may be summoned before the Governing Committee and suspended for a period not exceeding sixty
days.
SEC. 2. The Committee of Arrangements may make
rules to govern the conduct of members upon the Exchange; it may impose a fine, not exceeding fifty dollars,
for each violation thereof, or may report the delinquent
to the Governing Committee, who may suspend him for
a period not exceeding sixty days.
SEC. 3. Betting or offering to bet, upon the floor of
the Exchange, is forbidden. A member violating this
rule shall be subject to the penalties prescribed in the
preceding Section of this Article.
ARTICLE XXXVII.
Minutes - Visitors - Communications.
SEC. I. Members shall have access to the minutes
of the Exchange.
I73




STOCK EXCHANGE LAWS
SEC. 2. Visitors shall not be admitted to the floor
of the Exchange except by permission of the President
or the Committee of Arrangements.
SEC. 3. Communications shall not be read to the
Exchange without the consent of the President or the
Committee of Arrangements.
ARTICLE XXXVIII.
Alterations of the Constitution.
The Governing Committee may make additions, alterations or amendments to the Constitution by a majority vote of all its existing members. Every proposed
addition, alteration or amendment must be presented,
in writing, at a regular meeting of the Governing Committee, and referred to the Committee on Constitution,
which shall report thereon at the next regular meeting
of the Governing Committee, or at a special meeting
called for the sole purpose of considering it. Action
thereon may be postponed to a fixed date by a vote of
two-thirds of the members of the Governing Committee
present. Such alterations when adopted by the Governing Committee shall be submitted to the Exchange
and shall stand as the law of the Exchange, if not disapproved within one week by a majority vote of the
entire membership.
No alteration of Article XVIII shall ever be made
which will impair, in any essential particular, the obligation of each member to contribute, as therein provided,
to the provision for the families of deceased members.
I74




CONSTITUTION, BY-LAWS AND RULES


Resolutions Adopted by the Governing Committee.
Advertising.
FEBRUARY 9, I898.
"That in future the publication of an advertisement
of other than a strictly legitimate business character, by
a member of the Exchange, shall be deemed an act detrimental to the interest and welfare of the Exchange."
Arbitrage Dealings.
JANUARY 26, I898.
"Whereas, The so-called Arbitrage business or trading
between this Exchange and that of any other city in
the United States, based upon quotations from the floor
of this Exchange, has resulted in practically ignoring
the commission law; therefore
"Resolved, That in the judgment of this Committee
the sending of continuous quotations or quotations at
frequent intervals by members of this Exchange, from
the floor of the Exchange, is detrimental to the interest
and welfare of the Exchange, and that any member
engaging in such business or trading shall be proceeded
against under Section 8 of Article XVII of the Constitution;
"Resolved, That the Committee of Arrangements be
and they hereby are authorized and instructed to prevent the transaction of any such business or trading
by any member of this Exchange, and to prefer charges
against any member engaging therein."
I75




STOCK EXCHANGE LAWS


Foreign Arbitrage -Joint Accounts.
APRIL 20, I9 I.
(To take effect July i, I9 I.)
"Whereas, The so-called Arbitrage business by means
of joint account trading between this Exchange and
foreign cities, where each party interested charges a
commission or allowance, has resulted in practically
nullifying the Commission Law; therefore
"Resolved, That any business, domestic or foreign,
for the joint account of a member of the Exchange and
a non-member, where each party in interest charges a
commission or allowance, is hereby prohibited;
"Resolved, That any business, domestic or foreign,
conducted under an arrangement of accounts, not joint
account in name, but designed to produce results similar
to those of the above described joint account, is hereby
prohibited."
Bids and Offers.
DECEMBER 14, I898.
"That where parties have orders to buy and orders to
sell the same security, said parties must offer said security, whether it be stock or bonds, at one-eighth per
cent. higher than their bid before making transactions
with themselves."
Rules Covering Bids and Offers.
MARCH 30, I9IO.
(Amended May 12, I9II.)
i. That the recognized quotation on stocks shall be
public bids and offers on lots of Ioo shares.
176




CONSTITUTION, BY-LAWS AND RULES
2. All bids and offers on larger lots shall be considered to be for any part thereof in lots of Ioo shares or of
multiples thereof, whether so stated in the bid or offer
or not.
3. If a bid is made for a larger lot of stock above the
price at which smaller lots are offered, or if a transaction
is made in a larger lot above the price at which smaller
lots are offered, such bidder or buyer shall be compelled
to buy any or all of the smaller lots which were publicly offered at the time, at the lower price, up to the
amount of the bid for the larger lot. If the bid for the
larger lot is accepted, and the buyer is unwilling to buy
more, the seller must give up to the members who were
publicly offering to sell at the lower price, such amounts
as they were publicly offering to sell at the lower price,
if such claim is made immediately.
4. If an offer is made to sell a larger lot of stock
below the price which is bid for smaller lots, or if a transaction is made in a larger lot below the price which is
bid for smaller lots, such member offering to sell, or the
seller, shall be compelled to sell any or all of the
smaller lots which were publicly bid for at the time,
at the higher price, up to the amount of the offer of
the larger lot. If the offer of the larger lot is accepted,
and the seller is unwilling to sell more, the buyer must
give up to the members who were publicly bidding the
higher price, such amounts as they were publicly bidding
for, at the higher price, if such claim is made immediately.
5. A member may sell on offer the largest amount
bid for without regard to priority of bids. Should the
I77




STOCK EXCHANGE LAWS


offer be of an amount larger than the largest bid, the
balance shall go to the next largest bidder in sequence;
bids for equal amounts being on a par.
A member may buy on bids under the same rule.
6. Attention is directed to the resolution of the
Governing Committee adopted October 26, I892, which
reads as follows:
"When a purchase or sale is claimed by a party who
states that he had on the floor a prior or better bid or
offer such claim shall not be sustained if the bid or offer
was not made with the publicity and frequency necessary to make the existence of such bid or offer generally
known at the time of the transaction."
7. Disputes arising from a question as to priority of
bid or offer, if not settled by agreement between the
members interested, shall be settled by vote of the members knowing of the transaction in question.
Disputes as to the application of rules relating to the
transaction in question, if not settled by agreement between the members interested, shall be settled by any
member of the Committee of Arrangements.
8. The above rules shall not apply to lots of less than
Ioo shares, nor to active opeiiings when bids and offers
are simultaneous.
Members Dealing with Themselves - Specialists.
MARCH 30, I9IO.
(To take effect April 4, I9IO.)
"Resolved, That any member of the Exchange who,
while acting as a broker, either as a 'Specialist' or
178




CONSTITUTION, BY-LAWS AND RULES
otherwise, shall buy or sell directly or indirectly for his
own account, for account of a partner, or for any account in which he has an interest, the securities, the
order for the purchase or sale of which has been accepted
by him for execution, shall be deemed guilty of conduct
or proceeding inconsistent with just and equitable principles of trade, and shall be subject to the penalties provided in Article XVII, Section 6, of the Constitution.
"The foregoing rule shall not apply to the act of a
member who by reason of his neglect to execute an order
is compelled to take or to supply on his own account the
securities named in the order; in such case the member
is not acting as a broker and shall not charge a commission.
"A member, acting as a broker, is permitted to report to his principal a transaction as made with himself,
only when he has orders both to buy and to sell and
not to give up, and then he must add to his name on the
report, 'on order,' or words to that effect."
Bucket-shops.
MAY I9, I909.
"That any member of this Exchange who is interested
in, or associated in business with, or whose office is connected, directly or indirectly, by public or private wire
or other method or contrivance with, or who transacts
any business directly or indirectly with or for, any organization, firm or individual engaged in the business
of dealing in differences or quotations (commonly called
a bucket-shop) shall, on conviction thereof, be deemed
I79




STOCK EXCHANGE LAWS
to have committed an act or acts detrimental to the
interest and welfare of this Exchange."
Clearing Charges.
NOVEMBER 23, I88I.
"That in transactions where orders are received from
a non-member, wherein the broker filling the order is
directed to give up another broker or clearing-house, the
responsibility of collecting the full commission of oneeighth per cent. shall rest with the broker or clearinghouse settling the transaction."
OCTOBER 24, I894.
"That in transactions where orders are received from
a member, on which a clearing firm is given up by said
member or by his order, the responsibility of collecting
the full commission of one-thirty-second of one per cent.
shall rest with said clearing firm; and it shall be the
duty of the broker who executes such orders to report
the transactions to the clearing firm and render to them
and collect his bill therefor at the rate of one-fiftieth of
one per cent.; and also that where a broker executes an
order for a member and clears the security himself, he
must charge one-thirty-second of one per cent."
DECEMBER 28, I9II.
"That hereafter when a member of the Exchange receives and delivers securities for another member, the
clearing charge for said service may be a matter of
mutual agreement."
180




CONSTITUTION, BY-LAWS AND RULES
JANUARY 24, I9I2.
"That the Governing Committee rules that in the
matter of clearing charges between members of the
Exchange, said charges shall be based upon a stipulated
sum of money for each one hundred shares of stock or
ten thousand dollars of bonds, or portions thereof.
"The payment of a certain sum of money for any
period of time for said service, irrespective of the number of shares or amount of bonds cleared, is forbidden."
Clerks in Nominal Positions.
JANUARY 23, I90I.
"That the employment of a clerk or clerks in a
nominal position because of the business obtained by
such clerk or clerks for their employer, is a violation
of the rules." Articles XXXIV and XXXV of the Constitution.
Clerks, Speculative Transactions for.
MARCH 30, I9IO.
(To take effect April 4, I9IO.)
"That the taking or carrying of a speculative account,
or the making of a speculative transaction, in which a
clerk of the Exchange, or of a member of the Exchange,
or of a bank, trust company, banker or insurance company, is directly or indirectly interested, unless the
written consent of the employer has been first obtained,
shall be deemed an act detrimental to the interest and
welfare of the Exchange.
81i




STOCK EXCHANGE LAWS
Responsibility for Accounts - Fictitious
Names, etc.
"That every member of the Exchange be required to
use due diligence to learn the essential facts relating to
every account accepted by himself or by his clerks or
representatives, and also relating to the possible use
of a name for the account other than that of the party
interested."
Commissions.
Reciprocal Business.
APRIL I4, I897.
"That transacting or offering to transact business in
grain, produce, cotton or other commodities, without
commission, or for a nominal commission, by any member of this Exchange or firm represented therein, for a
customer dealing in securities dealt in at the Exchange,
is a method or arrangement for rebatement of commissions, and is a violation of the commission law.
"That giving or offering to give reciprocal business
in grain, produce, cotton or other commodities dependent upon the amount of Stock Exchange business received is a method or arrangement for rebatement of
commissions and is a violation of the commission law."
Commission on Mining Shares.
APRIL 13, I9IO.
"That the rates of commission on mining shares shall
be based upon selling price, regardless of par value, and
I82




CONSTITUTION, BY-LAWS AND RULES
shall not be less than the following, for each one hundred
shares:
For Non- For Members, For Members,
Selling at         Members.  if cleared,  if given up.
$io and above,       $I2.50   $3.I2~       $2.00
Below $io,            6.25     i.5614      I.oo
Taking Over or Accepting Transactions.
APRIL 12, I9II.
"Whenever a non-member of this Exchange shall
cause to be executed in any market outside of the United
States any order or orders for the purchase or sale of
securities listed on this Exchange, other than Government, State or Municipal securities, and said purchase
or sale shall be accepted by a member or a firm who are
members of this Exchange, for the account of said nonmember, one-eighth of one per cent. commission shall
be charged said non-member in addition to any commission charged by the party or parties making the
transaction."
Commissions.
(Bunched Orders.)
JUNE 12, I912.
The Committee on Commissions reported to the
Governing Committee that complaint had been made
that a custom prevails upon the Floor of what is called
"bunched" orders -that is, when one member has
300 shares of stock to sell, another 200 and another 500,
they "bunch" the lots, one of said members offering the
183




STOCK EXCHANGE LAWS
entire lot of I,ooo shares; if he succeeds in disposing of
said lot, it is not the custom for him to charge his associates in the sale any commission.
The Committee on Commissions expressed the opinion that such an arrangement or custom is contrary to
the commission law and should not be permitted, and
asked the confirmation of said opinion by the Governing
Committee.
On motion, said opinion was confirmed.
Commission on Government Securities.
JUNE 12, I907.
"That the Commission Law, in Subdivision d, Section 2, Article XXXIV, of the Constitution, which reads
as follows:
"' Government and Municipal Securities are exempted
from the provisions of this article,' refers only to securities of the United States, Porto Rico, or the Philippine Islands, and of States and Municipalities therein."
Comparisons.
NOVEMBER 9, 1904
"That when a mistake in comparison is made, either
by a member in person or by his clerks, thereby causing a loss to another member, or when a failure to
promptly fulfill the duties imposed by the comparison
law causes a loss to another member, the member sustaining the loss may bring a suit before the Arbitration Committee, joining as defendants, if he so elects,
i84




CONSTITUTION, BY-LAWS AND RULES
any or all of the parties concerned, and the Arbitration Committee may render such verdict against any or
all of the defendants as the facts in the case may
warrant."
Interest.
MARCH 26, I902.
"That any agreement or arrangement entered into
between a member or his firm, and his or their customer,
whereby special and unusual rates of interest are stipulated for, or money-advances upon unusual terms are
made a condition, in connection with the conducting of
an account, with intent thereby to give special or unusual advantages to such customer, for the purpose of
securing his business, shall be deemed to be a violation
of Article XXXIV of the Constitution, commonly known
as the Commission Law."
Money Loans - Interest.
OCTOBER 25, I899.
"When a member has contracted to borrow money on
collateral, the simple payment of the interest by the
borrower to the lender, after three o'clock P. M., without
actually effecting or properly endeavoring to effect a
loan, shall be held to be an evasion of the contract and
an act detrimental to the interest and welfare of the
Exchange, and the offending member may be proceeded
against under Section 8, Article XVII, of the Con,
stitution."




STOCK EXCHANGE LAWS


Stamp Tax.
MAY 24, 1905.
"That in the judgment of the Governing Committee
any member of the Exchange who, by agreement or
otherwise, directly or indirectly, assumes or bears for
his own account, or relieves his principal from any part
of the Stamp Tax imposed by the Act of the Legislature
of the State of New York, approved April I9, I905, is
guilty of a violation of Article XXXIV of the Constitution relating to commissions.
Failure to Affix Stamps.
NOVEMBER 9, 1910.
"The Governing Committee calls the attention of
members to the following resolution adopted on May
26, I905:
" 'In order to constitute a good delivery after June i,
1905, all deliveries on sales of stock, whether by Clearing-House delivery ticket or by certificate of stock,
must be accompanied by a sales ticket stamped in
accordance with the Act of the Legislature of the State
of New York, adopted April 19, I905, providing for a
Tax on Transfers of Stock.'
"Any wilful failure on the part of a member to affix
the stamps required by Article XII of the Tax Law relating to the Tax on Transfers or Sales of Stock, will be
deemed by the Governing Committee an act detrimental
to the interest and welfare of the Exchange.'
1i86




CONSTITUTION, BY-LAWS AND RULES
Stock List.
MARCH 27, I895.
"Whenever it shall appear to the Committee on
Stock List that the outstanding amount of any security listed upon the Stock Exchange has become so reduced as to make inadvisable further dealings therein
upon the Exchange, the said Committee may direct that
such security shall be taken from the list and further
dealings therein prohibited."
Telephones.
NOVEMBER 8, I9II.
"That the resolution adopted by the Governing Committee on March 28, 900o, be amended by striking out
the words 'Sec. 8,' and inserting in lieu thereof the words
'Sec. o,' so that said resolution as amended shall read
as follows, viz.:
"Resolved, That the privilege of telephonic communication between the offices of members and the building
of the New York Stock Exchange shall not be enjoyed
as of right but shall rest in the discretion of the Committee of Arrangements or the Governing Committee,
and that the Committee of Arrangements shall have
power in their discretion, at any time, and from time to
time, to withhold such privilege from any member, and
to disconnect, or cause to be disconnected, any private
telephone in the Stock Exchange building. Said Committee shall also have power in their discretion, at any
time, and from time to time, to deprive any member of
187




STOCK EXCHANGE LAWS
the privilege of using any public telephone in the Stock
Exchange building; said Committee shall not be obliged
to assign any reason or cause for any action taken by
them under this resolution.
"Any member aggrieved by any decision of the Committee of Arrangements under this resolution shall have
the right to appeal therefrom to the Governing Committee, and to appear in person before the Governing Committee to be heard upon such appeal.
"No such appeal shall suspend the operation of the
decision appealed from.
"Every decision of the Committee of Arrangements
by which the privilege of telephonic communication
with the Stock Exchange building shall be withheld from
any member, pursuant to this resolution, shall be immediately posted upon the bulletin board in the Exchange, and every member of the Exchange shall be
deemed to have notice thereof. If after any such
notice shall have been posted, any member of the Stock
Exchange shall furnish to the member named therein, or
to his partner or firm or office any facilities for communication between the office of such member and the
Stock Exchange building, or between the office of the
member named in such notice and the office of any other
member of the Exchange by means of private wire,
telephone or any electric or other device, contrivance or
apparatus, he may be suspended by the Governing Committee for a period not exceeding two months, pursuant to the provisions of Sec. io Article XVII of the
Constitution of the Exchange."
i88




CONSTITUTION, BY-LAWS AND RULES


Telephone or Telegraph Connections.
MAY 9, I900.
(To take effect on June I, 900o.)
"First. - That hereafter no member of the Stock
Exchange and no firm of which such member is a partner, shall establish telephonic or telegraphic wire connection between the office of such member or firm and
the office of any firm or individual not a member of
the Stock Exchange transacting a banking or brokerage
business, unless application therefor shall first be made
to the Committee of Arrangements, and shall have been
approved by them.
"Second. - Every such telephonic or telegraphic wire
connection which shall be so authorized by the Committee of Arrangements, as well as all existing telephonic or telegraphic wire connections of the same
character, shall be registered with the Committee of
Arrangements, who shall make such regulations governing the matter as they shall deem necessary.
"Third.-That the Committee of Arrangements
shall have power, at any time, in their discretion, to
order any connection of the character described in these
resolutions to be discontinued.
"Fourth. -While members of the Stock Exchange
may connect their offices by wire with the offices of
non-members, in accordance with the provisions of
these resolutions, and pay for such wire connection,
nevertheless no such member shall directly or indirectly,
by himself or through his firm, pay the cost of telegraph
i89




STOCK EXCHANGE LAWS


operators or any other expense pertaining to nonmembers' offices.
"Fifth. - No office in the City of New York of any
member of the Stock Exchange, or of any firm of which
such member is a partner, shall be connected by telegraphic or telephonic wire with any point outside of
the City of New York unless such wire shall be furnished
by a telegraph or telephone company approved by the
Committee of Arrangements. Said Committee shall
from time to time formulate a list of such approved companies.
"Sixth. -Any member violating any provision of
these resolutions, or any regulation made by the Committee of Arrangements in pursuance thereof, shall be
deemed to be guilty of an act detrimental to the interest
and welfare of the Exchange."
Privileges.
FEBRUARY I4, 1912.
"When securities are received or delivered on a privilege for a non-member, one-eighth of one per cent.
commission must be charged whether said securities
are received or delivered upon the day of expiration
of said privilege or prior thereto."
Margins - Improper Use of Customers' Securities —
Reckless and Unbusinesslike Dealing.
FEBRUARY 13, 1913.
"That the acceptance and carrying of an account for
a customer, either a member or a non-member, without
I90




CONSTITUTION, BY-LAWS AND RULES
proper and adequate margin may constitute an act
detrimental to the interest and welfare of the Exchange,
and the offending member may be proceeded against
under Section 8 of Article XVII of the Constitution.
"That the improper use of a customer's securities
by a member or his firm, is an act not in accordance with
just and equitable principles of trade, and the offending
member shall be subject to the penalties provided in
Section 6 of Article XVII of the Constitution.
"That reckless or unbusinesslike dealing is contrary
to just and equitable principles of trade, and the offending member shall be subject to the penalties provided
in Section 6 of Article XVII of the Constitution, in
every case in which the offense does not come within
the provisions of Section 5 of Article XVI thereof."
Sales With no Change of Ownership.
FEBRUARY 5, 1913.
Resolved, That no Stock Exchange Member, or
member of a stock Exchange firm shall give, or with
knowledge execute, orders for the purchase or sale of
securities which would involve no change of ownership.
The punishment for this offense shall be as prescribed
in Section 8 of Article XXIII of the Constitution regarding fictitious transactions.


I9I








PART V
LAWS OF THE STATE OF NEW YORK RELATING
TO STOCKBROKERS








PART V


LAWS OF THE STATE OF NEW YORK RELATING
TO STOCKBROKERS
Penal Law
(L. I909. chap. 88. Consol. Laws, chap. 40.)
SEC. 295. Receiving deposits in insolvent bank.-An
officer, agent, teller or clerk of any bank, banking association or savings bank, and every individual banker or
agent, and every private banker or agent and any teller
or clerk of an individual banker, or of a private banker
who receives any deposit, knowing that such bank or
association or banker is insolvent, is guilty of a misdemeanor, if the amount or value of such deposit be
less than twenty-five dollars; if the amount or value of
such deposit be twenty-five dollars or over, such person
shall be guilty of a felony, punishable by imprisonment
for not less than one nor more than five years or by a
fine of not less than five hundred nor more than three
thousand dollars, or by both.
Source.-Penal Code, Sec. 6oi, as amended by L. 1902,
ch. 148.
Application of section. - Cragie v. Hadley, 99 N. Y.
I3I (I885); Atkinson v. Rochester Printing Co. 114 N. Y.
175 (I889); Hall v. Baker, 66 App. Div. I3I, I35, 72 N. Y
Supp. 965 (I9Q9).
I95




STOCK EXCHANGE LAWS
Guilty knowledge must be shown on the part of the
officers. Stapelton v. O'Dell, 21 Misc. 94, 47 N. Y.
Supp. I3 (1897). The fact that the state superintendent
of banks had closed the bank does not tend to prove such
guilty knowledge. The condition of the bank, whether
solvent or not, is yet undetermined. People v. St.
NicholasBank, 77Hun, 159, I66, 28N.Y. Supp.407 (I894).
Admission of unproved paper on the trial of an indictment under this section may be reversible error. People
v. Severance, 67 Hun, I82, 22 N. Y. Supp. 91 (1893).
(L. I909, chap. 88. Consol. Laws I909, chap. 40.)
SEC. 298. Misconduct by banks and bankers. - Any
moneyed corporation or individual banker authorized
to carry on the business of banking under the laws of
this state, who:
I. Receives, pays out, gives or offers in payment as
money to circulate, or who attempts to circulate as money,
any bill, note or other evidence of debt issued or purporting to have been issued by any corporation or
individual, situated or residing without this state, and
which bill, note or other evidence of debt shall, upon
any part thereof, purport to be payable or redeemable at
any place or by any corporation or individual within
this state; or,
2. Issues, utters, or circulates, as money, or in any
way, directly or indirectly, aids or assists in the issuing,
uttering or circulating as money within this state, of any
bank bill, note or other evidence of debt in the similitude
of a bank note issued or purporting to have been issued
196




LAWS RELATING TO STOCKBROKERS
by any corporation or individual situated or residing
without this state; or procures or receives, in any manner
whatever, any such bank bill, note or other evidence of
debt with intent to issue, utter or circulate, or with
intent to aid in issuing, uttering or circulating the same
as money within this state; or,
3. Directly or indirectly lends or pays out for paper
discounted or purchased any bank bill, note or other
evidence of debt, which is not received at par by such
corporation or banker for debts due such corporation or
banker; or,
4. Issues or puts in circulation any bank bill or note
of any such corporation or banker, unless the same shall
be made payable on demand and without interest,
except bills of exchange on foreign countries or places
beyond the limits or jurisdiction of the United States,
Is guilty of a misdemeanor.
Nothing in this section contained shall be construed
to prohibit any such corporation or banker from receiving and paying out such foreign bank bills as they
shall receive at par in the ordinary course of their business, or to prohibit such corporation or banker from
receiving foreign notes from their dealers and customers
in the regular and usual course of their business, at a
rate of discount not exceeding that which is or shall be
at the time fixed by law, for the redemption of the bills
of the banks of this state at their agencies, or from obtaining from the corporations, associations or individuals
by which such foreign notes are made, the payment or
redemption thereof.
I97




STOCK EXCHANGE LAWS
Source.-Penal Code, sec. 604, as amended by L.
I892, ch. 692, Sec. i.
SEC. 299. Unlawful discount of bills of foreign banks.Any person, association or corporation within the state
who, directly or indirectly, on any pretense whatever,
procures or receives or offers to receive from any corporation or person any bank bill or note or other evidence
of debt in the similitude of a bank note, issued or purporting to have been issued by any corporation or individual, situated or residing without this state, at a
greater rate of discount than is or shall be at the time
fixed by law, for the redemption of the bills of the banks
of this state at their agencies, is guilty of a misdemeanor.
Source.- Penal Code, sec. 605, as amended by L. I892,
ch. 692, sec. i.
SEC. 302. Unauthorized use of the term "bank." Any
person engaged in banking in this state, not subject to the
supervision of the superintendent of banks, and not
required by law to report to such superintendent, who
was not engaged in such banking before May twentythird, eighteen hundred and eighty-five, who:
I. Uses an office sign at the place where such business
is transacted, having thereon any artificial or corporate
name, or other words indicating that such place or office
is the place or office of a bank; or,
2. Uses or circulates any letter-heads, bill-heads, blank
notes, blank receipts, certificates, circulars or any written
198




LAWS RELATING TO STOCKBROKERS
or printed paper whatever, having thereon any artificial
or corporate name, or other word or words indicating
that such business is the business of a bank,
Is guilty of a misdemeanor.
Source. - Penal Code, Sec. 609, as amended by L.
1892, ch. 692, Sec. i.
Application of section. - Hall v. Baker, 66 App. Div.
13I, 72 N. Y., Supp. 965 (I90I).
"Bucket-Shop" Act.
SEC. 390 Acts prohibited; penalty for violation. Any
person, copartnership, firm, association or corporation
whether acting in his, their or its own right, or as the
officer, agent, servant, correspondent or representative
of another, who shall,
I. Make or offer to make, or assist in making or
offering to make any contract respecting the purchase
or sale, either upon credit or margin, of any securities
or commodities, including all evidences of debt or property and options for the purchase thereof, shares in any
corporation or association, bonds, coupons, scrip, rights,
choses in action and other evidences of debt or property,
and options for the purchase thereof or anything movable
that is bought and sold, intending that such contract
shall be terminated, closed or settled according to, or
upon, the basis of the public market quotations of prices
made on any board of trade or Exchange upon which
such commodities or securities are dealt in, and without intending a bona fide purchase or sale of the same; or,
2. Makes or offers to make or assists in making or offerI99




STOCK EXCHANGE LAWS
ing to make any contract respecting the purchase or sale,
either upon credit or margin, of any such securities or
commodities wherein both parties intend that such
contract shall be deemed, terminated, closed and settled
when such market quotations of prices for such securities or commodities named in such contract shall reach
a certain figure, without intending a bona fide purchase
or sale of the same; or,
3. Makes or offers to make, or assists in making or
offering to make any contract respecting the purchase or
sale, either upon credit or margin, of any such securities
or commodities, not intending the actual bona fide receipt
or delivery of such securities or commodities, but intending a settlement of such contract based upon the difference in such public market quotations of prices at which
said securities or commodities are, or are asserted to be,
bought or sold; or,
4. Shall, as owner, keeper, proprietor or person in
charge of, or as officer, director, stockholder, agent, servant, correspondent or representative of such owner,
keeper, proprietor or person in charge, or of any other
person, keep, conduct or operate any bucket-shop, as
hereinafter defined; or knowingly permit or allow or
induce any person, co-partnership, firm, association or
corporation whether acting in his, their or its own right,
or as the officer, agent, servant, correspondent or representative of another to make or offer to make therein,
or in offering to make therein, any of the contracts specified in any of the three preceding subdivisions of this
section.
200




LAWS RELATING TO STOCKBROKERS
Shall be guilty of a felony and on conviction thereof
shall, if a corporation, be punished by a fine of not more
than five thousand dollars for each offense, and all other
persons so convicted shall be punished by a fine of not
more than one thousand dollars or by imprisonment for
not more than five years, or by both such fine and imprisonment. The prosecution, conviction and punishment of a corporation hereunder shall not be deemed to
be a prosecution, conviction or punishment of any of its
officers, directors or stockholders.
(AmendedbyLaws 1913, ch. 236. IneffectApril9,I9g3.)
SEC. 39I. Exhibiting quotations; penalty for violation.
Anyperson, firm, copartnership, association or corporation
receiving, communicating, exhibiting or displaying in any
manner any statement of quotations of prices of any such
securities or commodities with an intent to make or offer
to make or to assist in making or offering to make any contract prohibited in this article shall be guilty of a felony
and on conviction thereof shall be punished as provided
in section three hundred and ninety of this chapter.
Source. -Penal Code, sec. 355-b, as added by L.
1908, ch. 458.
SEC. 392. Written statement to be furnished; presumption. Every person, firm, association, copartnership or corporation shall furnish upon written demand
to any customer, or principal for whom such person has
executed an order for the actual purchase or sale of any
such securities or commodities, either for immediate
201




STOCK EXCHANGE LAWS
or future delivery, a written statement containing the
names of the persons from whom such property was
bought, or to whom it has been sold, as the case may be,
the time when, place where, the amount of and the price
at which the same was either bought or sold; and if such
person, firm, association, copartnership or corporation
shall refuse or neglect to furnish such statement within
forty-eight hours after such demand, such refusal shall
be prima facie evidence that such purchase or sale was
made in violation of this article.
Source. - Penal Code, sec. 355-c, as added by L.
1908, ch. 458.
SEC. 393. Corporations; additional penalty for second
offense. If a domestic corporation shall be convicted
of a second offense hereunder the supreme court shall
have jurisdiction upon an action brought by the attorney-general, in the name of the people, for that purpose,
to dissolve such corporation; and if a foreign corporation
shall be convicted of a second offense, such court shall
have jurisdiction in an action brought in like manner to
restrain such corporation from doing business in this
state.
Source.- Penal Code, sec. 355-d, as added by L. 1908,
ch. 458.
SEC. 394. Definitions. "Bucket-shop" shall mean
any building, or any room, apartment, booth, office
or store therein or any other place where any contract
prohibited by this article is made or offered to be made.
202




LAWS RELATING TO STOCKBROKERS
Source - Penal Code, sec. 355-e, as added by L. I908,
ch. 458.
SEC. 444. Discriminations by Exchanges or Members.
No exchange, voluntary association, or corporation,
heretofore or hereafter formed or organized, for the
purpose of affording to its members, or to others, facilities for dealing or trading in stocks, bonds, or other
securities, or in commodities, shall make or enforce any
by-law, rule, regulation, resolution or agreement the
purpose or result of which shall be to forbid or prevent
the members of such exchange, voluntary association,
or corporation, from dealing, at the regular rates of
commission with or for the members of any other exchange, voluntary association, or corporation formed or
organized for like purposes, nor shall any such exchange,
voluntary association, or corporation, penalize or discipline or attempt to penalize or discipline its members
or any of them, for an infraction of any such by-law, rule,
regulation, resolution or agreement.  Any corporation
violating any of the foregoing provisions, and any person
participating in the acts herein forbidden to be done by
any exchange, voluntary association, or corporation,
and any member of any such exchange, voluntary association, or corporation refusing to deal with or for any
customer as above provided, on the ground that said
customer is a member of some other Exchange, voluntary
association, or corporation of like character, is guilty of a
misdemeanor.
(Added by Laws I913, ch. 477. In effect Sept. i, I913.)
203




STOCK EXCHANGE LAWS
(L. I909, chap. 88. Consol. Laws 1909, chap. 40.)
SEC. 660. Frauds in the organization of corporations.
-A person who:
I. Without authority subscribes the names of another
to or inserts the name of another in any prospectus.
circular or other advertisement or announcement of any
corporation or joint-stock association existing or intended to be formed, with intent to permit the same to be
published, and thereby to lead persons to believe that
the person whose name is so subscribed is an officer,
agent, member or promoter of such corporation or
association; or,
2. Signs the name of a fictitious person to any subscription for or agreement to take stock in any corporation, existing or proposed; or,
3. Signs to any such subscription or agreement the
name of any person, knowing that such person does not
intend in good faith to comply with the terms thereof,
or under any understanding or agreement, that the
terms of such subscription or agreement are not to be
complied with or enforced,
Is guilty of a misdemeanor.
Source. -Penal Code, sec. 590, as amended by L.
1892, sec. i.
SEC. 662. Fraudulent issue of stocks and bonds. —An
officer, agent, or other person in the service of any jointstock company or corporation formed or existing under
the laws of this state, or of the United States or of any
state or territory thereof, or of any foreign government
204




LAWS RELATING TO STOCKBROKERS
or country, who wilfully and knowingly with intent to
defraud;
I. Sells, pledges or issues, or causes to be sold, pledged
or issued, or signs or executes, or causes to be signed or
executed with intent to sell, pledge or issue, or cause to
be sold, pledged or issued, any certificate or instrument
purporting to be a certificate or evidence of the ownership of any share or shares of such company or corporation or any bond or evidence of debt, or writing purporting to be a bond or evidence of debt of such company or
corporation, without being first thereto duly authorized
by such company or corporation, or contrary to the
charter or laws under which such corporation or company, exists, or in excess of the power of such company or
corporation or of the limit imposed by law or otherwise
upon its power to create or issue stock or evidences of
debt; or,
2. Reissues, sells, pledges or disposes of, or causes to
be reissued, sold, pledged or disposed of, any surrendered or canceled certificates, or other evidence of the
transfer or ownership of any such share or shares,
Is punishable by imprisonment for a term not exceeding seven years, or by a fine not exceeding three
thousand dollars, or by both.
Source.- Penal Code, sec. 591, as amended by L.
I892, ch. 662, sec. I9.
(L. I909, chap. 88. Consol. Laws I909, chap. 40.)
SEC. 663. Acting for foreign corporations not auth205




STOCK EXCHANGE LAWS
orized to do business in this state.-Any person, or corporation, who:
I. Acts as agent or representative of any mortgage,
loan or investment corporation or building and mutual
loan corporation or association or cooperative savings and
loan association organized outside of this state, while such
mortgage, loan or investment corporation or building and
mutual loan corporation or association or cooperative
savings and loan association shall not be authorized
under a license of the superintendent of banks to do
business in this state; or,
2. Acts as agent or representative in this state of a
foreign corporation, other than a moneyed corporation,
with the words "trust," "bank," "banking," "insurance,"
"assurance," "indemnity," "guarantee," "guaranty,"
"savings," "investment," "loan," "benefit," or any
other words or terms indicating, representing or holding
out such company to be a moneyed corporation as a
part of its name or corporate title, or who, in connection
with such corporation or otherwise, shall put forth any
sign containing said name, or who shall advertise or
publish the said company as doing business in this state,
directly or indirectly, through agents or otherwise, while
such company shall not be authorized under a certificate
procured from the secretary of state pursuant to section
fifteen of the general corporation law to do business, in
this state,
Is guilty of a misdemeanor.
Source. - Penal Code, sec. 593, as amended by L. I892,
ch. 692, sec. I; L. I904, ch. 489, sec. i; L. I908, ch. I8.
206




LAWS RELATING TO STOCKBROKERS
SEC. 926. False rumors as to stocks, bonds or public
funds.-A person who, with intent to affect the market
price of the public funds of this state or of the United
States, or of any state or territory thereof or of a foreign
country or government, or of the stocks, bonds, or other
evidences of debt of a corporation or association, or the
market price of gold or silver coin or bullion, or any
merchandise or commodity whatever;
I. Without lawful authority, falsely signs the name of
an officer of a corporation, or of any other person to a
letter, message, or other paper: or,
2. Utters or circulates such a letter, message, or paper,
knowing that the same has been so falsely signed; or,
3. Knowingly circulates any false statement, rumor,
or intelligence,
Is punishable by a fine of not more than five thousand
dollars, or by imprisonment for not more than three
years, or both.
Source.- Penal Code, sec. 435.
Circulating a false report that a stock corporation is
going into a receiver's hands is a violation of this action.
People v. Goslin, 67 App. Div., i6; 73 N. Y., Supp. 520
(I19O); aff'd I7I N. Y. 627.
SEC. 951. Reporting or publishing fictitious transactions in securities.-A person who with intent to
deceive, reports or publishes, or causes to be reported
or published as a purchase or sale of the stocks, bonds or
other evidences of debt of a corporation, company or
association, any transaction therein, whereby no actual
207




STOCK EXCHANGE LAWS
change of ownership or interest is effected, is guilty of a
felony, punishable by a fine of not more than five thousand dollars, or by imprisonment for not more than two
years, or by both.
(Added by Laws I9Ij, ch. 476. In effect May 9, I913.)
SEC. 952. False statement or advertisement as to securities. -Any person who, with intent to deceive,
makes, issues or publishes, or causes to be made, issued
or published, any statement or advertisement as to the
value or as to facts affecting the value of the stocks,
bonds or other evidences of debt of a corporation, company or association, or to facts affecting the financial
condition of any corporation, company or association
which has issued, is issuing or is about to issue stocks,
bonds or other evidences of debt, and who knows, or has
reasonable ground to believe that any material representation, prediction or promise made in such statement or advertisement is false, is guilty of a felony,
punishable by a fine of not more than five thousand
dollars, or by imprisonment for not more than three
years, or by both.
(Added by Laws 1913, ch. 475. In effect May 9, I913.)
SEC. 953. Manipulation of prices of securities.-Any
person who inflates, depresses, or causes fluctuations
in, or attempts to inflate, depress or cause fluctuations in,
or combines or conspires with any other person or persons
to inflate, depress or cause fluctuations in, the market
prices of the stocks, bonds or other evidences of debt of a
208




LAWS RELATING TO STOCKBROKERS
corporation, company or association, or of an issue or any
part of an issue of the stock, bonds or evidences of debt
of a corporation, company or association, by means of
pretended purchases and sales thereof, or by any other
fictitious transactions of devices for or on account of
such person or of any other person, or for or on account of the persons so combining or conspiring, whereby
either in whole or in part a simultaneous change of ownership of or interest in such stocks, bonds or evidences of
debt, or of such issue or part of an issue thereof, is not
effected, is guilty of a felony, punishable by a fine of not
more than five thousand dollars or by imprisonment for
not more than two years, or by both.
A pretended purchase or sale of any such stocks, bonds
or other evidences of debt whereby, in whole or in part,
no simultaneous change of ownership or interest therein
is effected, shall be prima facie evidence of the violation
of this section by the person or persons taking part in the
transactions of such pretended purchase or sale.
(Added by Laws I913, ch. 253. In effect April 0o, I913.)
SEC. 954. Trading by brokers against customers' orders.
-A broker who, being employed by a customer to buy and
carry upon margin the stocks, bonds or other evidences
of debt of a corporation, company or association, while
acting as broker for such customer in respect of such
stocks, bonds or other evidences of debt, sells for his own
account the same kind or issue of stocks, bonds or other
evidences of debt of such corporation, company or
association, with intent to trade against the customer's
209




STOCK EXCHANGE LAWS
order, or, who, being employed by a customer to sell the
stocks, bonds or other evidences of debt of a corporation,
company or association, while acting as broker for such
customer in respect to the sale of such stocks, bonds or
other evidences of debt, purchases for his own account
the same kind or issue of stocks, bonds or other evidences
of debt of such corporation, company or association,
with intent to trade against the customer's order, is
guilty of a felony, punishable by a fine of not more than
five thousand dollars, or by imprisonment for not more
than one year, or by both. Every member of a firm of
brokers, who either does, or consents or assents to the
doing of any act which by the provisions of this section
is made a felony, shall be guilty of a violation thereof.
(Added by Laws 1913, ch. 592. In effect May 17,
I9I3.)
SEC. 955. Transactions by brokers after insolvency.A person engaged in the business of purchasing and
selling as broker, stocks, bonds or other evidences of
debt of corporations, companies or associations who,
knowing that he is insolvent, accepts or receives from a
customer ignorant of such broker's insolvency, money,
stocks, bonds or other evidences of debt belonging to the
customer otherwise than in liquidation of, or as security
for, an existing indebtedness, and who thereby causes
the customer to lose in whole or in part such money,
stocks, bonds or other evidences of debt, is guilty of a
felony punishable by fine of not more than five thou210




LAWS RELATING TO STOCKBROKERS
sand dollars or by imprisonment for not more than two
years, or by both. A person shall be deemed insolvent
within the meaning of this section whenever the aggregate of his property shall not, at a fair valuation, be
sufficient in amount to pay his debts.
(Added by Laws I913, ch. 500. In effect May 8,
I9I3.)
(L. I909, ch. 88. Consol. Laws I909, ch. 40.)
SEC. 956. Hypothecation of customer's securities.-A
person engaged in the business of purchasing and selling
as a broker stocks, bonds or other evidences of debt of
corporations, companies or associations, who,
i. Having in his possession, for safe keeping or otherwise, stocks, bonds or other evidences of debt of a corporation, company or association belonging to a customer
without having any lien thereon or any special property
therein, pledges or disposes thereof without such customer's consent or,
2. Having in his possession stocks, bonds or other
evidences of debt of a corporation, company or association belonging to a customer on which he has a lien for
indebtedness due to him by the customer,
Pledges the same for more than the amount due to him
thereon, or otherwise disposes thereof for his own benefit,
without the customer's consent, and without having in
his possession or subject to his control, stocks, bonds or
other evidences of debt of the kind and amount to which
the customer is then entitled, for delivery to him upon
his demand therefor and tender of the amount due there211




STOCK EXCHANGE LAWS
on, and thereby causes the customer to lose, in whole or in
part, such stocks, bonds or other evidences of debt,
or the value thereof, is guilty of a felony, punishable by
a fine of not more than five thousand dollars or by imprisonment for not more than two years, or by both.
Every member of a firm of brokers, who either does,
or consents or assents to the doing of any act which by
the provisions of this or the last preceding section is
made a felony, shall be guilty thereof.
(Added by Laws 1913, ch. 500. In effect May 8, I9I3.)
SEC. 957. Delivery to customers of memoranda of
transactions by brokers. A person engaged in the business
of purchasing or selling as broker, stocks, bonds and other
evidences of debt of corporations, companies or associations shall deliver to each customer on whose behalf a
purchase or sale of such securities is made by him a statement or memorandum of such purchase or sale, a description of the securities purchased or sold, the name of the
person, firm or corporation from whom such securities
were purchased, or to which the same were sold, and the
day, and the hours between which the transactions took
place. A broker who refuses to deliver such statement
or memorandum to a customer within twenty-four hours
after a written demand therefor, or who delivers a statement or memorandum which is false in any material respect, is guilty of a misdemeanor, punishable by a fine
of not more than five hundred dollars, or imprisonment
for not more than one year, or both.
(Added by Laws, 1913, ch. 593. In effect Sept. i, I9I3.)
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LAWS RELATING TO STOCKBROKERS


Personal Property Law
(L. I909, chap 45. Consol. Laws I909, chap 4I.)
SEC. 33. Validity of certain agreements made without
consideration. An agreement for the purchase, sale,
transfer or delivery of a certificate or other evidence of
debt, issued by the United States or by any state, or a
municipal or other corporation, or of any share or interest
in the stock of any bank corporation or joint stock association, incorporated or organized under the laws of the
United States or of any state, is not void or voidable,
for want of consideration, or because of the non-payment of consideration, or because the vendor, at the
time of making such contract, is not the owner or possessor
of the certificate or certificates or other evidence of debt,
share or interest.
Source. Former Pers. Prop. L. (L. I897, ch. 417.)
Sec. 22; originally revised from L. 1858, ch. I34.
For rule and practice prior to act of 1858, and under
the Revised Statutes, see Staples v. Gould, 9 N. Y. 520
(1854); Washburn v. Franklin, 28 Barb. 27 (1858).
ARTICLE VI.
(Laws i909, ch. 45 Consol. Laws I909, ch. 41.)
Transfers of Certificates and Shares of Stock.
This new article is added by Laws 1913, ch. 660.
As originally enacted the Personal Property Law contained five articles. By Laws 1911, ch. 571, a new article
5 was added, and the original article 5, renumbered
article 6, which, with the new article added by said
213




STOCK EXCHANGE LAWS


Laws 1913, ch. 600, leaves the law with two articles
numbered 6.
SEC. 162. How title to certificates and shares may be
transferred.  Title to a certificate and to the shares
represented thereby can be transferred only,
(a) By delivery of the certificate endorsed either in
blank or to a specified person by the person appearing by
the certificate to be the owner of the shares represented
thereby, or
(b) By delivery of the certificate and a separate
document containing a written assignment of the certificate or a power of attorney to sell, assign or transfer
the same or the shares represented thereby, signed by the
person appearing by the certificate to be the owner of
the shares represented thereby. Such assignment or
power of attorney may be either in blank or to a specified
person.
The provisions of this section shall be applicable although the charter or articles of incorporation or code
of regulations or by-laws of the corporation issuing the
certificate and the certificate itself provide that the
shares represented thereby shall be transferable only on
the books of the corporation or shall be registered by a
registrar or transferred by a transfer agent.
(Added by Laws 1913, ch. 600. In effect Sept. i,
I913.)
SEC. I63. Powers of those lacking full legal capacity
and of fiduciaries not enlarged. Nothing in this article
214




LAWS RELATING TO STOCKBROKERS
shall be construed as enlarging the powers of an infant
or other person lacking full legal capacity, or of a trustee,
executor or administrator, or other fiduciary, to make a
valid endorsement, assignment or power of attorney.
(Added by Laws 1913, ch. 600. In effect Sept.,
I913.)
SEC. 164. Corporations not forbidden to treat registered holder as owner. Nothing in this article shall be
construed as forbidding a corporation,
(a) To recognize the exclusive right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, or
(b) To hold liable for calls and assessments a person
registered on its books as the owner of shares.
(Added by Laws 1913, ch. 600. In effect Sept i,
I9I3.)
SEC. I65. Title derived from certificate extinguishes
title derived from a separate document. The title of a
transferee of a certificate under a power of attorney or
assignment not written upon the certificate, and the
title of any person claiming under such transferee, shall
cease and determine if, at any time prior to the surrender
of the certificate to the corporation issuing it, another
person, for value in good faith, and without notice of
the prior transfer, shall purchase and obtain delivery of
such certificate with the indorsement of the person appearing by the certificate to be the owner thereof, or
shall purchase and obtain delivery of such certificate
215




STOCK EXCHANGE LAWS
and the written assignment or power of attorney of sucE
person though contained in a separate document.
(Added by Laws 1913, ch. 600. In effect Sept. I
I913.)
SEC. I66. Who may deliver a certificate.-The delivery
of a certificate to transfer title in accordance with the
provisions of section one hundred and sixty-two is
effectual, except as provided in section one hundred and
sixty-eight, though made by one having no right of
possession and having no authority from the owner of
the certificate or from the person purporting to transfer
the title.
(Added by Laws 1913, ch. 600. In effect Sept. I, I913.)
SEC. I67. Endorsement effectual in spite of fraud,
duress, mistake, revocation, death, incapacity or lack of
consideration or authority.-The endorsement of a certificate by the person appearing by the certificate to be
the owner of the shares represented thereby is effectual,
except as provided in section one hundred and sixtyeight, though the endorser or transferor,
(a) was induced by fraud, duress or mistake to make
the endorsement or delivery, or
(b) has revoked the delivery of the certificate, or the
authority given by the endorsement or delivery of the
certificate, or
(c) has died or become legally incapacitated after the
endorsement, whether before or after the delivery of
the certificate, or
216




LAWS RELATING TO STOCKBROKERS


(d) has received no consideration.
(Added by Laws I9I3, ch. 600. In effect Sept. i,
I913.)
SEC. i68. Rescission of transfer.-If the endorsement
or delivery of a certificate,
(a) was procured by fraud or duress, or
(b) was made under such mistake as to make the endorsement or delivery inequitable; or
If the delivery of a certificate was made
(c) without authority from the owner, or
(d) after the owner's death or legal incapacity,
The possession of the certificate may be reclaimed and
the transfer thereof rescinded, unless:
I. The certificate has been transferred to a purchaser
for value in good faith without notice of any facts making the transfer wrongful, or
2. The injured person has elected to waive the injury,
or has been guilty of laches in endeavoring to enforce his
rights.
Any court of appropriate jurisdiction may enforce
specifically such right to reclaim the possession of the
certificate or to rescind the transfer thereof and, pending litigation, may enjoin the further transfer of the
certificate or impound it.
(Added by Laws 1913, ch. 600. In effect Sept. i, I913.)
SEC. 169. Rescission of transfer of certificate does not invalidate subsequent transfer by transferee in possession.Although the transfer of a certificate or of shares repre217




STOCK EXCHANGE LAWS
sented thereby has been rescinded or set aside, nevertheless, if the transferee has possession of the certificate
or of a new certificate representing part or the whole
of the same shares of stock, a subsequent transfer of such
certificate by the transferee, mediately or immediately,
to a purchaser for value in good faith, without notice
of any facts making the transfer wrongful, shall give such
purchaser an indefeasible right to the certificate and
the shares represented thereby.
(Added by Laws 1913, ch. 600. In effect Sept. i, I913.)
SEC. I70. Delivery of unendorsed certificate imposes
obligation to endorse.-The delivery of a certificate by
the person appearing by the certificate to be the owner
thereof without the endorsement requisite for the transfer
of the certificate and the shares represented thereby,
but with intent to transfer such certificate or shares,
shall impose an obligation, in the absence of an agreement
to the contrary, upon the person so delivering, to complete the transfer by making the necessary endorsement.
The transfer shall take effect as of the time when the
endorsement is actually made. This obligation may be
specifically enforced.
(Added by Laws 1913, ch. 600. In effect Sept. i,
I913.)
SEC. 171. Ineffectual attempt to transfer amounts to
a promise to transfer.-An attempted transfer of title to
a certificate or to the shares represented thereby without delivery of the certificate shall have the effect of a
2I8




LAWS RELATING TO STOCKBROKERS
promise to transfer and the obligation, if any, imposed
by such promise shall be determined by the law governing the formation and performance of contracts.
(Added by Laws 1913, ch. 600.   In effect Sept. i,
I913.)
SEC. 172. Warranties on sale of certificate.-A person
who for value transfers a certificate, including one who
assigns for value a claim secured by a certificate, unless
a contrary intention appears, warrants -
(a) that the certificate is genuine,
(b) that he has a legal right to transfer it, and
(c) that he has no knowledge of any fact which would
impair the validity of the certificate.
In the case of an assignment of a claim secured by a
certificate, the liability of the assignor upon such warranty shall not exceed the amount of the claim.
(Added by Laws 1913, ch. 600. In effect Sept. I, I913.)
SEC. I73. No warranty implied from accepting payment of a debt.-A mortgagee, pledgee or other holder
for security of a certificate who in good faith demands or
receives payment of the debt for which such certificate
is security, whether from a party to a draft drawn for such
debt, or from any other person, shall not by so doing be
deemed to represent or to warrant the genuineness of
such certificate, or the value of the shares represented
thereby.
(Added by Laws I913, ch. 600. In effect Sept. i,
I913.)
2I9




STOCK EXCHANGE LAWS
SEC. 174. No attachment or levy upon shares unless
certificate surrendered or transfer enjoined.-No attachment or levy upon shares of stock for which a certificate
is outstanding shall be valid until such certificate be
actually seized by the officer making the attachment or
levy, or be surrendered to the corporation which issued
it, or its transfer by the holder be enjoined. Except
where a certificate is lost or destroyed, such corporation
shall not be compelled to issue a new certificate for the
stock until the old certificate is surrendered to it.
(Added by Laws I913, ch. 600. In effect Sept. i,
I9I3.)
SEC. I75.   Creditor's remedies to reach certificate.-A
creditor whose debtor is the owner of a certificate shall be
entitled to such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching such
certificate or in satisfying the claim by means thereof as
is allowed at law or in equity, in regard to property
which cannot readily be attached or levied upon by
ordinary legal process.
(Added by Laws 19I3, ch. 600.    In effect Sept. i,
I913.)
SEC. I76. There shall be no lien or restriction unless
indicated on certificate.-There shall be no lien in favor
of a corporation upon the shares represented by a certificate issued by such corporation and there shall be no
restriction upon the transfer of shares so represented by
virtue of any by-law of such corporation or otherwise,
220




LAWS RELATING TO STOCKBROKERS
unless the right of the corporation to such lien or the
restriction is stated upon the certificate.
(Added by Laws I913, ch. 600. In effect Sept. i,
I9I3.)
SEC. I77. Alteration of certificate does not divest title
to shares.-The alteration of a certificate, whether fraudulent or not and by whomsoever made, shall not deprive
the owner of his title to the certificate and the shares originally represented thereby, and the transfer of such a
certificate shall convey to the transferee a good title
to such certificate and to the shares originally represented thereby.
(Added by Laws 1913, ch. 600. In effect Sept. i, I913.)
SEC. I78. Lost or destroyed certificate.-Where a certificate has been lost or destroyed, a court of competent
jurisdiction may order the issue of a new certificate therefor on service of process upon the corporation and on
reasonable notice by publication, and in any other way
which the court may direct, to all persons interested and
upon satisfactory proof of such loss or destruction and
upon the giving of a bond with sufficient surety to be
approved by the court to protect the corporation or any
person injured by the issue of a new certificate from any
liability or expense, which it or they may incur by reason
of the original certificate remaining outstanding. The
court may also in its discretion order the payment of the
corporation's reasonable costs and counsel fees. The
issue of a new certificate under an order of the court as
221




STOCK EXCHANGE LAWS


provided in this section shall not relieve the corporation
from liability in damages to a person to whom the original
certificate has been or shall be transferred for value
without notice of the proceedings or of the issuance of the
new certificates.
(Added by Laws 1913, ch. 600. In effect Sept. i,
I913.)
SEC. 179. Rule for cases not provided for by this act.In any case not provided for by this act, the rules of
law and equity, including the law merchant, and in particular the rules relating to the law of principal and
agent, executors, administrators and trustees and to the
effect of fraud, misrepresentation, duress or coercion,
mistake, bankruptcy or other invalidating cause, shall
govern.
(Added by Laws I9I3, ch. 600. In effect Sept. i,
I9I3.)
SEC. I80. Interpretation shall give effect to purpose of
uniformity.-This act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it.
(Added by Laws 1913, ch. 600. In effect Sept. i,
I913.)
SEC. I8I. Definition of endorsement.-A certificate is
endorsed when an assignment or a power of attorney to
sell, assign or transfer the certificate or the shares represented thereby is written on the certificate and signed
222




LAWS RELATING TO STOCKBROKERS
by the person appearing by the certificate to be the
owner of the shares represented thereby, or when the
signature of such person is written without more upon
the back of the certificate. In any of such cases a certificate is endorsed though it has not been delivered.
(Added by Laws 1913, ch. 600. In effect Sept. i,
I913.)
SEC. 182. Definition of person appearing to be the
owner of certificate.-The person to whom a certificate
was originally issued is the person appearing by the
certificate to be the owner thereof, and of the shares
represented thereby, until and unless he endorses the
certificate to another specified person, and thereupon
such other specified person is the person appearing
by the certificate to be the owner thereof until and unless
he also endorses the certificate to another specified person.
Subsequent special endorsements may be made with like
effect.
(Added by Laws 1913, ch. 600. In effect Sept. I, I9I3.)
SEC. 183. Other definitions.- i. In this article, unless
the context or subject-matter otherwise requires -
" Certificate" means a certificate of stock in a corporation organized under the laws of this state or of another
state whose laws are consistent with this act.
"Delivery" means voluntary transfer of possession
from one person to another.
"Person" includes a corporation or partnership or two
or more persons having a joint or common interest.
223




STOCK EXCHANGE LAWS
To "purchase" includes to take as mortgagee or as
pledgee.
"Purchaser" includes mortgagee and pledgee.
"Shares" means a share or shares of stock in a corporation organized under the laws of this state or of another
state whose laws are consistent with this act.
"State" includes state, territory, district and insular
possession of the United States.
"Transfer" means transfer of legal title.
"Title" means legal title and does not include a merely
equitable or beneficial ownership or interest.
"Value" is any consideration sufficient to support a
simple contract. An antecedent or preexisting obligation, whether for money or not, constitutes value where a
certificate is taken either in satisfaction thereof or a
security therefor.
2. A thing is done "in good faith " within the meaning
of this act, when it is in fact done honestly, whether it
be done negligently or not.
(Added by Laws I913, ch. 600. In effect Sept. I, I913.)
SEC. 184.  Article does not apply to existing certificates. The provisions of this article apply only to
certificates issued after the taking effect of this article.
(Added by Laws 1913, ch. 600. In effect Sept. I, I9I3.)
SEC. 185. Inconsistent legislation repealed. All acts
or parts of acts inconsistent with this article are hereby
repealed.
(Added by Laws I913, ch. 600. In effect Sept. I, I9I3.)
224




LAWS RELATING TO STOCKBROKERS
The enacting clause of this law (Laws, I913, ch. 600)
provided that the article should consist of 25 sections,
to be numbered 162-186, inclusive, but the body of the
law contains only 24 sections, one short of the number
designated in the enacting clause.
General Business Law
(L. I909, chap. 25. Laws I909, chap. 20.)
Banking Licenses.
SEC. 25. Licenses, bonds and deposits. -Except as
provided in section twenty-nine-d, no individual or
partnership shall hereafter engage directly or indirectly
in the business of receiving deposits of money for safekeeping or for the purpose of transmission to another
or for any other purpose in cities of the first class without
having first obtained from the comptroller a license to
engage in such business. Before receiving such license,
the applicant therefor shall file with the comptroller a
written statement in the form to be prescribed by the
comptroller and verified by the individual or members of
the firm making the application, showing the amount of
the assets and liabilities of the applicant, designating the
place where the applicant proposes to engage in business,
that the applicant has been, or if the applicant shall constitute a partnership, that a majority of the members
thereof having a controlling interest in the business of
such partnership have been continuously for a period of
five years immediately preceding the date of such ap225




STOCK EXCHANGE LAWS


piication resident in the United States. Such applicant
shall at the same time deposit with the comptroller ten
thousand dollars in money or in securities which shall
consist of bonds of the United States, of this state or
of any municipality thereof, or other bonds approved
by the comptroller, and if a deposit of securities shall
be so made in lieu of ten thousand dollars in money,
the comptroller shall thereafter require the applicant to
maintain such deposit at all times at a value which shall
equal the sum of ten thousand dollars. In addition thereto there shall be presented to the comptroller a bond to
the people of the state of New York executed by the
applicant and by a surety company approved by the
comptroller, conditioned upon the faithful holding of all
moneys that may be deposited with the applicant, in
accordance with the terms of the deposit and the repayment of such moneys so deposited and upon the faithful
transmission of any money which shall be delivered to
such applicant for transmission to another, and in the
event of the insolvency or bankruptcy of the applicant,
upon the payment of the full amount of such bond to the
assignee, receiver or trustee of the applicant, as the case
may require, for the benefit of the persons making such deposits and of such persons as shall deliver money to the
applicant for transmission to another. The penalty of
the bond shall be a sum fixed by the comptroller, which
shall not be more than fifty thousand dollars nor less
than ten thousand dollars.  In lieu of the aforesaid
bond the applicant may deposit and the comptroller shall
accept, money and securities of the character above de226




LAWS RELATING TO STOCKBROKERS


scribed. The money and securities so deposited shall
be held on the conditions specified in the aforesaid
bond. If securities be deposited in lieu of the aforesaid bond, and be accepted as hereinafter provided, the
comptroller shall require the applicant to maintain such
deposit at a value equal to the amount fixed as the penalty
of the bond in lieu of which such money and securities
shall be so deposited. Upon the receipt of such application the comptroller shall cause to be posted upon a
bulletin to be maintained by him in his office in a place
accessible to the general public, at noon of the succeeding
Friday the name of the applicant and whether individual
or partnership, and the proposed business address designated in the application. After notice of the application shall have been so posted for a period of two weeks,
he may in his discretion approve or disapprove the application. In the event of his approval he shall accept the
money, securities and bond, if there be one, and hold
them for the purposes herein set forth, and shall issue
a license authorizing the applicant to carry on the aforesaid business at the place designated in the application
and to be specified in the license certificate. For such
license the licensee shall pay a fee of fifty dollars. Such
license shall not be transferred or assigned. It shall
not authorize the transaction of business at any place
other than that described in the license certificate, except with the written approval of the comptroller. Immediately upon the receipt of the license certificate issued
by the comptroller pursuant to this article the licensee
named therein shall cause such license certificate to be
227




STOCK EXCHANGE LAWS
posted and at all times conspicuously displayed in the
place of business for which it is issued, so that all persons
visiting such place may readily see the same. It shall
be unlawful for any person or partnership holding such
license certificate to post such certificate or to permit
such certificate to be posted upon premises other than
those designated therein or to which it has been transferred pursuant to the provisions of this article, or knowingly to deface or destroy any such license certificate.
If it shall be established to the satisfaction of the comptroller in accordance with the rules and regulations by
him prescribed, that an unexpired license certificate
issued in accordance with the provisions of this article
has been lost or destroyed without fault on the part of
the holder, the comptroller shall issue a duplicate license
therefor. The money and securities deposited with the
comptroller as herein provided and the money which in
case of default shall be paid on the aforesaid bond by
any applicant or the surety thereof, shall constitute a
trust fund for the benefit of the depositors of the licensee
and of such persons as shall deliver money to such
licensee for transmission to another, and such beneficiaries shall be entitled to an absolute preference as to
such money or securities, over all general creditors of the
licensee. Such money and securities shall in the event
of the insolvency or bankruptcy of the licensee be delivered by the comptroller on the order or judgment of a
court of competent jurisdiction to the assignee, receiver
or trustee of the licensee designated in such order or
judgment. The comptroller shall keep a book or books
228




LAWS RELATING TO STOCKBROKERS
in which the licenses granted and the bonds filed shall be
entered in alphabetical order, together with a statement
of the date of the issuance of the license, the name or
names of the principals, the place where the business
licensed is to be transacted and the name of the surety
company upon the bond filed, and the amount of all
moneys and a description of all securities deposited,
which record shall be open to public inspection. The
comptroller shall cause to be printed annually on the
first day of January and distributed upon application, a
list of all licenses granted and remaining unrevoked.
The comptroller shall from time to time pay over to each
such licensee all moneys received by him as interest
upon any moneys or securities deposited in accordance
with the provisions of this article.
(Added by L. I9IO, ch. 348. In effect Sept. i, I9IO.)
Constitutionality; waiver of a constitutional privilege
by an individual. - The regulations of the business of
receiving deposits is plainly within the power possessed
by the state to regulate the conduct of various pursuits
when necessary for the protection of the public; and the
action of the Legislature in subjecting to regulation the
particular class of people designated by this statute is
clearly constitutional. The conditions made known by
the commission of immigration recently appointed by
the Governor to inquire into the condition and welfare
of aliens in this state as to the widespread frauds upon
and losses by ignorant depositors of the class sought to be
protected and the knowledge of the Legislature of these
229




STOCK EXCHANGE LAWS
conditions justify the selection for regulations of the
persons selected. An individual may waive even a constitutional provision for his benefit, when no question
of public policy or public morals is involved; and when a
bond is given in accordance with this section the person
giving such bond thereby waives the right to question the
constitutionality of this statute, and his surety is estopped from raising that question in an action, thereafter
brought against it, by those who made deposits on the
faith of the undertaking. Nor is the statute unconstitutional as infringing on the exclusive right of Congress to regulate foreign and interstate commerce. It
is doubtless true that this statute may incidentally
and indirectly affect the business of transmitting moneys
abroad. But it is well settled that the law although
in a limited degree affecting interstate commerce is not
for that reason a needless intrusion upon Federal jurisdiction or strictly a regulation of interstate commerce,
but is to be considered as an ordinary police regulation
and therefore not invalid. Musco v. United Surety Co.,
I96 N. Y. 459 (I909), affg. 132 App. Div. 300, II7 N. Y.
Supp. 21; Guffanti v. National Surety Co., 196 N. Y.
452 (I909), affg. I33 App. Div. 6io, II8 N. Y. Supp.
207; Benvegna v. United Surety Co., 196 N. Y. 453,
(I909), affg. 132 App. Div. 925, II7 N. Y. Supp. 26.
SEC. 26. Books to be kept and records to be made;
revocation of licenses.- Each licensee shall keep books of
account showing full and complete records of all business transacted and a full statement of all assets and
230




LAWS RELATING TO STOCKBROKERS
liabilities, and shall four times in each year as of such
days as the comptroller shall designate by a notice to
be posted on the bulletin in his office and by written notice delivered at the place of business of such licensee
or deposited in the post-office in a postpaid wrapper
directed to him at such place of business, filed in the
comptroller's office within ten days after the date of such
notice, a written statement under oath in such form
as shall be prescribed by the comptroller, showing the
amount of the assets and liabilities of the licensee, which
report shall be accessible to the public at all reasonable
times. The license issued shall be revocable at all
times by the comptroller for cause shown, and in the
event of such revocation or of a surrender of such license,
no refund shall be made in respect of any license fee
paid under the provisions of this article. Every license
certificate shall be surrendered to the comptroller within
twenty-four hours after notice in writing to the holder
that such license has been revoked. In case of the
revocation of such license the money and securities
and the bond, if there be one, received from the licensee,
shall continue to be held by the comptroller, until
otherwise directed by the order or judgment of a court
of competent jurisdiction.
(Added by L. 191o, ch. 348. In effect Sept. i, I9Io.)
SEC. 27. Penalties for conducting business without
license, et cetera.-Any person or partnership carrying
on the business specified in section twenty-five of this
article without having obtained from the comptroller a
23I




STOCK EXCHANGE LAWS
license therefor, or who shall carry on such business
after the revocation of a license to carry on such business,
or who, without such license shall, on any sign, letterhead, advertisement or publication of any kind use the
word "banking" or "banker" or any equivalent term,
in any language, in connection with any business whatsoever, or who shall fail to display the license certificate as provided in section twenty-five hereof, or who
shall fail to keep books of account or to make the reports
as herein provided, or who shall advertise or publish
in any manner whatsoever, either orally or in writing,
any statement intended to convey or actually conveying
the idea or impression that such licensee is in any way
under the supervision of this state or of any officer
thereof, or that this state or any officer thereof has passed
in any way whatsoever upon the responsibility, solvency or qualifications of such licensee to engage in such
business, or that this state or any officer thereof has examined any accounts of said licensee or has in any
way certified that such licensee is in any way a fit
person to carry on such business, shall be guilty of a
misdemeanor.
(Added by L. I19I, ch. 348, in effect Sept. i, I9IO.)
SEC. 28. Perjury.-Any person who in any application for a license presented to the comptroller, or in any
report made under this article, shall swear falsely as to
the amount of the assets or liabilities of the applicant,
or as to the amount of the assets or liabilities of a licensee,
or in any other particular, or in any affidavit made under
232




LAWS RELATING TO STOCKBROKERS


section twenty-nine-d of this article shall swear falsely
as to any fact therein stated, is guilty of perjury.
(Added by L. I9I0, ch. 348, in effect Sept. I, I9I0.)
SEC. 29. Penalty for failure to make reports.-Any
person or partnership who shall fail to make any report
required by this article within the time specified for the
same, shall forfeit to the people of the state of New York
the sum of one hundred dollars for every day that such
report shall be delayed or withheld. The money forfeited
under this section shall be recovered in an action brought
in the name of the people of the state, and with all moneys
received as fees for the issuance of the licenses provided
for herein shall be paid into the state treasury to the
credit of the general fund.
(Added by L. 1910, ch. 348, in effect Sept. i, I9I0.)
(L. I909, chap. 25. Consol. Laws 1909, chap. 20.)
SEC. 379. Interest permitted on advances on collateral
security.-In any case hereafter in which advances of
money, repayable on demand, to an amount not less
than five thousand dollars, are made upon warehouse
receipts, bills of lading, certificates of stock, certificates
of deposit, bills of exchange, bonds or other negotiable
instruments pledged as collateral security for such repayment, it shall be lawful to receive or to contract to
receive and collect, as compensation for making such advances, any sum to be agreed upon in writing, by the
parties to such transaction.
Source.-L. 1868, ch. 237, sec. I.
233




STOCK EXCHANGE LAWS
Reference.-See Banking L., sec. 75.
Written contract is not necessary.  In re Wilde's
Sons, 138 Fed. Rept. 562 (1904).
Effect.-Hawley v. Kountze, 6 App. Div. 217, 39 N.
Y. Supp. 897 (1896).
(L. I909, chap. 25. Consol. Laws I909, chap. 22.)
SEC. 380. Brokerage on loans.-No person shall,
directly or indirectly, take or receive more than fifty
cents for a brokerage, soliciting, driving or procuring the
loan or forbearance of one hundred dollars, and in that
proportion for a greater or less sum, except loans on real
estate security; nor more than thirty-eight cents for
making or renewing any bond, bill, note or other security
given for such loan or forbearance, or for any counter
bond, bill, note or other security concerning the same.
Source.-R. S. pt. i, ch. 20, tit. 19, sec. i, as amended
by L. 1895, ch. 467.
Effect of statute is not to render contract wholly
void.  Buchanan v. Tilden, i8 App. Div. 123; 45 N. Y.
Supp. 417 (1897).
Length of time loan is to run does not affect commission. Corp. v. Brown, 2 Sandf. 293 (1848); Broad v.
Hoffman, 6 Barb. 177 (1848); Cook v. Phillips, 56 N. Y.
31I (I874).
Computation is upon the value of the currency called
for by contract. Brown v. Post, 6 Robt. iii (i868).
Promise to pay illegal compensation does not affect
broker's right to recover legal compensation. Vanderpoel v. Kearns, 2 E. D. Smith, I70 (I853)
234




LAWS RELATING TO STOCKBROKERS
SEC. 381. Recovery of excess.-Every person who shall
pay, deliver or deposit any money, property or thing in
action, over and above the rate aforesaid, and his personal
representatives may, within one year after such payment,
delivery or deposit, sue for and recover the same of
the person so taking or receiving such money, property
or thing in action, or of his personal representatives.
In case such suit shall not be brought within the time
above prescribed in good faith, or in case it shall be discontinued, or wilfully delayed, then the overseers of the
poor of the city or town where the offense was committed,
may within one year after such neglect, discontinuance
or delay, sue for and recover the money, property or
thing in action, so received, delivered or deposited, from
the person receiving the same, or his personal representatives, for the use of the poor of the county.
Source.-R. S. pt. i, ch. 20, title 19, secs. 2, 3.
Action for recovery may be commenced before contract is fully performed. Woodward v. Stearns, Io
Abb. Pr. N. S. 395 (I87I).
SEC. 382. Restitution a bar to further penalties. —Upon
the repayment and return of the money, property or
other thing so illegally received, with the payment of
the costs of such suit, the person making such return
shall be acquitted and discharged from any other punishment, forfeiture or penalty which he may have incurred
by reason of having so illegally received such money,
property or other thing so returned.
Source.-R. S. pt. i, ch. 20, tit. 19, sec. 5.
235




STOCK EXCHANGE LAWS
Tax Law
(L. I909, chap. 62. Consol. Laws I909, chap. 60.)
SEC. 270. Amount of tax.-There is hereby imposed
and shall immediately accrue and be collected a tax, as
herein provided, on all sales, or agreements to sell, or
memoranda of sales of stock, and upon any and all deliveries of transfers of shares, or certificates of stock,
in any domestic or foreign association, company or corporation, made after the first day of June, nineteen
hundred and five, whether made upon or shown by the
books of the association, company or corporation, or by
any assignment in blank, or by any delivery, or by any
paper or agreement or memorandum or other evidence
of sale or transfer, whether intermediate or final, and
whether investing the holder with the beneficial interest
in or legal title to said stock, or merely with the possession or use thereof for any purpose, or to secure the
future payment of money, or the future transfer of any
stock, on each hundred dollars of face value or fraction
thereof, two cents. It shall be the duty of the person or
persons making or effectuating the sale or transfer to
procure and affix the stamps and pay the tax provided by
this article. It is not intended by this act to impose a
tax upon an agreement evidencing the deposit of stock
certificates as collateral security for money loaned thereon
which stock certificates are not actually sold, nor upon
such stock certificates so deposited, nor upon mere loans
of stock for the return thereof. The payment of such
tax shall be denoted by an adhesive stamp or stamps
affixed as follows: In the case of a sale or transfer,
236




LAWS RELATING TO STOCKBROKERS
where the evidence of the transaction is shown only by
the books of the association, company or corporation,
the stamp shall be placed upon such books, and it shall
be the duty of the person making or effectuating such sale
or transfer to procure and furnish to the association, company or corporation the requisite stamps, and of such
association, company or corporation to affix and cancel the
same. Where the transaction is effected by the delivery
or transfer of a certificate, the stamp shall be placed upon
the surrendered certificate; and in cases of an agreement
to sell, or where the sale is effected by delivery of the
certificate assigned in blank, there shall be made and
delivered by the seller to the buyer, a bill or memorandum
of such sale to which the stamp provided for by this
article shall be affixed. Every such bill or memorandum
of sale or agreement to sell shall show the date of the
transaction which it evidences, the name of the seller,
the stock to which it relates, and the number of shares
thereof; and no further tax is hereby imposed upon the
delivery of the certificate of stock, or upon the actual
issue of a new certificate when the original certificate
of stock is accompanied by the duly stamped memorandum of sale as herein provided. (Amended byL. I19o,
ch. 38; L. 1911, ch. 352, and L. 1912, ch. 292, in effect
May I, I912.)
Application. - The statute relates to sales or transfers
of shares or certificates of stock in "associations and
companies" as well as in corporations. Rept. of Atty.
Genl. (I91I), Vol. 2, p. 692.
No tax is imposed on a deposit of stock as collateral
237




STOCK EXCHANGE LAWS
security to a loan when the title to the stock is not
actually transferred on the books of the corporation.
The rule is otherwise, however, if by reason of a default
in the payment of the loan or otherwise the transfer ripens
into a sale. Rept. of Atty. Genl. (1911), Vol. 2, p. 577.
Effect of amendment of I9i I.- Prior to the adoption of
this amendment it was frequently contended that the
statute related only to sales or transfers of stock which
operated to invest the transferee with the beneficial
interest in or ownership of the stock, and the amendment in question providing in express terms for a tax,
not only upon sales or transfers of stock but upon deliveries or transfers of shares or certificates of stock,
"whether investing the holder with the beneficial interest
in or legal title to stock or merely with the possession
or use thereof for any purpose," was adopted to settle
this dispute. Rept. of Atty. Genl. (I9II), Vol. 2, p. 697.
Since the amendment of I9II transfers which operate
to effect a change in the legal title to stock are taxable
though the intermediate holder of the stock be acting
merely as a trustee for the transferee. Rept. of Atty.
Genl. (19II), Vol. 2, p. 695. Transfers of stock to
voting trustees or nominees are taxable. Rept. of Atty.
Genl. (I9II), Vol. 2, p. 616.
Taxable transfers. - Where stock is issued pursuant
to an agreement whereby the subscriber is on certain
conditions to return a portion thereof to the treasury
of the company, and a return is made accordingly, the
latter transfer is taxable. Rept. of Atty. Genl. (I911),
Vol. 2, p. 554 -238




LAWS RELATING TO STOCKBROKERS


Surrenders of certificates of stock, held by the Standard Oil Company, to its various subsidiary corporations
and the issuance of new certificates of those companies
to the stockholder of the Standard Oil Company are
taxable transfers. Rept. of Atty. Genl., Mch. 7, I912.
Where a corporation, as a consideration for the sale
to it of the assets of a second corporation, issues and
delivers certificate of its capital stock to and in the name
of the selling corporation, the subsequent distribution
of said stock by the directors of the latter among its
stockholders according to their respective holding in
said corporation constitutes taxable transfers. Rept.
of Atty. Genl. (I9II), Vol. 2, p. 697.
Where foreign insurance company has, in compliance
with the provisions of section 27 of the Insurance Law,
by a deed of trust transferred to certain individual
trustees corporate stock, the subsequent transfer of
said stock to a corporation substituted as trustee in
place of such individual trustee is taxable. Rept. of
Atty. Genl. (I9II), Vol. 2, p. 575.
Transfers of stock to or from "nominee" are taxable
under the law as amended by Chapter 352 of the Laws of
I9II. Deliveries of certificates of stock, made against
receipt, but without payment, by order and for account
of a foreign client are taxable. Rept. of Atty. Genl.
(I9II), Vol. 2, p. 586.
Transfers of voting trust certificates constitute transfers of stock within the meaning of the Stock Transfer
Tax Law and accordingly are taxable. Rept. of Atty.
Genl. (I9II), Vol. 2, p. 616.
239




STOCK EXCHANGE LAWS
A compromise of claims for stock transfer taxes
cannot be made by the Comptroller. Rept. of Atty.
Genl. (I9II), Vol. 2, p. 583.
SEC. 271. Stamps, how prepared and sold. - Adhesive
stamps for the purpose of paying the state tax provided
for by this article shall be prepared by the State Comptroller, in such form and of such denominations and in
such quantities as he may from time to time prescribe,
and shall be sold by him to the person or persons desiring to purchase the same; he shall make provision for
the sale of such stamps in such places and at such times
as in his judgment he may deem necessary.
Source.-Former Tax L. (L. 1896, ch. 908), sec.
316, as added by L. 1895, ch. 341.
Forging state stamps, a misdemeanor. Penal Law,
sec. 892.
SEC. 27I-a. Sale of Stamps.-The proprietary interest
which one has in stamps purchased under the provisions
of the Stock Transfer Law is of a limited and peculiar
character, and the Legislature may limit the right to sell
such stamps to those who are duly licensed without
violating the provisions of either the State or Federal
Constitution. People ex rel. Isaacs v. Moran (1911), 74
Misc. 49I.
Selling stamps without consent of Comptroller; defense.
-It is no defense to one charged with selling stamps,
issued pursuant to this section, as amended in 1911, without the consent of the State Comptroller, that when said
240




LAWS RELATING TO STOCKBROKERS
amendment took effect he had in possession about $I,ooo
worth of stamps which he had purchased under the
original statute which did not require that the seller of
stamps should first obtain the written consent of the
State Comptroller. People ex rel. Isaacs v. Moran
(I9II), 74 Misc. 49I.
SEC. 272. Penalty for failure to pay tax. -Any person or persons liable to pay the tax by this article imposed,
and any one who acts in the matter as agent or broker
for such person or persons, who shall make any sale,
transfer or delivery of shares or certificates of stock,
without paying the tax by this article imposed, and
any person who shall in pursuance of any sale, transfer
or agreement, deliver any stock or evidence of the sale or
transfer of or agreement to sell any stock, or bill or
memorandum thereof, or who shall transfer or cause the
same to be transferred upon the books or records of the
association, company or corporation, and any association,
company or corporation whose stock is sold or transferred, which shall transfer or cause the same to be
transferred upon its books, without having the stamps
provided for in this article affixed thereto, shall be
deemed guilty of a misdemeanor, and upon conviction
thereof shall pay a fine of not less than five hundred
nor more than one thousand dollars, or be imprisoned
for not more than six months or by both such fine and
imprisonment, in the discretion of the court.
(Amended by L. I9II, ch. 352, and L. I912, ch. 292,
in effect May i, I912.)
24I




STOCK EXCHANGE LAWS
SEC. 273. Canceling stamps; penalty for failure. -
In every case where an adhesive stamp shall be used to
denote the payment of the tax provided by this article,
the person using or affixing the same shall write or stamp
thereupon the initials of his name and the date upon which
the same shall be attached or used, and shall cut or perforate the stamp in a substantial manner, so that such
stamps cannot be again used; and if any person makes
use of an adhesive stamp to denote the payment of the
tax imposed by this article, without so effectually canceling the same, such person shall be deemed guilty of a
misdemeanor, and upon conviction thereof shall pay a
fine of not less than two hundred nor more than five
hundred dollars or be imprisoned for not less than six
months, or both, in the discretion of the court.
(Amended by L. I9II, ch. 352, in effect June I5th,
I9II.)
SEC. 274. Contracts for dies; expenses, how paid. -
The State Comptroller is hereby directed to make, enter
into and execute for and in behalf of the state such contract or contracts for dies, plates and printing necessary
for the manufacture of the stamps provided for by this
article, and provide such stationery and clerk hire together with such books and blanks as in his discretion may be necessary for putting into operation
the provisions of this article; he shall be the custodian of all stamps, dies, plates or other material or
thing furnished by him and used in the manufacture
of such state tax stamps, and all expenses incurred
242




LAWS RELATING TO STOCKBROKERS
by him and under his direction in carrying out the
provisions of this article shall be paid to him by the
State Treasurer from any moneys appropriated for such
purpose.
Source. - Former Tax L. (L. 1896, ch. 908), sec. 319,
as added by L. I905, ch. 24.
SEC. 275. Illegal use of stamps; penalty. - Any person
who shall wilfully remove or alter or knowingly permit
to be removed or altered the canceling or defacing marks
of any stamp provided for by this article with intent to
use such stamp, or who shall knowingly or wilfully buy,
prepare for use, use, have in his possession or suffer to be
used any washed, restored or counterfeit stamp, and
any person who shall intentionally remove or cause to be
removed or knowingly permit to be removed any stamp,
affixed pursuant to the requirements of this article, shall
be guilty of a misdemeanor and on conviction thereof
shall be liable to a fine of not less than five hundred nor
more than one thousand dollars, or be imprisoned for not
more than one year, or by both such fine and imprisonment, at the discretion of the court. (Amended by
L. I9II, ch. 12, and L. 1912, ch. 292, in effect May i,
1912.)
SEC. 276. Power of State Comptroller. - Every person, firm, company, association or corporation engaged
in whole or in part in the making or negotiating of sales,
agreements to sell, deliveries or transfer of shares or
certificates of stock, or conducting or transacting a
brokerage business, shall keep or cause to be kept at
243




STOCK EXCHANGE LAWS
some accessible place within the state of New York,
a just and true book of account, in such form as may be
prescribed by the comptroller, wherein shall be plainly
and legibly recorded in separate columns, the date of
making every sale, agreement to sell, delivery or transfer of shares or certificates of stock, the name of the
stock, and the number of shares thereof, the face value
of the stock, the name of the seller or transferor, the
name of the purchaser or transferee and the number and
face value of the adhesive stamp affixed as provided
for by section two hundred and seventy of this chapter.
Every association, company or corporation shall keep
or cause to be kept at some accessible place within the
state of New York, a stock certificate book and a just
and true book of account, transfer ledger or register,
in such form as may be prescribed by the comptroller,
wherein shall be plainly and legibly recorded in separate
columns the date of making every transfer of stock, the
name of the stock and the number of shares thereof,
the serial number of each surrendered certificate, the
name of the party surrendering such certificate, the
serial number of the certificate issued in exchange
therefor, the number of shares covered by said certificate,
the name of the party to whom said certificate was issued
and the number and face value of the adhesive stamps
affixed, as provided by section two hundred and seventy
of this chapter. It shall also retain and keep all surrendered or canceled shares or certificates of its stock
and all memoranda relating to the sale or transfer of
any thereof, All such books of account, transfer led244




LAWS RELATING TO STOCKBROKERS


gers, registers and stock certificate books, shall be
retained and kept as aforesaid for a period of at least
two years subsequent to the date of the last entry made
therein as herein required; and all such surrendered or
canceled shares or certificates of stock and memoranda
relating to the sale or transfer of stock, shall be retained
and kept for a period of at least two years from the date
of the delivery thereof. For the purpose of ascertaining whether the tax imposed by this article has been
paid, all such books of account, transfer ledgers, registers, stock certificate books, surrendered or canceled
shares or certificates of stock and memoranda relating
to the sale or transfer thereof, shall at all times between
the hours of ten o'clock in the forenoon and three o'
clock in the afternoon, except Saturdays, Sundays and
legal holidays, be open to examination by the comptroller or his duly authorized representative.
The comptroller may enforce his right to examine such
books of account and bills or memoranda of sale or
transfer; and such transfer ledger, register and stock
certificate books and surrendered or canceled shares or
certificates of stock by mandamus. If the comptroller
ascertains that the tax provided for in. this article has not
been paid, he shall bring an action in his name as such
comptroller, in any court of competent jurisdiction
for the recovery of such tax and for any penalty incurred by any person under the provisions of this article.
Every person, firm, company, association or corporation who shall fail to keep such book of account or
bills or memoranda of sale or transfer, or transfer ledger,
245




STOCK EXCHANGE LAWS
register or stock certificate book or surrendered or canceled shares or certificates of stock as herein required,
or who alters, cancels, obliterates or destroys any part
of said records, or makes any false entry therein, or
who shall refuse to permit the comptroller or any of his
duly authorized representatives freely to examine any
of said books, records or papers at any of the times herein
provided, or who shall in any other respect violate any
of the provisions of this section shall be deemed guilty
of a misdemeanor and on conviction thereof shall for
each and every such offense pay a fine of not less than
five hundred dollars nor more than five thousand dollars,
or be imprisoned not less than three months nor more
than two years, or both, in the discretion of the court.
(Amended by L. I90o, ch. 453; L. I9II, ch. 352, and
L. 1912, ch. 292, in effect May i, 1912.)
Books and records. - The fact that stock books of a
New York Corporation are kept at its place of business
in the state of Rhode Island does not relieve the corporation from the duty imposed upon it by this section,
and such corporation must keep the books and records
required by said section. Rept.ofAtty. Genl. Vol. 2. p. 674.
SEC. 277. Civil penalties; how recovered. -Any person, firm, company, association or corporation who shall
violate any of the provisions of section two hundred and
seventy or section two hundred and seventy-two of this
chapter shall in addition to the penalties herein provided forfeit to the people of the state a civil penalty
of ten dollars for each and every share of stock so sold
246




LAWS RELATING TO STOCKBROKERS


or transferred or transferred or entered upon the books
of the corporation, as the case may be, without the
payment of the tax by this article imposed thereon.
Any person who shall violate any of the other provisions of this article shall in addition to the penalties
hereinbefore provided forfeit to the people of the state
a civil penalty of five hundred dollars for each and every
such violation.
The State Comptroller shall bring an action in his
name as such comptroller in any court of competent jurisdiction for the recovery of any civil penalty; and all
moneys collected by him shall be paid into the state
treasury. In an action against a corporation or its
transfer agent to recover a penalty because of its transfer
of stock upon the books or records of the corporation
without requiring the payment of the tax by this article
imposed, the failure of the corporation or its transfer
agent, on the demand of the comptroller or his duly authorized representative to produce the surrendered certificate or memoranda of sale with the required stamps
attached, shall constitute prima fade proof of the nonpayment of the tax imposed by section two hundred and
seventy of this chapter.
(Amended by L. 1912, ch. 292, in effect May I, 1912.)
SEC. 278. Effect of failure to pay tax.-The effect
of this section is not to impose upon the vendor who
fails to pay the tax a forfeiture of his property, but simply
denies to him the right to enforce the contract of sale,
and hence the provision is not unconstitutional. Sheri247




STOCK EXCHANGE LAWS
dan v. Tucker (I9II), I45 App. Div. I45, 129 N. Y.
Supp. i8.
The donee of corporate stock claiming title by gift
causa mortis or inter vivos can prove such gift only in a
case where the donor affixed the proper stamps to the
certificates at the time of the gift and delivery thereof.
Matter of Raleigh (I91I), 75 Misc. 55.
Failure to pay tax must be pleaded as defense. - The
statute does not provide that a person must pay this
tax before he can make or bring an action to enforce a
contract for the transfer of stock. Such payment is not
made a condition precedent to the right to bring an
action, and plaintiff is not compelled to alleged compliance, but the failure to pay the tax is matter to be
pleaded as a defense. Bean v. Flint (I912), 204 N.Y. 153.
SEC. 280. Refund of tax erroneously paid. Application. - The face value of stock transfer stamps should
not be refunded to the Standard Oil Company, although
such company has surrendered certificates of stock held
by it to its various subsidiary corporations and has issued
new certificates to those companies. Rept. of Atty.
Genl. Mch. 7, I912.
Insurance Law
(L. I909, chap. 33. Consol. Laws I909, chap. 28.)
Life or Casualty Insurance Corporations upon the Cooperation or Assessment Plan.
SEC. 214. Exemption of certain societies*** from
the provisions of this article.
248




LAWS RELATING TO STOCKBROKERS


***The voluntary unincorporated associations known
as the New York Stock Exchange*** are exempted from
the provisions of this article.
Banking Law
(L. I909, ch. Io. Consol. Laws I909, ch. 2.)
SEC. 23. Books, papers and affairs to be examined.-It
shall be the duty of the board of directors of every bank
and trust company in the months of April and October in
each year to examine or cause a committee of at least
three of its members to examine fully into the books,
papers, and affairs of the bank or trust company of which
they are directors, into the loans and discounts thereof
and particularly into the loans or discounts made directly or indirectly to officers or directors thereof, or
for the benefit of such officers or directors, or for
the benefit of other corporations of which such officers
and directors are also officers or directors, or in which
they have a beneficial interest as shareholders, auditors, or otherwise, with the special view of ascertaining
the value and security thereof, and of the collateral
security, if any, given in connection therewith, and into
such other matters as the superintendent of banks may
require. Such directors shall have power to employ such
assistance in making such examination as they may deem
necessary. On or before the fifteenth day of the month
succeeding such examination, a report in writing thereof,
sworn to by the directors making the same, shall be
made to the board of directors of such bank or trust
company, be placed on file in said bank or trust company,
249




STOCK EXCHANGE LAWS
and a duplicate thereof filed in the banking department.
Such report shall particularly contain a statement of the
assets and liabilities of the bank or trust company, examined, as shown by the books of the bank or trust
company, together with such deductions from the assets
and the addition of such liabilities direct, indirect, contingent or otherwise, as such directors or committee,
after such examination, may find necessary in order to
determine the true condition of the bank or trust company. It shall also contain a statement showing in
detail every liability to such bank or trust company,
direct, indirect, contingent or otherwise, of every officer
or director thereof and of every corporation of which any
such officer or director is also an officer or director, or in
which corporation any such officer or director is beneficially interested as a shareholder, creditor, or otherwise.
It shall also contain a statement, in detail, of loans,
if any, which in their opinion are worthless or doubtful,
together with their reasons for so regarding them; also
a statement of loans made on collateral security which
in their opinion are insufficiently secured, giving in each
case the amount of the loan, the name and market value
of the collateral, if it has any market value, and, if not,
a statement of that fact, and its actual value as nearly
as possible. Such report shall also contain a statement of
overdrafts, of the names and amounts of such as they
consider worthless or doubtful, and a full statement of
such other matters as affect the solvency and soundness
of the institution. If the directors of any bank or trust
company shall fail to make, or cause to be made and filed,
250




LAWS RELATING TO STOCKBROKERS


such report of examination in the matter, and within the
time specified, such bank or trust company shall forfeit
to the people of the state one hundred dollars for every
day such report shall be delayed, which penalty may be
recovered through an action brought by the attorneygeneral against such bank or trust company, in the name
of the people of the state of New York.  The moneys
forfeited by this section, when recovered, shall be paid
into the state treasury, to be used to defray the expenses
of the banking department.
(Amended by Laws I9I3, ch. 45I. In effect May 8,
I9I3.)


25I








TABLE OF CASES CITED








TABLE OF CASES CITED
(References are to pages)
A                             Page
Albers v. Merchants' Exchange, I40 Mo. App., 446..        3
Albers Commission Co. v. Spencer, 205 Mo., I5...    2
Allen v. McConihe, 124 N. Y., 342....            77
American Ins. Co. v. Fisk, I Paige, go....               59
Amsden v. Jacobs, 75 Hun, 311.....      lo
Armstrong v. Bickel, 217 Pa., 173...04
Armstrong v. Danahy, 75 Hun, 405......   58
Amott v. Pittson, etc., Coal Co., 68 N. Y., 558... 
Asgood v. Bander, 75 Iowa, 550.....            75
Atkinson v. Rochester Printing Co., 114 N. Y., 175... 195
Austin v. Hayden, Mich., 137 N. W., 317.46, 51, 52, 94, 96, 104
Ayer v. Mead, 13 IUi. App. 625..                            83
B


Bach v. Tuch, 126 N. Y., 53
Baker v. Drake, 66 N. Y., 518 
Baldwin v. Flagg, 36 N. J. Eq., 57
Barber v. Ellingwood, I44 App. Div., 512
Barber v. Ellingwood No. 2, 137 App. Div., 704
Bartlett v. Bartlett & Son Co., 116 Wis., 450
Bassett v. Irons, 8 Mo. App. 127 
Bassett v. Perkins, 65 Misc., 103..
Baster v. Board of Trade, 83 Ill., 146 
Bate v. McDowell, 40 N. Y. Super. Ct., Io6
Baum v. N. Y. Cotton Exch. 4 N. Y., Supp., 207
Bean v. Flint, 204 N. Y., 153.
Benvegna v. United Surety Co., 196 N. Y., 453
Bernheim v. Keppler, 34 Misc., 321.
Bigelow v. Benedict, 70 N. Y., 204
255


58. 84, 87,94
74
53, 103, 104, 107
III. 7, 24
2
II3
7, 24
76, 78
20, 23
70, 248. 230. 6, 15, I6, I9. 22, 54, 75




TABLE OF CASES CITED
PAGE
Birnbaum v. May, 58 App. Div., 76..                       79
Blaine v. Thomas, 103 App. Div., 600......   go
Blodgett v. Morril, 20 Vt., 509.....       58
Board of Trade v. Kinsey, I30 Fed. 507; I98 U. S., 236.   29
Board of Trade v. Nelson, 162 Ill., 43...       2, 3, 25
Board of Trade v. Riordan, 94 Ill., App., 298...  20, 25
Board of Trade v. Weare, I05 Ill. App., 289..    3, 24
Bostedo v. Board of Trade, I30 Ill. App., 560.      3, 24, 27
Boyce v. Grundy, 3 Pet., 210..                                 59
Boyle v. Henning, 121 Fed. 376.    76, 86, 88, I04
Broad v. Hoffman, 6 Barb., I77...   56, 234
Brown, In re, 175 Fed., 769  *......   Io
Brown, In re, i85 Fed., 766.....II
Brown v. Hall, 5 Lans., I77........   54
Brown v. Post, 6 Robt.   I.......  56, 234
Bruff v. Mali, 36 N. Y., 200......       59
Buchanan v. Tilden, i8 App. Div., 123...       55, 56, 234
Buch v. Houghtaling, IIo App. Div., 52..           8
Burhorn v. Lockwood, 7I App. Div., 301 affd., I77 N. Y., 539.  8i
Burnham v. Lawson, ii8 App. Div., 389..              8i, I07
Byrne v. Weinfield, 113 App. Div., 45I.                         99
C
Caldwell v. People, 67 Ill. App., 367..                       50
Camman v. Huntington, 89 App. Div., 99... 
Campbell v. Wright, 8 N. Y. St. Rep., 47I                  53, I03
Carlisle v. Norris, 142 N. Y. Supp., 393       ~       75, 94, II3
Cassard v. Hinman, I Bosw. 207...53
Cazeaux v. Mali, 25 Barb., 578.                            59
Christie Grain & Stock Co. v. Board of Trade, 125 Fed., i6i.   29
Clappe v. Taylor, 125 App. Div., 605.....     94
Cochran v. Adams, i80 Pa. St., 289...15
Cochran v. Ellis, 107 Ill., 413.                               77
Cohen v. Budd, 52 Misc., 217.. 3, 15
Colket v. Ellis, o0 Phila., 375..                              82
Commonwealth Bank v. Schuylkill Bank, i Pars. Eq. Cas. Pa., i80  59
Conklin v. Raymond, 127 App. Div., 663..                   78
Content v. Banner, 184 N. Y., 121..                   89, 94
Cook v. Phillips, 56 N. Y., 310..                        56, 234
256




TABLE OF CASES CITED
Corp. v. Brown, 2 Sand., 293.
Cragie v. Hadley, 99 N. Y., I3I 
Crummey v. Mills, 40 Hun., 370.
Currie In re, I85 Fed., 263
Curtis v. Leavitt, 15 N. Y., 9.
Custer v. Titusville Gas Etc., Co. 63 Pa. St., 381
D


PAGE
55, 234
I95
54
6, 17
46.  6


Davis v. Gwynne, 57 N. Y., 676
Day v. Holmes, 103 Mass., 306
Denton v. Jackson, io6 Ill., 438
Denton v. MacNeill L. R. 2 Eq., 352
Des Jardin v. Hotchkin, I4I App. Div., 845.
Douglas v. Carpenter, I7 App. Div., 329
Downie v. White, I2 Wis., 176
Dwight v. Badgley, 75 Hun. I74
E
Ennis, In re, 187 Fed., 720 
Ennis v. Ross, 37 Misc., i60
EsseD v. Linderman, 71 Pa. St., 76 
Estes v. Perkins, 137 App. Div., 367
Evans v. Wrenn, 93 App. Div., 346
Evans v. Chamber of Commerce, 86 Minn., 4


80
~ ~  ~   47, 83
85
62
82, 85
46, 96, 97
58
54. 110..  II3. 86. 89
79,Io3
7


F
Fairbaim v. Rausch, I04 App. Div., 259
Fairchild v. Flowerfelt, 79 Misc., 42
First National Bank of Waterloo v. Bacon,


102
87, 88
612 98


I 3 App. Div.,


Fisk & Robinson, In re, I85 Fed., 974.
Fletcher v. Dold Packing Co., I69 N. Y. 571
Foster v. Murphy & Co., 135 Fed., 47.
Frost v. Stokes, 55 N. Y., Super. Ct., 76
Fuller v. Mun. Tel. & St. Co., 117 App. Div., 352
Furniture Co. In re, 170 Fed., 485
G
Galigher v. Jones, I29 U. S., I93.
Gen. Prov. Assur. Co. In re, L. R., 9 Eq., 74
257


3
53
85
56
26, 54.  6I


77
~ ~.   58




TABLE OF CASES CITED
Gheen v. Johnson, 90 Pa. St., 38 
Gillet v. Whiting, 120 N. Y., 402.
Glynn v. Conklin, I27 App. Div., 473
Goddard v. Merchants' Exchange, 9 Mo. App., 290
Gould v. Trask, io N. Y. Supp., 619
Greely v. Doran-Wright Co., 148 Mass., Ii6
Green v. Board of Trade, I74 Ill., 585 
Gruman v. Smith, 81 N. Y., 25 
Guffanti v. National Surety Co., I96 N. Y., 452


PAGE
76, I03
94, o05
69
3
101
83
3
86, 94
230


H
Haebler v. N. Y. Prod. Exch., 149 N. Y., 414
Haight v. Dickerman, i8 N. Y. Supp., 559.
Haight v. Haight & Freese Co., 46 Misc., 501;
475
Hall v. Baker, 66 App. Div., I3I
Hallett's Estate, In re, L. R. I38 Ch. D., 696
Hardy v. Jaudon, i Rob., 261
Harris v. Pryor, I8 N. Y. Supp., I28
Harris v. Turnbridge, 83 N. Y., 92
Hawley v. Kountze, 6 App. Div., 217
Hayes In re. 75 N. Y. Supp., 312 
Heath v. Griswold, 5 Fed., 573
Heath v. President of Gold Exchange, 7 Abb. ]


8
2, I9
I02 App. Div.,
26, 50
95, I99
IO9
45. 88, 93, ioo
76
* 56, 57,234.  2, I5
46
Pr. N. S., 251   6


Heim v. N. Y. Stock Exch., 64 Misc., 529; Affd. 138 App. Div., 96
23, 26, 28, 52


Hellman, Matter of, 174 N. Y., 254
Helm v. Ennis, Io9 App. Div., 42 
Hentz v. Minor, I8 N. Y. Supp., 880.
Hess v. Rau, 95 N. Y., 359
Hess Malting Co. v. Warren, 15 Ill. App., 507
Hickok v. Cowperthwait, I37 App. Div., 94
Hoffman v. Livingston, 46 N. Y. Super. Ct., 552
Holmes v. Seaman, 184 N. Y., 486.
Hopkins v. O'Kane, I67 Pa. St., 478
Horton v. Morgan, I9 N. Y., 170.
Hunt v. Marquand, Io9 App. Div., 729
Hurd v. Taylor, i8I N. Y., 23..
Hurlbutt, Hatch & Co. In re, I35 Fed., 504
258


II
76
54
74, I03
2
98
76
39
74
82, 83
99
54, 77, I07
2, 13




TABLE OF CASES CITED
Hurst v. N. Y. Produce Exch., Ioo N. Y., 605.
Hurt v. Miller, I20 App. Div., 833
Hutchinson v. Lawrence, 67 How. Pr., 38
Hyde v. Woods, 94 U. S., 523
I
Illingworth v. De Mott, 59 N. J. Eq., 8
J
Jackson v. Foote, 12 Fed., 37 
Jones v. Gallagher, 3 Utah, 54.
Jones v. Seaman, 133 App. Div., 127
K


PAGE
25
77, I07
23, 25
12


76


75
8o.io6


Keller v. Halsey, 202 N. Y., 588
Kent v. DeCoppet, 149 App. Div., 589
Ketcham v. Provost, 156 App. Div., 477 
Kilmer v. Hutton, 13i App. Div., 625 
King v. Zell, I05 Ind., 435.
Kingsbury v. Kirwan, 43 N. Y. Super. Ct., 451
Kisch v. Venezuela Cent. R. Co., 34 L. J. Ch., 545
Knowlton v. Fitch, 52 N. Y., 288.
Konta v. St. Louis Stock Exchange, 189 Mo., 26.
Kridel v. Bloomingdale, 149 App. Div., 605 
Kruse v. Kennett, 181 I., 109 
L
La Gar v. Carey, 12 N. Y. St. Rep., 171
La Grange, etc., Plank Road Co. v. Mays, 29 Mo., 64
Lambert v. Addison, 46 L. T. Rep., 20
Langer v. Price, 114 App. Div., 78.
Lawrence v. Maxwell, 53 N. Y., 9.
Lazare v. Allen, 20 App. Div., 66.
Leech v. Harris, 2 Brewst. (Pa.), 57.
Lehman v. Feld, 37 Fed., 852.
Leiter v. Thomas, IIO App. Div., 879 
LeMarchant v. Moore, 79 Hun, 352
Leo v. McCormack, 142 App. Div., 741.
Levy v. Loeb, 85 N. Y., 365..
259


92
32
I4, 97
77, o05
74
53, 57
62
74
II
54
54


54
58
22
88
46, 84
53, 88, I03
19, 23, 24
83
88, 91.  o8
112.   76, 84




TABLE OF CASES CITED


Levy v. Potter, 104 App. Div., 457
Lewis v. Wilson, 121 N. Y., 288
Life Assn. of England, Re, 34 Beav., 639
Ling v. Malcolm, 77 Conn., 517
Litchfield Bank v. Church, 29 Conn., 137
Little v. McClain, 152 App. Div., 197 
Livermore v. Bushnell, 5 Hun, 285
Logan v. Tel. etc. Co., 157 Fed., 570
Lowenberg v. Greenbaum, 99 Cal., 162 
Lurman v. Jarvie, 8 App. Div., 37
Lynch v. Simmonds, 67 N. Y. Supp., 420
M


PAGE.  113
22, 25
58
83...  *  58
8i, II2
III
54
12
24
77


McCabe v. Emmons, 5I N. Y. Super. Ct., 219
McCabe v. Lawrence, 5I N. Y. Super, 219


12, 13, 219
12


McDearmott Commission Co. v. Board of Trade, I46 Fed. 961       29
McGinnes v. Smythe, ioi N. Y., 646.93
Mcllvaine v. Egerton, 2 Rob., 422...53
McIntyre v. Whitney, I30 App. Div., 557... III
McIntyre, In re, i8i Fed., 955...II
MacDonald v. Ackley, 93 Pa. St., 277....               39
MacDowell v. Ackley, 93 Pa. St., 277...               39
Mangles v. Grand Collier Dock Co., io Sim., 519; i6 Eng. Ch., 519  58
Manning v. Heidelbach, 153 App. Div., 790.  90, io6
Markham v. Jaudon, 41 N. Y., 235...         83, 86, 94
Marye v. Strouse, 5 Fed., 483.. 47, 78, 84
Marylebone Banking Co., Matter of, 3 De G. & S., 2.       58
Mayer v. Monzo, I5I App. Div., 866...... 46, 85, 97
Michael v. Hart (I90I), 2 K. B., 867; L. T. Rep. (N. S.), 548   oo
Miller & Co. v. Lyons, Va. 74 S. E., I94..                    89
Mills v. Gould, 42 N. Y. Super. Ct., II9..                    2
Mills, Matter of, 125 App. Div., 730,... Ioo, io6, I7; I1o
Minnesota Lumber Co. v. Whitebreast Co. i60 Ill., 85.       54
Moffatt v. Board of Trade, Mo., iI S. W., 894... 7, 23, 37
Moore v. Rodewald, 142 App. Div., 741..       I5, 1i2
Morgan v. Jaudon, 40 How. Pr., 366.....     93
Morris v. Grant, 34 Hun., 377......       3, 6, 9
Moyse v. N. Y. Cotton Exchange, I43 App. Div., 265..   25
Mullen v. Quinlan & Co., I95 N. Y., o09.,..     07
260




TABLE OF CASES CITED
PAGE
Muller v. Bensley, 20 Ill. App., 530..                    75
Mulligan, In re, 116 Fed., 715.....                 o6
Musco v. United Surety Co., I96 N. Y., 459.... 230
N
Nashua Savings Bank v. Abbot, I8I Mass., 531....   13
Nat. League of Com. Merchants v. Hornung, I48 App. Div., 355
2, 7, I9, 20
Neilson v. James, g Q. B. D., 546....                 83
Nelson v. Board of Trade, 121 Ill., 412..             2, 23
Newkirch v. Keppler, 56 App. Div., 225.   20, 21
Newman v. Lee, 87 App. Div., ii6..                    77, 84
0
O'Dell v. Boyden, 150 Fed., 731.                    2, 13, i6
P
Pacaud v. Waite, 218 Ill., 138......     2, 7
Page, In re, 107 Fed. 89.....      I3
Page v. Edmunds, I87 U. S., 590....              12
Parish v. N. Y. Produce Exch. 169 N. Y., 34.  39
Paton v. Newman, 51 La. Ann., 1428....            2
Peabody v. Speyers, 56 N. Y., 230....               2
Pearce v. Foote, 113 Ill., 228..                        54
Peck v. Doran, etc., Co. 46 Hun, 454......  54
Peckham v. Ketchum, 5 Bosw., 506......III
Peckham v. Ketchum, 90 Pa. St., 38....              76
Peller v. Leiter, 189 N. Y., 36.......  50
People v. Board of Trade, 45 Ill., II2..2, 3
People v. Board of Trade, 80 Ill., 134.....   20, 23
People v. Board of Trade, 224 Ill., 370......  39
People v. Duffy-McInnerney Co., 122 App. Div. 336.  69
People v. East Buffalo Live Stock Assn., 88 App. Div., 619.  24
People v. Feitner, 167 N. Y., I                            12
People v. Goslin, 67 App. Div., i6, affd. 171, N. Y., 627.62, 207
People v. Meadows, 199 N. Y.,...                  I09
People v, N. Y. Produce Exch., 149 N. Y., 401..       20, 24
People v, Reardon, 197 N. Y., 236...69
People v, St. Nicholas Bank, 77 Hun, 59;.....   6
261




TABLE OF CASES CITED
I
People v. Severance, 67 Hun, 182,
People v. Todd, 51 Hun, 446.
People v. Wade, 59 N. Y. Supp., 846
People ex rel. Farrington v. Mensching, 187 N. Y., 8
People ex rel. Hatch v. Reardon, iio App. Div., 821, 184 N. Y.


'AGE
196
55
55
68


43I, 204 U. S.,I52
People ex rel. Isaacs v. Moran, 74 Misc., 491
Picard v. Beers, I95 Mass., 419
Pickering v. Demerritt, Ioo Mass., 416
Pickering v. Templeton, 2 Mo. App., 424
Pierson v. Frenkel, 103 N. Y. Supp., 49
Pitcher v. Board of Trade, 121 I11.,42.
Pixley v. Boynton, 79 Ill., 553.
Platt v. Jones, 96 N. Y. 24
Porter v. Wormser, 94 N. Y., 431
Post v. Thomas, 153 App. Div., 865
Potter v. Malcolm, 104 N. Y. Supp., 760
Prout v. Chisholm, 89 Hun, Io8
Pugh v. Moore, 44 La. Ann., 209 
Q
Quelle   Paine, 39 Misc., 712.
Quentell v. N. Y. Cotton Exch., 56 Misc., I50
R


69
240, 241
77
47, 84
58
94
21, 24
*    75
12
47, 79, 84
80
83
60, 78
113


93
25


Raleigh, Matter of, 75 Misc., 55..                      69, 248
Ramsey v. Muller, 202 N. Y., 72...                    81
Reichard v. Hutton, 138 App. Div., 122..                   77
Reichland v. Hutton, 148 App. Div., 813...               05
Renville, Matter of, 46 App. Div., 37..                       29
Rice v. Davis, 136 Pa. St. 430..                    84
Richter v. Poe, (Md.) 71 Atl., 420...   78, 84, IOO, 103
Ridgeley v. Taylor & Co., ii8 App. Div., io.                80
Ritchie v. Burke, Io9 Fed., i6.....                   46
Ritter v. Cushman, 35 How. Pr., 284.86
Robinson v. Pittsburgh, etc., R. Co., 32 Pa. St., 334...   6i
Rock v. Carpenter, iio N. Y. Supp., 261                         8I
Rogers v. Wiley, I4 N. Y., Supp., 622, affd. I31 N. Y., 527
86, 93, IoI
262




TABLE OF CASES CITED
PAGE
Rorke v. San Francisco Stock and Exch., Bd., 99 Cal. 196.  17


Rosenbaum v. Stiebel, 122 N. Y. Supp., I3I
Rosenstock v. Torney, 32 Md., I69
Rothschild v. Alien, go App. Div., 233, affd.
Ruggles v. Brock, 6 Hun, 164.
Russel v. N. Y. Produce Exch. 27 Misc., 381
Rutland R. Co. v. Haven, 62 Vt., 39
Ryan v. Cudahy, I57 Ill., io8.
Ryan v. Lamson, 44 Ill. App., 204
S. 88, io8
83
I80 N. Y., 56I
45, 46, 95, 96
6i
28
59
24, 25
21


Schulteis v. Caughey, I46 App. Div., 02.....   2
Seymour, Johnson & Co., Matter of, 37 Misc., 264...6, 6
Shannon v. Chenay, 156 Cal., 567....             I2
Sheridan v. Tucker, 145 App. Div., I45.. 69, 70, 243
Shiel v. Stoneham, 77 Misc., I25.......  94
Shotwell v. Mali, 38 Barb., 445....                 59
Skiff v. Stoddard, 63 Conn., 198....              46, 96
Small v. Housman, 208 N. Y., 15...        87, 91, 92, 93
Smith v. Craig, I5I App. Div., 648..88
Smith v. Savin, 141 N. Y., 515....                 46
Smith v. Tracy, 30 N. Y., 79....                    III
Soby v. People, 134 Ill., 66....                     50
Sonneborn v. Lavarello, 2 Hun, 20....           7
Sparhawk v. Yerkes, 142 U. S., I.......   12
Spear v. Hart, 3 Rob., 420....                     83
Sprague v. Currie, 133 App. Div., i8...    76, 8i, 94, io6
Springs v. James, I37 App. Div., Iio...53,82
Stanton v. Small. 3 Sandf., 230...                 53
Stapleton v. O'Dell, 21 Misc., 94...                 96
Staples v. Gould, 9 N. Y., 520.54, 213
State v. Milwaukee Chamber of Commerce, 47 Wis., 670.  24
Stenton v. Jerome, 54 N. Y., 480....     86, 93
Sterling v. Jaudon, 48 Barb., 459.53, 03, I04
Stewart v. Drake, 46 N. Y., 449......    88
Stewart v. Harris, ioi App. Div., 8i....          8
Stone v. Lothrop. Io9 Mass., 63...                 82
Story v. Salomon, 7I N. Y., 420..                     54, 75
263




TABLE OF CASES CITED
PAGE
Strickland v. Magoun, 119 App. Div., 113.. 45, 96, 97, 99
Swift v. San Francisco St. Exch. Board, 67 Cal., 567..   39
T
Talcott v. Standard Oil Co., 149 App. Div., 694.II.       I3
Taylor v. Ketcham, 35 How. Pr. 289; 5 Rob., 507.77, 85, 87, io6
Thompson v. Adams, 93 Pa. St., 55....         2, I3, I5
Thornburgh v. Newcastle, etc. R. Co., I4 Ind., 499.         62
Thorne v. Prentiss, 83 Ill., 99........    2
Tompkins v. Morton Trust Co., 91 App. Div., 274...  94
Tracy In re, 191 Fed., 8io.....        45, 99
Treadwell v. Clark, II4 App. Div., 403, affd. I90 N. Y., 5I  98, 99
Tuell v. Paine, 39 Misc., 712.......       76
Tyler v. Barrows, 6 Rob., I04.......   53
U


Union Nat. Bank v. Hunt, 76 Mo., 439
U. S. Radiator Corp. v. State of N. Y., 208 N. Y., I44


62
69


V
Vanderpoel v. Kearns, 2 E. D. Smith, I70.
Van Dusen-Harrington Co. v. Jungeblut, 75 Minn., 298.
W


56, 234
83


Washburn v. Franklin, 28 Barb., 27......213
Waugh v. Seaboard Bank, 54 N. Y. Super. Ct., 283     3
Weare Commission Co. v. People, 209 Ill., 528..  5
Weidenfeld v. Keppler, 84 App. Div., 235...       23
Weir v. Dwyer, II4 N. Y. Supp., 528...           77, 90
Weld v. Cable Co., I99 N. Y. 88......       54
Weston v. Ives, 97 N. Y., 222........               2
West v. McLaughlin, 162 Fed., I24...... I
West v. Wright, 86 Hun, 436....                    54
Wheeler v. Newbould, i6 N. Y., 392....            87
White v. Brownell, 2 Daly, 329. 2, 3, 13, 21, 22
White v. Smith, 54 N. Y., 522..           53, 74, I03
White Mountains R. Co. v. Eastman, 34 N. H., I24.  58
Whitlock v. Seaboard Nat. Bank, 29 Misc., 84.     47
Wilde, In re, 133 Fed., 562....                56, 234
264




TABLE OF CASES CITED


Willard v. White, 56 Hun, 58i.
Willets v. Poor, 141 App. Div., 743.
Winston v. F. A. Longshore & Co., ii6 La., 21
Wolff v. Lockwood, 70 App. Div., 569
Wood v. Fisk, i4i N. Y. Supp., 342.
Woodward v. Stearns, io Abb. Pr. N. S., 395
Wright v. Toomey, 137 App. Div., 401
Wronkow v. Clews, 52 N. Y. Super. Ct., I76
Y
Young v. Eames, 78 App. Div., 229.
Z
Zeller v. Leiter, 114 App. Div., I48.
Zimmerman v. Heil, i56 N' Y., 703.


PAGR
6io
86
I07
98, io6
56, 235
8o


20, 26


53
77


265








IN DE X








INDEX
(References are to pages)
PAGE
Account, agreement to carry for a definite period... oo
"   joint......113
"   stated defined.....                112
Accounts, essential facts of...         27, 182
"   of the Exchange....122, 130
", fictitious names....27, 182
", keeping proper.....              78
Accusations, method of procedure..    21, I40, 142
Acting for buyer and seller..84
"   "   foreign corporations....         205
Acts detrimental to welfare of Exchange.. 86, 190, I9I
" of partner, responsibility for.           I71
Additional margin, waiver of customers' default.   93
Addresses of members.........  36, 170
Adequate margin..... 38, I90
Admissions, Committee on........           6, I27
t       "t   " its jurisdiction......  6n.
Admission to membership........, 33
Adopted child, gratuity to....         38, I45
Advances on collateral security.......  56, 223
",pledging stock for.45
", right to, on authorized sale 
Adverse interest, creating, custom disapproved. 83
Advertisements.........     37, I75
"       false, as to securities....  6, 208
"       to depress market value...        62
Agents, solicitation of business by......  36, 172
Agreement' as to margin.........  91
i"   to carry customer's account for a definite period.. oo
Altering contracts, custom disapproved... 83
269




INDEX


Alternative demand for margin insufficient
Anti-bucket shop law.
Appeals
Application of proceeds of membership 
Applications for membership 
"      "      ", misstatement on
Appointees
Arbitrage, domestic
"     foreign.
Arbitration
"     Committee.
(         "i, Appeals from.
"clause, effect of
Arrangements, Committee of 
Assessments on death of members 
"      "     "i, failure to pay
Assistant Chairman
"At three days," bids and offers
Authority to sell, discretionary
Authorization to sell, distinguished from order
"       " ", makes notice unnecessary
Award of arbitrators, effect of 
"Bank," unauthorized use of the term 
Bankers, misconduct by


PAGE.*...   86
49, I99.  0, 28, 132
I4, I35
I., I33
20, 140
II6, I26
* 35, 175
35, I76
6, 127
6, I27
6, I28. 6n.
5, 126
38.II, 134, I44
5, I22
*..   25, 154
80....   78
94
*...  7n..  98.  96


Banking Law, examination of books and papers..       249
"    ", licenses, bonds and deposits....    225
"    ", Constitutionality of Statute...229
Banking licenses, books to be kept and records made.. 230
"(   ", penalty for conducting business without uc-ense,
etc.                                 231
("     ", perjury.... 232
l"     ", penalty for failure to make reports..    33
Banks, misconduct by....96
Betting............      73
Bids and offers.....                           24, 153
" "      ", rules covering.                            176
Bids or offers, variation.....                 55
Bills of foreign banks, unlawful discount of....      98
270




INDEX
PAGE
Bonds, (See "Securities," "Stocks")
Books of corporations, closing of......      65
( t        ", "     "( during deliveries.       58
"   " Exchange...                            122, 130
" "members..                                  20, 21, 14I
Borrowing and lending (See "Loans")
Branch houses..I7a
Branch offices....                     36, 70, I7
Brokerage on loans........      55, 234
"     "   ", recovery of excess                  55, 234
Broker's correspondent, his agent....    03
duty as to retaining stock purchased..      94
"    insolvency stock goes to customer.....   0
"    lien......                            III
"    own name, custom as to purchase in  8.., right to pledge margined stock en bloc.         95
Brokers, transactions by, after insolvency...., 210
Bucket shop.....                     27, 49, 179
t     ", defined                                    50, 202
"     ", law as to                                 49, 199
"   ", corporations, penalty for second offence. 202
"     "  transactions with or for, forbidden        27, 179
"Bull" defined......                         74
"Bunching" orders prohibited.......  34, 183
Business Conduct, Committee on..                  7, I29
Business hours......                    23, I52
", solicitation of..              33, 36, i68, I72, i8i
Buyer and Seller, acting for.....                84
Buyers' duties on comparison..                     29, 155
"    options, bids and offers...                25, 154
"  rights..                                    29, I57
Buying customers' stocks.....                     84
"    on margin, valid.....                     84
By-laws, when reasonable, sustained by courts.. 3n.
"    upheld when not against public policy.. 3n.
"    courts will construe........ 3n.
"Call" defined......                        75
Calls..........53
27I




INDEX
Capital stock, notice of increase of... ".
Care required.
"Cash" bids and offers
Certificate of stock, etc., change in form
"      "    "(, not a negotiable instrument 
"      cc  ", transfers of (See "Transfers")


PAGE.   33, I67
75
25, I54
33, i68.. 13


Chairman
", Assistant
", gratuity fund trustees
Charges against members
City bonds, listing
"(  ", commission rate on
Claims between partners
"   filing
"Claims of members," meaning of
Clearances for members
"      " non-members.....       5, I22
5, I22
148
21, 22, 142, 143
9, I3I
169, 183
6, I36.    5, I36...... isn.....o. I8o, I83....... i80o


Clearing charges......                        8o
Clearing House........        30, 31, i6o
"        ", Committee on.....      8, 129
"        ", orders binding....                 157
i"       ", exchange of tickets.    29, 30, i56, 159
Clerk of broker as customer's agent......    2
Clerks, doing business for.........I
", employment of, for business obtained forbidden.   34, I8i
", speculative transactions for...                27, 181
Closing contracts "Under the Rule"....   30, 3, 32, i6r
(See also "Under the Rule")
"    out transactions on default, custom as to..        83
Collateral security, advances on.                             56, 233
"         ", sale of, customs as to.    82, 83
Collection of dividends, charge for...                   33, 167
Commission rule, money advances upon unusual terms.   35, 185."      ", penalty for violation of....   35, 70
i"      ", relieving customer from part of stamp tax.   35
I"      ", special or unusual rates of interest.   35, I85
Commissions, Committee on...                         8, 129
", right of suspended member.   35, 170
"        must be charged.......   34, i68
272




INDEX
PAGE
Commissions, must be net....                  34, i68
"t, "bunching" orders prohibited.         34, i68
", rates of......              34, 169
", reciprocal business                          35, i82
c, taking over transactions                         83
", on government securities.....   84
", on mining shares.....    82
Committees, standing... 5-IO, I26, ad interim                                          I2I
", fees to.18
vacancies in.32
Communications to Exchange.                       37, 74
Comparison, responsibility for losses by..  37, 84
Comparisons.....                        29, 30, I55, 184
Compulsion, to sell when broker is under no....   80
Conducting transactions, statutory enactments.   83
Conduct of business, rules for.                        23, I52
"    disorderly........       23, I52
Consenting to felony.....                       47
Consideration, validity of certain agreements made without.  53, 213
Consolidated Stock Exchange, transaction of business with members prohibited.........     27
Constitution, alterations of..                     37, 74
", Committee on.8, 30
", signing of........, 33
", violation of...                          20, I4I
Continuous quotations...                                   175
Contracts, altering, custom disapproved.83, liability on.                                      30, 155
(", maturity of, on transfer of membership.      14, 134
", on holidays.......... I54
", settlement of                                  30, I58, subject to rule of, Exchange.               53
", deposits on.32, 64, closing.31, i6I
", disagreements                               30, i56, 64, written                                            25, 154
Conversion.45 46, 99, I05
", by selling without notice.87
273




INDEX


Conversion, sale without demand and notice
Co6peration with insolvent broker 
Cornering the market, illegal 
Corporations, acting for foreign
", frauds in organization of 
Correspondent, broker's his agent
Counsel of Exchange
", Gratuity Fund
", professional, excluded.
Courts, interference of
Creditor, members, rights of 
Customer's agent, notice to
death
"     stock, buying 
Customs and usages of Exchange govern
"    " 4   "   "    ", approved
it..it    CC"  "    ", disapproved
Damages for default, claims for..  30, 31,
", measure of, sale of stock.
Dealing outside of Exchange prohibited
", suspension of.
"    in Exchange with non-members
"    in dividends
"    in privileges
"   in differences or quotations
"    for clerks
", members' transactions with himself 
"   outside of business hours
", reckless and unbusinesslike
Dealings, inquiry into.
Death, customer's
"Debts," meaning of
Deceased members
Decorum
Default as to margin, waiver of
"   in delivery (See "Deliveries")
"   of customer, custom as to closing out
", transactions on
274


PAGE
93
5I, I04
III
205
57, 204
103
5, I20
150
22, I44
2in., 22n., 23n.,
I7, I36
92
I02
84
82
83
47, 83
32, I58, I59, i6i, 162
107
23, 152
33, I68, 187
20, 140
33, I67
26, 155
26, 179
27, i8i
26, 178
23, 152
I9, I39
8, I30
102
I9n.
I6, 17, 38, I36, 148
37, 173
93
83
83




INDEX
Defrauded customer of insolvent broker, rights of
Deliveries
", necessity for stamped sales ticket 
"    by certificate or transfer.
"    during "closing" of books
", hours for, and payment.
", default, damage.
Delivery of memoranda of transactions
Demand and notice, sale without, a conversion
"    for margin, necessity for 
"    must be specific
", alternative insufficient.
"    for money deposited
Deposits in insolvent bank, receiving
"    on contracts
", due bills for dividends 
Differences, arbitration of.
t"     as to terms of contract
", dealing in
t"     on comparison
Disagreement on terms of contract.
Discount, unlawful, of bills of foreign banks.
Definite order, broker must obey 
Definition of terms
Discretion, order to sell at.
Discrimination by Exchange or members
Disorderly conduct
Disposal of membership of deceased members...         "     ". expelled members
Dividends.....
", charge for collecting 
", dealing in, prohibited 
Due bills
Dues and Fines
Elections, annual.
", special.
Eligibility for membership...
"     to offices...
275


PAGE
Io8
30, I57
3I, i86
30, I57
30, 158
30, 158
30, 31, 158, I59
47, 212
93.  86.  86
86
II3
I95
32, 164
32, i66
6, 128
37, I64
26, 79
30, 56
36, 164
198
77
50, 74
80
52, 203
37, I73
I6, 136
17, i8, 136
33, I65
33, I65
33, I67
32, i66
II, I33. 123
126
10, I33
I25




INDEX


Employees (See "Clerks")
Equitable principles of trade
Evidence, production of
Exchange, objects of.
", government and officers of
", hours of business, minutes of
", special closings.
", special meetings.
", or members, discrimination by
Exchanges, other in New York.
Ex-dividend
"Exhausted" margin defined
Exhaustion of margin
t"    "    "    notice of... it.    II      "  " iobject of 
it"   "    "     "   " reasonableness of 
Exhibiting quotations
Expulsion, right to provide for
I"     " of courts to interfere,
", "   " member to notice and hearing
"    must be contested promptly
effect                       17, I9,
", readmission after
"Ex-rights"
Extension of time to insolvent.
"      "I  ", misstatement
Failure to affix stamps
"   " exchange clearing-house tickets
"   " make deposits
"   "  execute orders
Failures, number of
False rumors as to stock, bonds or public funds
"   statement or advertisement as to securities
Fees to committees
Felony, manipulation of prices of securities. 
", anti-bucket shop law
", trading against customers' orders
276


PAGE.    I, 23, II7
22, 141
3, II7
3, 117
23, 152
I73..  52
4, I20
52, 203
140, 152
33, I65
85
80
86
*..   86
87
87
201
Ign, 23n.
2In, 22n, 23n.
24n, 25n.. IIn.
22n, 23n. 136, I39
6, I27
33, I66
8, 138
20, I40
31, i86
30, 159
32, I65
82
43
207
60, 208
II8
48
49
47




INDEX
PAGE
Felony, unauthorized pledging of customers' securities..45
Fictitious person, signing name of, to subscription. 57, 204
"   transactions.......      48, 49
i"     ", custom disapproved.. 83
1"     "    forbidden......  26, 155
"   names accounts in..              27, 182
"   reporting or publishing..        59, 207
Filing  claims........, 136
Finance Committee.....        8, 130
Finances of Exchange....    8, 130
"   "  gratuity fund....             I49
Fines...........    I, I  33
"Fly-power" defined.........               75
Foreign arbitrage.....                76
"   corporations acting for...         205
"  partnerships..               35. 36, 170, 172
Fraud or fraudulent acts...            21, I40
Frauds in organization of corporations..  57, 204
Fraudulent issue of stocks and bonds..  58, 204
Futures, contracts in, not illegal.....  53
", dealings in......55
", options in, when valid...        54


Gambling transactions.
Good faith and care required
Governing Committee.
"         ", vacancies in
"         ", quorum
"         i", adjourned meetings
i"        ", special meetings.


53, 54
75. 3, 4, I18. 119
II9
120
6, I20


c"        ", resolutions of, violation of
Government of Exchange
"      securities, listing of.
Gratuity Fund
9"     "t, its trustees
-"(     ", purposes
"       ", liability of Exchange and members
"       ", assessments.
"       ", reduction of
277


21, 141
3, II7
9, I31
37, 38, I44
39, I48
* 45
I47
44
47




INDEX
PAGE
Gratuity Fund, beneficiaries....                    45
t"      "t, )benefits not part of estate of member.. 47
"        i", investments                                 I48, 149
(       ",    ", organization of.....   48
t      ", officers       1.49
"i       i, vacancies...   148
"        ", amendment of rules..                     39
Guaranteeing stock..                                    III
Half-holidays, contracts falling due on                           I54
"       ", loans of money or securities on day preceding     155. ", deposits called on                                 65
Holidays, closing Exchange........   52
(See also "Half-holidays")


Hours of business
Hypothecation, when larceny
(See also "Pledging")
Improper use of customer's securities
Indebtedness, disputed prior
Indecorous conduct or language
Initiation fee.
Insolvencies, committee on 
Insolvency
i", transactions by brokers afte
(", of broker, stock goes to cus
Insolvent members, announcement by
"      bank receiving depos'ts in
("     broker, cooperating with 
"      broker, rights of de'rauded cl


*...*. 3 23, 152......  o6.     37, I90, I9I
77
37, 173
IO, I33
8, I30
7, I37;r....   51, 2I0
itomer....  o8
7, I37
I95
5I, 104
ustomer of...io8


t"      member, closing contracts of....  3I, 6
"          "i, extensior of time.8, 137
it         4,     "    "  " misstatement on application 21, 140
i          ", reinstatement...                   8, I37, 138
it     it, list of creditors...    8, 19, 138, I39
i"         ", commission rates to.   34, 170
it         ", reckless and unbusinesslike dealings.  I9, 139, when broker is.                                          51
Insurance law, exemption of Exchange from.... 243
278




INDEX
PAGE
Interest....                                     37, I65, I67, I85, creating adverse, custom   disapproved..                83
", payment of, without effecting loan..        85
", permitted on advances on collateral security.   56, 233
", Rates of..                         35
Investigations.......                              9
Irregularity in securities........   37, 64
Issue of stocks and bonds, fraudulent.....    58, 204


Joint account
"     deposits
Just and equitable principles of trade


II3, I69, I76
32, 164, I65
I, 7n. 23, II7, I4I


Keeping proper accounts


78


Larceny......45
t, where securities hypothecated.o6
Law Committee....                                   9, I30
Laws and Decisions, summary of..43
Laws covering stockbrokers, scope of....   43
Lender of securities (see "Loans")
Lien, broker's....                                    III
Loans of money or securities not effected.               I67, I85
"   subject to rule of Exchange.                              53
"   of money or securities, closing under rule.  31, 32, I58, 163
"   of money or securities due on holidays.               I54
"    'c...   " ", notice of return..   59
", brokerage on.........   55, 234
", recovery of excess.55, 235
", restitution a bar to further penalties.                   235


Manager of branch office
Manager's acts, broker bound by 
Manipulation of prices of securities.
Manner of Sale 
Margin, adequate.
", broker's course on exhaustion of
", buying on, valid
defined
279


~  36, I72....  76
48, 208
79
38, 90o
80....   84
~      ~   74, 85




INDEX


Margin, necessity for demand for 
", demand for must be specific
"       "     i" alternative, insufficient
", notice of exhaustion of
",   "   ", object of
",       " ", sufficiency of
", reasonable time to make good
", special agreement as to, waiver of customer's default as to 
Margined stock, sub-pledging en bloc
"t     (", must be purchased
"       "<, broker's right to pledge
"  ",    (      "  "  "  en bloc.
(       ", "sale of sufficiently
Market, cornering, the, illegal
", quotations, transactions on basis of
",sale at the
Maturity of contracts on transfer of membership
Measure of damages
Member of Exchange, (See "Membership")
"..       ", dealings of, inquiry into
I"   "      "<,   "   on other exchanges
"    "      ",    "   with non-members
"    "      ",    "   with one's self
"    "      "", debts of
Members, discrimination by
"     number of.
Membership, admission to.
", application for
", eligibility for
", transfer of 
", how increased
", readmission
", reinstatement
", application of proceeds of 
", of deceased member, disposal of
Memoranda of transactions, delivery of 
Mining shares, commission on.
Minor offence, procedure..


PAGE..  86
86
86
86
87
87
88
9I
93
46
84
95
95
85
III
49
IOI
12, 34
107
9, I30
23, 152
23, I40
178
14, I35
52, 203
IO
IO, I33
IO, I33
IO, I33
II, I34
IO, I33
6, 127. 8, 138
14, I35. 6, 136
47, 212
I82
22, 143




INDEX
Minutes......
Misconduct by banks and bankers
Misdemeanor, failure to deliver memoranda of transactions
Money deposited, demand for.
"    loans, (See "Loans")
Mutual deposits


PAGE
37, I73
I96
48, 212
*  I3
32, I64


Names of persons dealt with to be forwarded to customers
Nominal margin, agreement as to
"    positions for employees
Nominating Committee.
Non-members, arbitration by
"      ", commission rates to.
Notice, loans, return of
", closing of contracts under rule.
", mutual deposits
", time contract.
", of transactions to customer
"    of exhaustion of margin
I.  cc     "     "     ", object of 
i"   "      "     "i    ", reasonableness of
"    of time and place of sale, sufficiency of
", not necessary when direct authorization to sell
"    to customer's agent
", waiver of reservation in contract to close without
Number of members
"    "     ", increase of
Officers of Exchange, powers and duties.
"   (      "(, eligibility.
a   it     i     rtmAwoI


49
9?.  i8i
18I
123
6, I27
34, I69
30, 159
31, 162
32, I64
25, 154
76
86
87
87
89
94
92
89
ion. I33
10, I33
4
125
9, 1oi, lLtVl..I......, 9I u
"  "t  ", compensation......  8
Offices of members (See "Branch Offices")
"Option" defined...74
Options in futures, when valid...54
Options sometimes prohibited by statute..  54
Order, broker must obey definite..    77
", distinguished from  authorization to sell...  78
", proof of receipt of.......  79
28I




INDEX
PAGE
Order, to sell at, discretion...                            80
Orders, customers, trading against.47, 209
Orders, failure to execute....                                82
"(, waiver or revocation of...            82
Organization of corporations, frauds in.57, 204
Partners, commission rate to.....
", general and special                                 36, I7I
", foreign.36, I7I, responsibility for acts of.                         36, I72
", persons ineligible as..                          36, 171, claims between...                             6, 36
Partnerships (See also "Partners")......   36, 171
", registration of and changes in.                36, 71
", undesirable...                     36, 171
", dissolution of....                    36, I7I
Payment...30, 157
"      before delivery.30, 77
Penalties, violation of commission law..                   34, 170
",    "(     t provision of Constitution.            22, 141
(,    "L    " rule of Governing Committee              22, 141, violation of partnership rule                          36, 172
",     "    I" branch office rule                      36, 172
"     for non-payment of dues and fines              II, I33, I34
Period, agreement to carry account for a definite...  00
"Personal Liability" securities.......   29, 157
Place of sale, sufficiency of notice of......   89.t  " transaction, customer to be notified of.                  49
Pledgee from broker, right of......   99
Pledge of margined stock, right of.......   95
i"   " stocks, en bloc.....                   95
Pledging stock.......   97
t       " i, waiver of pledgee's lien......   98
"       ", for advances.45
"       ", left for safe keeping.52
Pledging of customer's securities, unauthorized...   44, 2II
Pooled stock......                             79
Premiums.......                                65, 67
President......                             4, 20
282




INDEX
PAGE
Presumption of value..... 78
Price of securities, manipulation of..    48, 208
Principal and agent, acting as....... 47
", duty on comparisons.                29, I56
", substitution of...               29, 157
", undisclosed....                 I3
Prior indebtedness, disputed... 77
Privileges, dealing in, forbidden            26, I55
1"   for non-member, commission on..... I90
Proceeds of membership, application of....  4, 135
Proof of receipt of order...                 79
Prospectus, subscribing name of another in.  57, 204
Publishing or reporting fictitious transactions  59, 207
Purchase in broker's own name, as to......82
Purpose of Stock Exchange.....                 I
"Put" defined......                    75
Quorum of Committees.........132
i(  "   Exchange.......... 125
"   " Governing Committee......             119
"   " Gratuity Fund trustees.......49
Quotation  service.......                27
Quotations, dealing in.....            29n, 179
", continuous or frequent.......  75
", exhibiting.....                201
Ratification of unauthorized pledge.... 46
"    "  transaction......        8
Readmission to membership.......               6, 27
Reasonable time to make margin good.... 88
Rebatement of assessments to members.....147
"     " commissions.... 34, i68
Receipt of order, proof of....79
Receiver of securities, rights and duties of.... 58
"   "   ", must not deduct damage.      I59
Receiving deposits in insolvent bank....95
Reckless and unbusinesslike dealing... 37, I90, I9I
Reclamation......                    64
Reestablishment of contract (See "Under the Rule")
283




INDEX
PAGE
Registration of address..                            36, 70
i(, branch office.36, 170
", partnership and changes..                   36, I7I
", securities.33, I67
", wire connections...                   28, I89
Registry office of corporation.......   33, 67
"Regular way" bids and offers....              25, I54
Reinstatement.......                   8, I37
Removal of appointees, clerks, etc......           126
"     " officers of Exchange.....26
"     " Trustees of Gratuity Fund...151
I     " securities from list.                            9, I3
Reporting or publishing fictitious transactions.   59, 207
"     transactions........       29, 155
Resolutions of Governing Committee, violation of..   22, 141
Responsibility for accounts......           I82
Return of loans (See "Loans")
Revenue tax......                               86
Rights of defrauded customer of insolvent broker... o8
"    " receiver or seller of securities.   32, i66
"   pertaining to securities........   32, i66
Rules of Exchange as between broker and customer...   82
"   ("     "     "     "(    members....         2, power of Exchange to make.                              3
", member cannot deny reasonableness of.   3
Rumors, false, as to stocks, etc.....          207
Salary of employees in branch offices.....  36, I72
it   "." for procuring business.   34, i68
t"   it     "     of Clearing House......   29
"    "      "     of officers and appointees...        18
Sale at the market......... 
", manner of......                            79
"   of collateral security, customs as to.               82, 83
", sufficiently margined stock                                 85, unauthorized                                             III
"   with no change of ownership...                I9I, without demand and notice, a conversion.                93
Sales, short........                   03
284




INDEX
PAGE
Sales, tickets, revenue stamp on..               3I, i86
Fame security, orders to buy and sell..                   26, I76
Seat on Exchange, is property....      n, I2n, I3n.
"  ".", disposal of, on insolvency..       2.n.
"(  "      "4, consent to transfer necessary...2n..(  "      ", cannot be sold as collateral.... I4n.
"1 "       (", trustee in bankruptcy gets title to..  2n.
Secret profits...                                             76.i.     ", ratification of taking of..                     81
Secretary of Exchange...                             5, 122
"    "   Gratuity Fund......                  49
Securities Committee on....                9, I3
t"        "       " its jurisdiction... 9n.
", manipulation of prices of.208
", suspension of dealing in...                   33, I68
", removal from list..                       33, i68, I87
", change in form of certificate.                  33, 155
", commissions on transactions in                        I69, contracts, rules for settlement.    9, I3I
", deliveries (See "Deliveries," "Under the Rule")
", increase of capitalization......   33, I67,listing of......             9, I31
', loans of (See "Loans").
", payment for........          30, 157
", rights pertaining to.....      33, I66
", transfer and registry.....       33, I65
", unauthorized pledging or other disposition of customer's securities........  44, 21I
Seller and buyer, acting for....                   84
", rights of.....                       32, I65
", duties on comparison....                   29, I56
"Seller's" options, bids and offers......   25, 154
Settlement of contracts........     30, I58
Shares of stock, transfers of (See "Transfers")
"Short sale" defined.....                            74
Short sales.......                            03
Short selling valid....53
Signature to Constitution, effect of...               I33
Smaller quantity than ordered, purchase of...  '.   78
285




INDEX
PAGE
Solicitation of business.....                   36, 72
Special agreement as to margin....                91
"   committees.                                              132
"   partners....                                   36, 17I
Specialists....                                26, 178
Stamp Tax (See "Stock Transfer Stamp Tax")....   86
Stamps, failure to affix........          3, I86
Standing Committees....                          5-Io, I26
Statement, false, as to securities......  6o, 208
"       of transactions.....                       201
State securities, listing of.9, 131
it      ", commission rates on..        69
Statutory enactments, disregarding custom disapproved             83
Stock certificate not a negotiable instrument..                13.
"   goes to customer on broker's insolvency...      0o,guaranteeing                                               III
",margined, must be purchased....            84,pledging.                                          97,        ", waiver of pledgee's lien..                     98
"   pooled.                                                    79, tender of.93, transfers of certificates and shares of (see "Transfers"),list, Committee on                                      9, 131,listing of securities, dealt in.                        9, I3I
list removal from                                        9, I3I
Stock Transfer Tax Law........    236
'(     '' '"       " ', amount of tax.                   65, 236
"       "      "    "(, application.                      65, 237
c"       "        "    ", effect of amendment of I911      68, 238
u       "      " " ", taxable transfers..           65, 239
(     ".."      "., ( compromise of claims.  240
"   "   "', ( stamps, how prepared and sold.  66, 240
<     " "    "    ", selling stamps without consent of comptroller.                              240
"  "      "   "~ ~, penalty for failure to pay tax    66, 241
"  " "    "c, canceling stamps, penalty for failure  66, 242
"'      "      "   (", contracts for dies; expenses, how paid 242
"  "      "   "(<, illegal use of stamps, penalty.   66, 243
("      "      "   ", power of state comptroller.        67, 243
286




INDEX
PAGE
Stock Transfer Tax Law, books and records...    67, 69, 246
"       "      "   ", civil penalties, how recovered.. 246
"(      "      "   ", effect of failure to pay tax..   68, 247
t"    "      "   ", refund of tax erroneously paid..248
"           "   ", summary...                       65
(See "Commision rule")
Stocks (See "Securities")
",buying customer's                                         84
",false rumors as to, etc..207
"    and bonds, fraudulent issue of.                   58, 204
"Stop order" defined......                   78
Sub-pledging margined stock en bloc....               46
Subscribing name of another in prospectus, etc...   57, 204
Subscription receipts, listing of....            9, 131
"        rights, commission rates....69
Subscription, signing name of fictitious person to           57, 204
Subscriptions for collateral purposes only....       58
Substitute principal........   29, I57
Sufficiently margined stock, sale of....                85
Summary of Laws and Decisions....               43
"     proceedings......         22, 43
Suspension of members,...   17, I8, 19, 20, 21 22, 137, 139
"     "    ", how period determined.                19
"       "    ", for what imposed.        20, 21
""         ", committees finding final.               22
<(      "    "(, announcement of.....   22
" ", effect of..22
"      of dealings in securities......   34, i68


Table of cases cited
Taking over position, commission rate.
Tax law, transfer, summary
Telegraph and telephone connections with non-members
di....           ".    "  Consolidated;
nection with Exchange operator, pay of.
Telephone (see "Telegraph")
Tender of stock....
Testimony, requirement to give 
Time and place of sale, sufficiency of notice of 
287


253
183
65
28, 187, I89
con-.  89
93
22, I41
89




INDEX
Time and place of, transaction to be furnished to customer
it   it i"     it contracts (see "Written Contracts")
cc"  "   "    " extension of (see "Insolvent")


PAGE
49
47, 209
8


Trading against customer's orders 
Transaction, ratification of unauthorized
Transactions (see "Dealings")
"     by brokers after insolvency
", closing out on defendant, custom as to
", delivery of memoranda of
", fictitious.
", notice of, to customer.
", statement of
Transfer agency of corporation 
"   books, closing of.
"    of membership
"    "      "I, maturity of contracts on 
Transfers of certificate and share of stock
"    (     ", how title transferred


o.  51, 210
83
47, 212
48
76
201
33, I67
33, I65. II, I34.  12, 34
62, 213
62, 2I4


Transfers of powers of those lacking full legal capacity and of fiduciaries not enlarged.                       62, 124
", corporations not forbidden to treat registered holder
as  owner.........   63, 2
", title derived from certificate extinguishes title derived
from a separate document.63, 2I5, who may deliver a certificate                       63, 216
", effectuality of indorsement                     63, 216
", rescission of transfer.                        63, 217
",    "     "      "  does not invalidate subsequent
transfer by transferee in possession.        63, 217
", delivery of unindorsed certificate imposes obligation to,  indorse.......              63, 218
ineffectual attempt to transfer amounts to a promise to
transfer......                  63, 218, warranties on sale of certificate...      63, 219
", no warranty implied from accepting payment of a debt 64, 219
", no attachment or levy upon shares unless certificate surrendered or transfer enjoined....   64, 220
", creditors' remedies to reach certificate..  64, 220
(", no lien or restriction unless indicated on certificate 64, 220
288




INDEX
PAGE
Transfers, alteration of certificate does not divest title to shares 64, 221
", lost or destroyed certificate.....   64, 221
", rule for cases not provided for by the act...  221
", interpretation.........222
", definition of indorsement......222
", definition of person appearing to be the owner of certificate......223
", other definitions.........223
", article does not apply to existing certificates..  65, 224
", inconsistent legislation repealed.....224
Treasurer of Exchange........    5, 21
"     " Gratuity Fund...                           149
Trials, minor offenses, summary proceedings.                  22, 143
", major offenses....                        22, 142
", adjournment of....                               II9
", counsel excluded...                    22, 144
Trust companies, doing business for clerks of                  27, I81
(       ", Gratuity Fund....I50
"       ", mutual deposits.....   32, I64
Trustees of bond issues........  33, i68
".     " Gratuity Fund (see "Gratuity Fund")
Unauthorized pledge of customers' securities.         44, 2II
"         "    ratification of......   46
t"      sale, right to advances, etc.                      1i.
"       transaction, ratification of.....        8
"       use of the term  "bank"......   98
Unbusinesslike dealings.                                       I91, I39
"Under the rule", contracts of insolvents.  31, I6i
"     "   ", duties of chairman..              31, i6i, 163
"        " ", notice of intention..                    32, i6i
"    "    ", notice of closing....               162
"    "    ", parties in interest...                    62
"    "    ", settlement price if not closed out..   32, 162."   "    ", damages resulting from securities pledged for
loan.......        32, 163
Undisclosed principal..........113
Unlawful discount of bills of foreign banks intention by one party
only.....                                        54, 198
289




INDEX
Usages of Exchange govern.
Usury
Vacancies in Governing Committee..
"offices
"     " chairmanship.
("   "( CCommittees
"     " Gratuity Fund
Validity of certain agreements made without consideration
Vice-President... ", Vacancy in office
Violation of branch office or partnership law
"     commission law 
"     provision of Constitution.
"     resolution of Governing Committee.
"     rules covering bids and offers.


PAGE
82


II9
125
122
I32
148
53, 213
4, 121
126
36, I72
35, 170
22, 141
22, 141
155
', I73, I74
33, I66


Visitors
Voting power, pertaining to securities


37
*      *     o


Wager.......                         53-55
Waiver of customer's default......               93
"    " pledgee's lien......                   98
"    " reservation to close without notice.   89
Welfare of Exchange, act detrimental to..22, 142
Wire connections, approval of by committee of arrangements   28, 189
(see also "Telegraph and Telephone")
Witness, requirement to testify....               22, 141
", right to produce, etc...                             22, 141
Written contracts, when they must be made.     25, 154
"        ", notice under                              25, 154
"        ", liability fixed..                       29, 157
290
UNIY, OF MICHK)lO         A


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