V 

Approved Code No. 141-Arnendment No. 3 Registry No. 1707-04 

NATIONAL RECOVERY ADMINISTRATION 

AMENDMENT TO 

CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

AS APPROVED ON FEBRUARY 18, 1935 

WE 00 OUR PART 

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UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON: 1935 

For sale by the Superin tendent of Documents, Washington, D. C. • • - - • • - - - Price 5 cents 
This pubiication is for sale by the Superintendent of Documents, Government 

Printing Office, Washington, D. C., and by district offices of the Bureau of 

Foreign and Domestic Commerce. 

DISTRICT OFFICES OF THE DEPARTMENT OF COMMERCE 

Atlanta, Ga.: 504 Post Office Building. 

Birmingham, Ala.: 257 Federal Building. 

Boston, Mass: 1801 Customhouse. 

Buffalo, N. Y.: Chamber of Commerce Building. 

Charleston, S. C.: Chamber of Commerce Building. 

Chicago, Ill.: Suite 1706, 201 North Wells Street. 

Cleveland, Ohio: Chamber of Commerce. 

Dallas, Tex.: Chamber of Commerce Building. 

Detroit, Mich.: 801 First National Bank Building. 

Houston, Tex.: Chamber of Commerce Building. 

Indianapolis, Ind.: Chamber of Commerce Building. 

Jacksonville, Fla.: Chamber of Commerce Building. 

Kansas City, Mo.: 1028 Baltimore Avenue. 

Los Angeles Calif.: 1163 South Broadway. 

Louisville, Ky.: 408 Federal Building. 

Memphis, Tenn.: 229 Federal Building. 

Minneapolis, Minn.: 213 Federal Building. 

New Orleans, La.: Room 225-A, Customhouse. 

New York, N. Y.: 734 Customhouse. 

Norfolk, Va.: 406 East Plume Street. 

Philadelphia, Pa.: 422 Commercial Trust Building. 

Pittsburgh, Pa.: Chamber of Commerce Building. 

Portland, Oreg.: 215 New Post Office Building. 

St. Louis, Mo.: 506 Olive Street. 

San Francisco, Calif.: 310 Customhouse. 

Seattle, Wash.: 809 Federal Office Building. 
Approved Code No. 141-Amendme:it No. 3 

Al\'IENDMENT TO CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

As Approved on F ebruary 18, 1935 

ORDER 

APPROVING AMENDMENT OF CODE OF F AIR COMPETITION FOR INVESTMENT B ANKERS 

Applications having been duly made pursuant to and in full compliance with the provisions of Title I of the National Industrial 

Iwcovery Act, approved June 16, 1933, for approval of amendments 

of Amendment No. 2 of the Code of Fair Competition for Investment Bankers, which are attached hereto and hereby made a part 

hereof, and Notice of Opportunity to be H"ard having been afforded 

to all interested parties, and any objections filed having been dulyconsidered and the annexed report on said amendments, containing 

findings with re pect thereto, having been made and directed to the 

President: 

NO,v, TI-IEREFORE, 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 incorporate, by reference, said annexed report and does 

find that said amendments and the Code as constituted after being 

amencle l comply in all respects with the pertinent provisions and 

will promote the policy and purposes of said Title of said Act, and 

doe. hereby order that said amendments, which are attached hereto 

and made a part hereof be and they are hereby approved, and that 

the previou approval of aid Code an l said Amendment No. 2 

are hereby modified to include an approval of said Code in its entirety a · amende l. 

N ATION AL IND STRIAL R ECOVERY B OARD, 

By L. C. M ARSH ALL, E xecidive Sec1·etC1Jry. 

A I prov al recommended : 

L. H. P EEBLES, 

Dh ision Administrator. "T ASHI GTON' D. C. 

F bruary 18, 1935. 

116633°-1G03-13-35 (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 Am.endment No. 2 of the Code of Fafr 

Competition for Investment Bankers for the following purposes: 

1. To clarify the definitions '' interim certificate " and " interim 

receipt " in paragraph ( t) of Article II. 

2. To modify subsection ( d) of Section 1 of Article IV regarding the acceptance of stock dividends in excess of the amount 

charged earnings or earned surplus by a company paying a stock 

dividend. 

3. To clarify Section 2 of Article V with respect to three-day 

notice of organization of selling syndicate or selling group. 

4. The addition of a new Section 14 to Article X to provide for 

automatic suspension and cancellation of registration in cases of 

nonpayment of code assessments. 

5. The addition of a new Section 15 to Article X to provide for 

automatic suspension and cancellation of registration for failur~ 

to supply necessary reports on which code assessments are predicated. 

6. The addition of a new Section 16 to Article. X to provide fo:r 

reregistration in cases of cancellation as provided in Sections 14 and 

15 of Article X. 

The Code of Fair Competition for Investment Bankers was 

approved on November 27, 193·3. Amendment No. 2 of this Code 

contains all of the Fair Trade Practice provisions and was approved 

on March 23, 1934. 

The proposed amendment clarifying paragraph (t) of Article 

II with reference to definition of the terms "interim certificate:, 

and "interim receipt" is advisable in order to avoid the possibility 

that a temporary security which gives the holder all the legal rights 

might be considered either an interim certificate or interim receipt, 

as in that case under Article IV, Section 3 of the Code the required 

refund of monies paid for a security would be unjustified since the 

pnrpo e of Article IV, Section 3 in requiring refunds of monies 

paid is to protect the holders of interim certificates or interim receipts in the event that the security purchased cannot for any unforeseen reason be delivered. In contrast with such temporary security interim certificates and interim receipts do not give the 

holder the legal rights he would possess if the security were in 

permanent form. 

It is proposed to modify sub ection ( d) of Section l of Article IV 

so as to permit an organization which receives regularly recurring 

stock dividends from a company neither controlled by nor affiliated 

with it to promptly sell such stock dividends and take up the proceeds 

(2) 
3 

as income regardless o:f whether or not the proceeds are more or lr,ss 

than the proportionate amount charged again t earnings or earned 

surplus by the issuing company. The section as written prohibits 

taking up as income stock dividends received at an amount greater 

than that charged against earnings or earned surplus by a company 

paying such stock dividends and this i in accordance with sound 

business practice when applied to corporations in general, such as 

operating corporations. This principle is not applicable, however, 

with respect to organizations defined in the proposed amendment, 

such as investment trusts. 

The clarification of Section 2 of Article V is necessary because of 

uncertainty among investment bankers as to its exact int0 ntions. The proposed amendment accomplishes the following two purposes, 

which I am advised was the intention of the proYision now in the 

Code: 

1. It provides a three-day period during which an inve tment 

banker may come to a decision as to whether or not he wishes to participate in the distribution of the issue of securities as well as the 

amount of his participation, and 

2. It provides a three-day period during which the investor may 

come to a decision as to whether or not his order for a portion of the 

issue is a firm order since the order cannot become a firm order in 

accordance with the Code until written confirmation from the seller, 

which confirmation may not be given by the seller within the threeday period. 

Under the existing Code the Code Committee has authority to cancel the registration of any registered investment banker in cases of 

non-payment of code assessments, but may do so only after formal 

procedure entailing unnecessary expenses. The proposed amendment 

adding Section 14 to Article X provides ample time for the payment 

of an assessment by a registered investment banker before any action 

occurs since he has thirty days after the notice of indebtedness has 

been sent to him to pay such assessment and if the assessment is not 

received within that time a second notice is mailed to him with which 

second notice it is required that a copy of this amended section be 

included. A period of fifteen days after the second notice is provided, after which time the investment banker is automatically suspended and if payment is not received within another fifteen day 

period after suspension, his registration is automatically cancelled. 

Provision is made, however, that the Investment Bankers Code Committee may stay the operation of automatic cancellation in any case 

jn which it finds that undue or unreasonable hardship will result by 

reason of the requirement that the assessment be paid within the 

period prescribed. Neces ary discretion is thus in ured to the Code 

Committee in cases which warrant pecial consideration. 

The above remarks with reference to the proposed Section 14 are 

likewi e applicable to the proposed amendment to add a new Section 

15 to Article X involving the submi ion of reports upon which are 

predicat cl the code as e ments, except that there is, of course no 

nece sity for di cretion with respect to automatic cancellation in this 

a e since there would appear to be no valid excu e why any investment banker could not forward a report as to the number of his 

emploj ees. The plan of asse ment is based on the number of em-
4 

ployees of a regi tered investment banker, and therefore, is the controlling factor in assessments for code expenses. 

The proposed amendment adding Section 16 to Article X provides that an investment banker whose registration has been cancelled in accordance with the new Section 14 may again become 

a registered investment banker upon application, provided payment 

has been made in full of the amount of the indebtedness for which 

the original registration was cancelled. It further provides that if 

an investment banker's registration has been cancelled in accordance 

with the new Section 15 for failure to send in the reports required 

by the Code the investment banker may again become a registered 

investment banker upon application if the required reports are submitted. This section further provides that an investment banker 

who has assented to the Code is entitled to new registration only 

if he pays in full the amount of any unpaid assessment owing by 

him in his capacity as an assentor. 

FINDINGS 

The Deputy Administrator in his report to the National Industrial Recovery Board on said amendments 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 n1atter : 

It finds that: 

(a) The amendments of said Code and the Code as amended are 

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 eliminating unfair competitive practices, by promoting the fullest possible utilization of the 

present productive capacity of industries, by avoiding undue restriction of production ( except as n1ay be temporarily 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 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 thereof. 

( c) The Code empowers the Code Committee to present the aforesaid amendments on behalf of the Industry as a whole. 

( d) The amendments and the Code as amended are not designed 

to and will not pennit monopolies or monopolistic practices. 

( e) The amendments and the Code as amended are not designed 

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

operate to discriminate against them. 
5 

( f) Tho e engaged in other steps of the economic process have 

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

amendments. For these reasons, therefore, the e amendments have been 

approved. 

For the National Industrial Recovery Board: 

L. C. :MARSHALL, 

FEBRUARY 18, 1935. 

Executive S ecretary. 
AMENDJ\1ENT TO CODE OF FAIR COMPETITION FOR 

INVESTl\fENT BANKERS 

Amend Paragraph ( t) of Article II of Amendment No. 2 of the 

Code of Fair Competition for Investment Bankers: 

Strike out the first period and insert in lieu thereof a semicolon 

and the following : 

but the term "interim certificate" or "interim receipt" shall not include any security in temporary form which entitles the holder 

thereof to the possession of the sam,e legal rights in respect of such 

security as would be possessed by the holder of the security in 

permanent form. 

Amend Article IV, Section 1, Sub-Section ( d) of Amendment No. 

2 of the Code of Fair Competition for Investment Bankers: Add the 

following to the present Sub-Section : 

Where a corporation ( or a voluntary association) receives regularly recurring stock dividends from a company not directly or indirectly controlled by it or affiliated with it and promptly sells such 

stock dividends, such recipient may take up as income the cash 

proceeds from the sale of such stock dividends, provided the amount 

thereof is segregated from other income in such recipient's published 

reports and a statement of the basis upon which the credit is computed is given. 

Amend Article V, S€ction 2 of Amendment No. 2 of the Code o-f 

Fair Competition for Investinent Bankers: 

Strike out all of the exi ting Section and in lieu thereof insert the 

following: 

SECTION 2. Three-day Notice of Organization of Selling Syndicate 

or Selling Group.-Any investment banker proposing to organize a 

selling syndicate or a selling group to distribute new securities other 

than those of the United States Government or any instrumentality 

thereof or of any State or subdivision or instrumentality thereof 

shall mail or deliver or telegraph a copy of the prospectus or an 

adequate description of the security to each investment banker who 

is to be offered a participation in such syndicate or a membership in 

such selling group at such time that, in the usual course of delivery, 

such prospectus or description will be received by all such investment banker on approximately the same day and at least three days 

( excluding Sundays and holidays but including the day of delivery) 

before the da.te fixed by the manager when participants in such syndicate or members in such group must accept or refuse such participation or membership and such manag'>r shall, either at the time of 

the mailing or delivery or telegraphing of such prospectus or description as aforesaid or at another time, fix a date for the public offering 

of uch securities which offering date shall be a date not earlier than 

the date fix d by such manager when participants in such syndicate 

or members in uch group must accept or refuse such participation 

or membership. 

(6) 
7 

After the receipt of the prospectus or descripton any inYe -tment 

banker who is to be offered a participation in a selling syndicate 

or a membership in a selling group may advi e pro pective purchasers in reo-ard to the security, but no such inve tment banker shall 

confirm an order for such securities before the day fixed by the 

manager for the public offering or before he shall have accepted 

in whole or in part the participa.tion or membership offered to him. 

Amend Article X of Amendment No. 2 of the Code of Fair Competition for Investment Bankers: 

Add the following new Section to be numbered Section 14: 

SECTION 14. Payment of Assessment.-Any registered investment 

banker who shall, upon the date when this amended Section becomes 

effective, have failed to pay any assessment levied against him pursuant to the provisions of Section 13 of this Article X, within 30 

days after notice of his indebtedness shall have been sent him, or 

any registered investment banker who shall, at any time after this 

amended Section becomes effective, fail to pay any assessment levied 

against him pursuant to the provisions of Section 13 of this Article 

X, within 30 days after notioe of his indebtedness shall have been 

sent him, shall immediatley be sent by registered mail a second 

notice in writing of his indebtedness, and if said indebtedness be not 

liquidated within 15 days after the date of the mailing of such second notice, the registration of such delinquent registered investment banker is thereby automatically suspended; provided that a 

copy of this amended Section shall have been sent to such delinquent registered investment banker with such second notice. Any 

registered investment banker whose registration shall have been 

suspended as provided in this amended Section shall be immediately notified in writing of the suspension of his registration, and 

his registration may be automatically reinstated after payment of 

his indebtedness; provided such payment shall be made within 15 

days after such registration has been so suspended. If any delinquent registered investment banker shall fail to pay his indebtedness after 15 days suspension his registration shall be automatically 

canceled; provided, however, that the Investment Bankers Code Committee may stay the operation of the automatic cancellation provided 

for herein, in any case in which it finds that undue or unreasonable 

hardship will result to a registered investment banker by reason of 

the payment by him of his assessment within the period prescribed. 

Amend Article X of Amendment No. 2 of the Code of Fair 

Competition for Investment Bankers: 

Add the following new Section to be numbered Section 15: 

SECTION 15. Filing of Reports for Assessm,Rn ts.-Any registered 

investment banker who shall, upon the date -n-hen this amended 

Section becomes effective, have failed to file with the Investment 

Bankers Code Committee any report within 30 days after notice 

shall have been sent him that uch report is required for the purpose 

of any as e sment to be levied pursuant to the provi ·ions of Section 

13 of thi Article X or any regi tere l investment banker who hall, 

at any time after this amended Section becomes effecti v-e, fail to file 

·w·ith the Inve tment Banker Code Committee any re1 ort within 

30 day after notice shall have been sent him that such report i · required for the purpose of any as essment to be levied pursuant to 
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the prov1 10n of Section 13 of this Article X, shall immediately 

be ent by regi tered mail a second notice in writing to file such report, and if such report be not filed within 15 days after the mailing 

of uch econd notice the registration of such delinquent registered 

investment banker i thereby automatically suspended; provided 

that a copy of thi amended Section shall have been sent to such 

delinquent reo-istered investment banker with such second notice. 

Any regi tered inve tment banker whose registration shall have 

been thus suspended shall be immediately notified in writing of the 

u pen ion of his registration; and his registration may be automatically reinstated after filing such report and after payment of 

any asse sment levied against him based on such report; provided 

such payment shall be made within 15 days after notice of his indebtedness shall have been sent to him. If any delinquent registered 

investment banker shall fail to file his report after 15 days suspension or shall fail to pay his indebtBdness within 15 days after notice 

of assessment levied based on such report, his registration shall be 

automatically cancelled. 

Amend Article X of Amendment No. 2 of the Code of Fair 

Competition for Investment Bankers : 

Add the following new Section to1 be numbered Section 16: 

SECTION 16. Application for Renewal of Cancelled R egistTa- tions.-Any investment banker whose registration as a registered 

investment banker shall have been cancelled as provided in Section 

14 or 15 of this Article X, may apply for a new registration as a 

registered investment banker by an application therefor made in the 

same manner and under the same conditions as are specified in this 

Article X with respect to an original application for such registration; provided, that in the event such cancellation shall have been 

made under the provisions of said Section 14, the application for 

new registration shall be preceded or accompanied by payment in 

full of the amount of the indebtedness for which the original registration of such applicant shall have been cancelled; and, provided, 

further that in the event such cancellation shall have been made 

under the provisions of said Section 15, the application for such 

new registration shall be preceded or accompanied by the report or 

reports as to which the applicant was delinquent, and thereupon 

there shall be levied against such applicant the same assessment or 

as e sments based on said report or reports which would have been 

levied if said report or reports had been filed in accordance with 

the original notice thereof, and such new registration shall not be 

grante l until such applicant shall pay in full the amount of said 

a se sment or assessments. No investment banker who shall have 

assented to the Code shall be entitled to a new registration as provided in this Section unless he shall also first pay in full the amount 

of any unpaid assessment owing by him in his capacity as such 

Assen tor. 

Approved Code No. 141-Amendment No. 3. 

Registry No. 1707-04. 

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