v 

Approved Code No. 141-Amendment No. 4 Registry No. 1707-04 

NATIONAL RECOVERY ADMINISTRATION 

AMENDMENT TO 

CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

AS APPROVED ON FEBRUARY 27, 1935 

WE DO OUR PARl' 

U.S. oePOllfTOIW 

UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON: 1935 

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Apprnved Code No. 141-Amendment No. 4 

AMENDMENT TO CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

As Approved on February 27, 1935 

ORDER 

ArPROVING Al\IENDMENT OF CooE OF F .AIR COMPETITION FOR 

INVESTMENT BANKERS 

An application having been duly made pursuant to and in full 

compliance with the provisions of Title I of the National Industrial 

Recovery Act, approved June 16, 1933, for approval of an amendment to Section 4 of Article V of Amendment No. 2 of the Code of 

Fair Competition for Investment Bankers, which is attached hereto 

and hereby made a part hereof, and Notice of Opportunity to be 

Heard having been afforded to all interested parties, and any objections filed having been duly considered and the annexed report on 

said amendment, containing findings with respect thereto, having 

been made and directed to the President: 

NOvV, THEREFORE, on behalf of the President of the United 

States, the National Industrial Recovery Board, pursuant to authority vested in it by Executive Orders of the President, including 

Executive Order No. 6859 dated September 27, 1934, and otherwise; 

does hereby adopt and incorporate, by reference, said annexed report 

and does concur in and adopt the findings of fact made therein, 

and does find that said amendment and the Code as constituted after 

being amended comply in all respects with the pertinent provisions 

and will promote the policy and purposes of said Title of said Act, · and does hereby order that said amendment, which is attached hereto 

and made a part hereof, be and it is hereby approved, and that the 

previous approvals of aid Code and suid Amendment No. 2 are 

hereby modified to include an approval of said Code in its entirety 

as amended. 

NATIONAL INDUSTRIAL RECOVERY BOARD, 

• By L. C. 11ARSHALL, E xecutive S em·etary. 

Approval recommended : 

L. H. PEEBLES, 

Division Adniinistrato·r. 

WASHINGTON, D. C., 

February f7 , 1935. 

118227°-1603-27-35 (1) 
REPORT TO THE PRESIDENT 

The PRESIDENT, 

The White House. 

Sm: An application has been duly made pursuant to and in 

full compliance with the provisions of the National Industrial 

Recovery Act for the amendment of Amendment No. 2 of the Code 

of Fair Competition for Investment Bankers for the following 

purposes: 

The addition of a new Sub-Section ( e) to Section 4 of Article 

V to require that in order to receive a concession on each purchase of 

ecurities the investment banker ( other than a member of the selling 

syndicate or selling group organized in connection with the distribution of the issue of securities in question) must sign a certificate 

which will indicate that said investment banker is performing a 

service for which he is entitled to the concession. 

The Code of Fair Competition for Investment Bankers was approved on November 27, 1933. Amendment No. 2 of this Code contains all of the Fair Trade Practice provisions and was approved 

on March 23, 1934. 

The Code provides that where new securities are being distributed 

through a selling syndicate or selling group there can be only one 

price at which the new securities can be offered to the public during 

the life of the selling syndicate or selling group, the intent being 

to avoid any preference or discrimination in sales to investors. 

However, the Code provides that another investment banker may 

have the concession from such public offering price if and to the 

extent that the selling syndicate or selling group agreement authorizes such concession. Since certain purchasers, notably banks in 

the normal course of their business, purchase new issues of securities, 

either for redistribution or for their own investment account or 

both, they are as a class in the dual capacity of distributors and 

investors. Therefore, such purchasers, under the Code as now written, when purchasing solely for their own investment account, are 

in a position of receiving preference as compared with other investors. 

The proposed amendment would require that before a concession 

could be given to an investment banker ( other than a member of the 

selling syndicate or selling group organized in connection with the 

distribution of the issue of securities in question) he must certify that 

he is purchasing the securities either (1) solely for the account of 

clients, or (2) for his own account but with the intention of redistributing the securities to his clients in the ordinary course of his 

business. No certificate is required of participants in the selling 

yndicate or members of the selling group, because the necessary 

control is included in the syndicate or group agreements. 

The effect of the amendment would be to ·consistently maintain 

the principle of no discrimination between investors by putting all 

investment bankers on a level with private investors when they purchase securities solely for investment and not for distribution. It 

proceeds on the theory that an investment banker is entitled to a lower 

price than that available to the public only when that investment 

(2) 
3 

banker actively participates in the distribution to others of the securities in question. 

FIN DINGS 

The Deputy Administrator in his report to the National Industrial 

Recovery Board on said amendment of said Amendment No. 2 of said 

Code having found as herein set forth and on the basis of all of the 

proceedings in this matter : 

The National Industrial Recovery Board finds that: 

(a) The amendment of said Code and the Code as amended arc 

well designed to promote the policies and purposes of Title I of the 

National Industrial Recovery Act including the removal of obstructions to the free flow of interstate and foreign commerce which tend 

to diminish the amount thereof, and will provide for the general 

welfare by promoting the organization of industry for the purpose 

of cooperative action among trade groups, by inducing and maintaining united action of labor and management under adequate governmental sanction and supervision, by promoting the fullest possible 

utilization of the present productive capacity of industries, by avoiding undue restriction of production ( except as may be t emporarily 

required), by increasing the consumption of industrial and agricultural products through increasing purchasing power, by reducing and 

relieving unemployment, by improving standards of labor, and by 

otherwise rehabilitating industry. 

(b) The effect of the amendment will be to consistently maintain 

the principle of no discrimination between investors by putting all 

investment bankers on a level with private investors when they 

purchase securities solely for investment and not for distribution. 

( c) The amendment will eliminate unfair competitive practices 

by prohibiting the granting of a concession by a selling investment 

banker to any purchaser where such concession is merely an inducement for the purchaser to purchase securities from said investment 

banker rather than the recognition that the purchaser will perform 

a service in the distribution of the securities which entitles him to 

such concession. 

( d) The Code as amended complies in all respects with the pertinent provisions of said Title of said Act, including without limitation subsection (a ) of Section 3, subsection (a ) of Section 7, and 

subsection (b) of Section 10 ther eof. 

( e) The Code empowers the Code Committee t o present the aforesaid amendment on behalf of the Industry as a whole. (f) The amendment and the Code as amended are not designed 

to and will not permit monopolies or monopolistic pr actices. 

(g ) The amendment and the Code as amended are not designed 

to and will not eliminate or oppress small enterprises and will not 

oper ate t o discriminate against them. 

(h) Those engaged in other steps of the economic process have 

not been deprived of the right to be heard prior to approval of said 

amendment. 

For these reasons, therefore, this amendment has been approved. For the National Industrial Recovery Board: 

L. C. :M ARSHALL , 

FEBRUARY 27, 1935. 

Ewecutiv'e S ecretary. 
AifENDM:ENT TO CODE OF FAIR COMPETITI ON F OR 

INVESTMENT BANICERS 

Amend Article V, Section 4, of Amendment No. 2 of the . Code of 

Fair Competition for Investment Bankers: Add the following new 

Sub-section to be known as Sub-section ( e) : 

( e) No investm<mt banker ( other than a member of the selling 

syndicate or selling group organized in connection with the distribution of the issue of securities in question) shall be allowed a commission or concession by such selling syndicate or selling group, 

nor shall any investment banker, ( other than as aforesaid), be 

allowed a commission or concession by a participant in such selling 

syndicate or by a member of such selling gToup as provided in paragraph (b) of this section, unless the investment banker receiving 

such commission or concession shall furnish to the manager of the 

selling syndicate or selling group or to such participant in the selling syndicate or such member in the selling group at the time of 

the confirmation of the purchase or the entering of a subscription 

in connection with which such commission or concession is or is to 

be received, or prior to the date of confirmation of sale or of allot- ment, a certificate in a form to be approved by the Code Committee and signed by such investment banker stating he claims a com- mission or concession upon the purchase of the security in question 

and that such security is being acquired either ( 1) · solely for the 

account of clients, or (2) for such investment banker's own account 

but with the intention of redistributing such security to clients in 

the ordinary course of his business. 

Approved Code No. 141-Amendment No. 4. 

Registry No. 1707-04. 

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UNIVERSITY OF FLORIDA 

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