Approved Code No. 141-Amendment No. 2 Registry No. 1707-04 

NATIONAL RECOVERY ADMINISTRATION 

AMEND1\1ENT TO 

CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

AS APPROVED ON MARCH 23, 1934 

BY 

PRESIDENT ROOSEVELT 

WE DO OUR PART 

IAlt O ~:::..:: 

........ 

U.S. DEP08fr()tll¥ I I / 

/ 

UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1934 

I ( r 

For sale by the Superintendent of Documents, Washington, D.C. - - - - - - - - Price 5 cents 

V 
This publication Is for sale by the Superintendent of Documents, Government 

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

Foreign and Domesti<' 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. 

Indianapoli~, Ind.: Chamber of Commerce Building. 

Jacksonville, Fla.: Chamber of Commerce Building. 

Kansas City, Mo. : 1028 Baltimore A venue. 

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 Buildlng: 

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 

Amendment No. 2 

ERRATA SHEET FOR 

AMENDMENT TO 

Registry No. 1707-04 

CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

AS APPROVED ON MARCH 23, 1934 

1. Article II (t). Subparagraphs i and ii are shown as 1 and 2; also 

the word "definite" on first line, top of page 9, should be "definitive." 

2. Article IV, section 1 (b). Third paragraph, page 12, line 2, the 

word "accounts" should be "amounts." 

3. Article IV, section 2 (e). First paragraph, pa.ge 14, line 4, the 

word "such" a.t end of line should be "each." 

4. Article X, section 4. Page 27, line 5, the figure "5" should be 

"3." 

5. Article X, section 8 (c). Page 29, line 2, the figures "$600" 

should be "$500." 

6. Article X, section 11. Page 30, line 10, the figure "I" should be 

" 1." 

7. Article XI, section 8. Page 32, line 6, the word "act" was 

omitted between the words "shall" and "as." 

50885°-34 

u . • . IIOYIRIIIUNT l'RINTINtl o,,ic 1 : ,.,.. 

Approved Code No. 141-Arnendrnent No. 2 

CODE OF FAIR COMPETITION 

FOR 

INVESTMENT BANKERS 

As Approved on March 23, 1934 

BY 

PRESIDENT ROOSEVELT 

EXECUTIVE ORDER 

AMENDMENTS TO CODE OF FAIR 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 my approval of the 

Amendments to the Code of Fair Competition for Investment 

Bankers, and hearings having been held thereon and the Administrator having rendered his report containing an analysis of the said 

Amendments together with his recommendations and findings with 

respect thereto, and the Administrator having found that the said 

Amendments comply in all respects with the pertinent provisions of 

Title I of said Act and that the requirements of clauses (1) and (2) 

of subsection (a) of Section 3 of the said Act have been met; and 

the Administrator having further found that the agreement provided for in Article X of the said Amendments, pursuant to the 

provisions of subsection (a) of Section 4 of the said Act, will aid 

in effectuating the policy of the said Title I: 

NOW, THEREFORE, I, Franklin D. Roosevelt, President of the 

United States, pursuant to the authority vested in me by Title I of 

the National Industrial Recovery Act, approved June 16, 1933, and 

otherwise, do adopt and approve the report, recommendations and 

findings of the Administrator and do order that the said Amendments to the Code of Fair Competition be and they are hereby approved, subject to the following condition: 

Inasmuch as the Amendments hereby approved are designed to 

accom.plish far reaching and desirable reforms in the practices of 

investment bankers, involving important changes in methods heretofore customary, it is considered necessary to prescribe a more 

expeditious method than that prescribed in the Code for effectuating 

changes in the provisions of the Code as amended. In order, there483070-425-137-34 (1) 
2 

:fore, to provide prompt relief for any hardship which may have been 

inadvertently imposed by the provis10ns o:f the Code as amended, or 

to make such corrections as may become necessary to meet unforeseen 

contingencies, the Administrator may, upon recommendation of the 

Investment Bankers Code Committee or otherwise, and after such 

notice and hearin~ as he may specify, approve such modification or 

amendment of this Code as amended as he may deem necessary or 

desirable. 

Approval rec01nmended: 

HuGH S. JOHNSON, 

.A.dmini,s trator. 

THE WmTE HousE, 

March ~3, 1934. 

FRANKLIN D. ROOSEVELT. 
LETTER OF TRANSMITTAL 

The PRESIDENT, 

The White H ous,e. 

Sm: I have the honor to transmit herewith Amendments to the 

Code of Fair Competition for Investment Bankers, which are submitted in accordance with Articles IV and V of the Code of Fair 

Competition for Investment Bankers. 

The extent to which the Amendments are designed in the interest 

of the investors of this country is peculiarly significant. 

The evidences of fairness of purpose and thoroughness in preparation appear obvious. At a meeting of investment bankers assenting 

to the Code, held on March 5, 1934, in Washington, 888 investment 

bankers, in person or by proxy, voted to approve the Amendments, 

and 117 voted in disapproval. At that time 1,251 investment 

bankers had assented to the Code and were eligible to vote. Since 

that time the number of assentors has increased to above 1,600. 

A majority of the 117 who dissented expressed their approval of 

the provisions as a whole and in principle and objected only to 

certain specific provisions which have since been modified. A large 

majority of the assenting investment bankers favor acceptance of 

the Amendments. 

Examination of the proceedings attending the preparation of the 

Amendments discloses the fact that every reasonable effort was 

exerted to keep every investment banker in the United States informed regarding the form~lation of these Articles and to enlist 

their suggestions or criticisms, which were given full consideration 

and were weighed as to their effect upon every factor in-,olved. 

A public hearing on these Amendments was held in Washington 

on :March 15, 1934. At this hearing the objections centered on the 

Qrovisions having to do with-

( a) Municipal securities. 

(b) Restrictions upon salesmen. 

( c) The appointment of Regional Committees. 

In subsequent conferences with the Investment Bankers Code 

Committee both proponents and opponents of the controversial 

sections agreed to the modifications which have been made. The 

reasonableness of the attitude of the investment bankers greatly 

facilitated harmonizing the differences. 

These fair practice provisions constitute a remarkable document. 

The essential purposes are to eradicate past and existing abuses and 

to establish principles and practices which will justify public confidence, greatly assist in restoring the markets for both public and 

private investment funds and result in an increased fl.ow of investment capital into sound, productive enterprises, which will unquestionably increase employment and distribute added wealth among 

our people. 

(3) 
4 

The importance of developing a capital market in connection with 

the Recovery Program cannot be over emphasized. 

Very definite provisions are included for these specific pur:J?oses 

both prescribing and proscribing investment banking activities 1n all 

fundamental essentials. Briefly, the purport of the Amendments 

is as follows1. Eleven sections are devoted to a statement of general principles 

for the conduct of the business, as a guide to the investment banker 

and to the Investment Bankers Code Committee in interpreting and 

administering the fair practice provisions of the Code. These deal 

with standards of business conduct in the underwriting and distribution of securities and in safeguarding the welfare of investors. 

2. Five sections govern the issuance of new securities. In the 

future those issuing securities will be required to provide adequate 

detailed information to investors as long as a security is outstanding. This is a far reaching provision. It marks a very long 

step in the right direction and furnishes a new safeguard to protect 

investors. 

3. Seventeen sections regulate the underwriting and distribution 

of new issues. Provisions are included which will tend to establish 

one price for all investors irrespective of the size of the transaction 

or the importance of the purchaser. Adequate time is provided for 

the proper study and analysis of the facts regarding new issues by 

~11 investment bankers participating in the distribution of each 

issue. 

4. Eight sections are directed to retail sales and :purchases dealing with disclosure of the adequate and the pertinent facts required to be made available to investors. 

5. Four sections pertain primarily to salesmen, and stipulate the 

minimum qualifications of those employed in that capacity and the 

requirement for :responsible supervision of their activities. 

6. One important section relates to . investment companies and 

places certain restrictions on investment bankers having relations 

or transactions with such companies. 

7. Thirteen sections provide a unique opportunity for investment 

bankers, through registration, to agree with one another upon the 

expeditious enforcement of effective self discipline in the investment banking business. 

It was stated in my letter of November 20, 1933, transmitting to 

you the Code of Fair Competition for Investment Bankers that the 

members of the association proposing the Code transacted approximately 90% of the total volume of the investment banking business 

for the year 1932. This statement was intended to refer only to the 

percentage of the volume of new issues. The members of the Association did a substantial percentage of the total volume. The Investment Bankers Association of America is the single truly representative organization of this type of financial concerns, and there 

is no other national association. 

Inasmuch as the Amendments submitted herewith involve important changes in methods now existing, I suggest a more expeditious procedure than that prescribed in the Code of Fair Competition for effectuat_ing changes in its provisions. Especially is this 

necessary in view of the provisions of Section 1 of Article IV; of 
5 

Sections 1 and 2 of Article V; of Section 1 of Article VI; of Article 

X; and of Section 11 of Article XI. I therefore recommend that you 

permit the Administrator, upon recommendation of the Investment 

Bankers Code Committee or otherwise and after such notice and 

hearing as he may specify, to approve such modifications or Amendments as he may deem necessary or desirable. 

The Di vision Administrator in his final report to me on the said 

Amendments to said Code having found as herein set forth and on 

the basis of all the proceedings in this matter: 

I find that: 

(a) The Amendments to 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 may 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 

rehabilitatino- 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 4, Subsection (a) of Section 7 and Subsection (b) of Section 10 thereof. 

(c) The Code empowers the Investment Bankers Code Committee 

to present the aforesaid amendments on behalf of the business as a 

whole. 

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

to and will not permit 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. 

(f) Those engaged in the 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 I recommend that you approve these Amendments. 

Respectfully, 

MARCH 23, 1934. 

HUGH S. JOHNSON, 

Administrator. 
AMENDMENT TO CODE OF FAIR COMPETITION FOR 

INVESTMENT BANKERS 

ARTICLE I-ADOPTION AND INTERPRETATION l 

The following provisions are adopted as supplementary provisions to the Code of Fair Competition for Investment Bankers, as 

approved November 27, 1933, by the President of the United States1 and the provisions of Articles IV, V, VI, VII, VIII, and IX hereof 

are established as Rules of Fair Practice for Investment Bankers 

pursuant to the provisions of Articles IV and V of said Code. 

These supplementary provisions shall become effective on the 

thirtieth day after approval hereof by the President of the United 

States: provided, that the Investment Bankers Code Committee may 

postpone, and from time to time further postpone, the date on which 

Section 7 of Article IX and Article X shall become effective so long 

as no such postponement is made beyond the ninetieth day after 

approval hereof by the President of the United States. They shall 

continue in effect as long as said Code shall be in effect, and shall in 

all respects be subject to said Code and the National Industrial 

Recovery Act, approved June 16, 1933. They may be amended in 

the same manner as is provided in said Code for amendment of 

said Code. 

The Rules shall be interpreted in such manner as will aid in 

effectuating the policy of Title I of said National Industrial Recovery Act, and so as to require that all practices in connection with 

the investment banking business shall be just, reasonable, and nondiscriminatory. 

The Rules are grouped for purposes bf convenience under several 

general headings, but such grouping and headings shall not be construed as limiting the application of any Rule. 

The Rules shall not apply to contracts made prior to the effective 

date of the Rules. 

ARTICLE II-DEFINITIONS 

As used in these supplementary provisions-

( a) The term " Code " shall mean the Code of Fair Competition 

for Investment Bankers, as approved November 27, 1933, by the 

President of the United States, under the provisions of Title I of 

the National Industrial Recovery Act, approved June 16, 1933. 

(b) The term " Rules " shall mean the Rules of Fair Practice for 

Investment Bankers as established in Articles IV, V, VI, VII, VIII, 

and IX hereof, or as the same may be hereafter amended or supplemented. 

( c) The term "investment banking business" shall mean the 

business of underwriting or distributing issues of securities, or of 

1 See paragraph 3 of order approving this Code. 

(6) 
7 

purchasing securities and offering the same £or sale as a dealer 

therein, or 0£ purchasing and selling securities upon the order and 

£or the account 0£ others; provided, however, that the term "investment banking business" shall not include transactions on regularly organized exchanges, but such term shall include all business 

relating to such transactions to the extent that such business is not, 

conducted by a member of such exchange or by any person or organization having the privilege of any such exchange for itself or any 

of its partners or executive officers. 

(d) The term "investment banker" shall mean any person engaged in the investment banking business but shall not include an 

employee. 

( e) The term " registered i1westment Lanker '' shall mean any 

investment banker registered pursuant to the provisions of Article 

X of these supplementary provisions. 

( f) The term "Investment Bankers Cou.e Committee" shall mean 

the Investment Bankers Code Committee established as provided in 

Article III 0£ the Code. 

(g) The term "Regional Code Committee" shall mean 

any Regional Code Committee established as provided in Section 2 

0£ Article XI of these supplementary provisions. 

(h) The term " security " or " securities " shall mean any note, 

share of stock, bond, debenture, evidence of indebtedness, voting 

trust certificate, certificate of deposit, interim certificate or interim 

receipt, or, in general, any instrument commonly known as a security, or any certificate of interest or of participation in, or -warrant 

or right to subscribe to or purchase, any of the foregoing. 

(i) The term "new issue of securities" shall mean any issue 0£ 

securities sold or offered for sale in one transaction or in a connected 

series of transactions as a result of which consideration for such 

securities is or is to be received directly or indirectly by the issuer 

thereof. As used in this paragraph (i) the term "issuer" shall 

include, in addition to an issuer, any person directly or indirectly 

controlling or controlled by the issuer, or any person under direct 

or indirect common control with the issuer. 

(j) The term "new security" shall mean any security included 

in a new issue of securities. 

(k) The term "public securities " shall mean any securities issued 

by the United States or by any instrumentality thereof, or by any 

territory or insular possession therof, or by the District of Columbia, 

or by any State of the United States or by any subdivision or instrumentality of any such Statei territory or insular possession. 

(1) The term "issuer" sl1all mean any person who issues or 

proposes to issue any security or who guarantees such security either 

as to principal or income or who assumes the obligation to pay 

such security either as to principal or income; except in respect to 

certificates of deposit, voting trust certificates, interim certificates 

or similar securities, the term "issuer" shall mean the person or 

persons issuing the securities represented by such certificates of 

deposit, voting trust certificates, interim certificates, or similar securities; and except that in respect to certificates of interest or 

shares in an unincorporated investment company (sometimes spoken 

48307°--425-137-34--2 
8 

0£ as U1.Vestment trust) not having a board of directors ( or persons 

performing similar functions) or of the fixed, restricted management? or unit type, the term ' issuer " shall mean the person performing the acts and assuming the duties of depositor or manager 

pursuant to the provisions of the trust or other agreement or instrument under which such securities are is ued; and except that in 

respect to equipment trust certificates or similar securities, the term 

"issuer" shall mean the person by whom the equipment or other 

property is or is to be used. 

(m) The term "prospectus" used in relation to any security 

registered under the Securities Act of 1933 shall mean the official 

prospectus required by said Act, and used in relation to any other 

security shall mean the offering or descriptive circular. 

(n) The term "originator" shall mean any person who purchases 

from an issuer a new issue of securities of such issuer; or who contracts with the issuer to find purchasers for such securities, with 

a view to the public distribution of such securities, or who contracts with an issuer to act as agent for such issuer for the public 

distribution of such securities of such issuer. 

As used in this paragraph (n) the term "issuer" shall include, 

in addition to an issuer, any person directly or indirectly controlling 

or controlled by the issuer, or any person under direct or indirect 

common control with the issuer. 

( o) The term "selling syndicate" shall mean anr syndicate 

formed in connection with a public offering, to distribute all or 

part of a new issue of securities by sales made directly to the public 

by or through participants in such syndicate under an agreement 

which imposes a financial commitment upon participants in such 

syndicate to purchase any such securities. 

(p) The term "selling group' shall mean any group formed in 

connection with a public offering, to distribute all or part of a new 

issue of securities by sales made directly to the public by or through 

members of such selling group, under an agreement which imposes 

no financial commitment on the members of such group to purchase 

any such securities except as they may elect to do so. 

( q) The term "manager " used in relation to a selling syndicate 

or selling group shall mean the person or persons named as manager 

or managers in the agreement under which such syndicate or group 

is formed. 

( r) The term " person " shall include any natural person, copartnership, corporation, association, or other entity. 

(s) The term "salesman" shall mean any officer, employee, or 

agent ( other than another investment banker) of an investment 

banker, who offers securities for sale to any person other than 

another investment banker. 

(t) The term" interim certificate" or" interim receipt" shall mean 

any instrument in writing delivered to a purchaser against payment 

in connection with the public distribution of a new issue of securities and calling for the future delivery of such securities and executed by either an originator, the issuer of the securities called for 

by such interim certificates or interim receipts, or a corporate trustee. 

1. The term "interim certificate" shall mean such instruments 

in writing when the securities called for thereby are delivered in 
9 

temporary or definite form to the person executing the interim 

certificate prior to or concurrently with such execution. 

2. The term "interim receipt" shall mean such instruments in 

writing when the securities called for thereby are not so delivered 

to the person executing the interim receipt prior to or concurrently 

with such execution. 

ARTICLE III-GENERAL PRINCIPLES 

In addition to the Rules, the General Principles set forth in this 

Article III shall be a guide to the Investment Bankers Code Committee in interpreting, administering, and enforcing the provisions 

of the Code and Rules, as well as to the In.vestment Banker himself 

in the conduct of his business under such Code and Rules. 

SECTION 1. Standard of Business Oonduct.-To observe, and to 

use his best efforts to maintain, high standards of commercial honor 

in the investment banking business, and to promote just and equitable 

principles of trade and business. 

SECTION 2. Origination of New /ssues.-(a) If acting as an originator, to make such investigation as may be reasonably necessary 

to determine the merit of such issue, and to satisfy himself that the 

business risk of the investors who purchase such securities is reasonable and that there are appropriate provisions to safegHard the 

interests of such investors. 

(b) If distributing a new issue of securities originated by another, to satisfy himself that the investigation required by paragraph (a) has been made. 

SECTION 3. Information as to all new Iss-ues E xcept United States 

Government and State Issues.-Not to originate nor to participate 

in the public distribution of any new issue of securities, other than 

securities issued by the United States or by any instrumentality 

thereof, or by any State of the United States, unless there is available 

to investors, either in a prospectus or from public sources or in some 

other manner, adequate information with respect to the issuer, the 

nature of its business, its financial condition, the terms of the new 

security, and, in addition, all other information required by the 

Rules to be contained in the prospectus. 

In the ca.se of any security issued by any subdivision or instrumentality of any State of the United States, it shall be deemed a 

compliance with this principle if there is available to investors either 

in a prospectus or otherwise, adequate information with respect to 

the terms of the new security and all information required by the 

Rules, and if, in addition, where available, the record of tax collections of such issuer for the preceding three years is included in the 

prospectus, if any, or if there is no prospectus, is otherwise disclosed 

to each purchaser of such security. 

In the case of securities issued by a common carrier which is subject to the provisions of Section 20a of the Interstate Corrunerce Act, 

as amended, it shall be deemed a compliance with this principle, if 

there is available to investors, either in a prospectus or otherwise, 

adequate informatifln with respect to the terms of the new security 

and all information required by the Rules, and a copy of the last 

annual balance sheet and the income and surplus accounts for the 
10 

last three years of such common carrier as required to be filed with 

the Interstate Commerce Commission, and, if there is available, on 

request, to any investor a copy of all reports and orders of the Interstate Commerce Commission approving and authorizing the issue of 

such securities. SECTION 4. / nvestment R ecommendations.-Where an investment 

banker recommends to an investor the purchase or exchange of any 

security, to have reasonable grounds for believing the security to be 

acquired by the investor is a suitable investment for such investor 

upon the basis of the facts, if any, disclosed by such investor as to 

his other security holdings and as to his investment situation and 

needs. 

SECTION 5. Salesmen's Compensation.-To compensate his salesmen in a manner consistent with the application of the principles 

set forth in Sections 1 and 4 of this Article. 

SECTION 6. Financial Condition of lssuer.-To keep himself reasonably informed of the financial condition of the issuer of any issue 

of securities of which he acted as originator, so long as any material 

part of such issue shall be outstanding in the hands of investors, 

and to endeavor to cause the issuer to meet his promises and obligations to investors. _ This section is intended to apply in respect to issues of securities 

originated prior to the effective date of the Rules as well as to issues 

originated thereafter. 

SECTION 7. Written Order or C onfirmation.-To require a customer, wherever practicable, to give a written order or a written 

confirmation of any oral order for any transaction in securities. 

SECTION 8. Charges for S ervices.-To make his charges for services performed, including miscellaneous services, such as collection 

of moneys due :for principal, dividends, or interest; exchange or 

transfer of securities; appraisals; safe-keeping or custody of securities, and other services, reasonable and not unfairly discriminatory 

between customers. 

SECTION 9. Sinking Fund Provisions.-!£ an originator of an 

issue of bonds or other interest-bearing obligations for distribution 

to the public, to cause the issuer to make provision for the retirement 

of such issue in whole or in part before maturity, through a sinking 

fund or otherwise, where such provision is appropriate to safeguard 

the interest of investors who purchase such securities. 

SECTION 10. Delivery of Definitvve or Temporary Securities of 

lssuer.-In distributing new issues of securities, to deliver as 

promptly as possible after the public offering date, definitive or 

temporary securities of the issuer. 

SECTION 11. Duration of Selling Syndicates and Selling Groups.-

If the manager of a selling syndicate or selling group, to form such 

syndicate or selling group for the shortest period which, in the judgment of the manager, is sufficient for the purpose for which it ie 

formed. 

ARTICLE IV-RULES PERTAINING PRIMARILY TO ORIGINATION OF 

ISSUES • 

SECTION 1. Agreements Required of /ssuers.-No investment 

banker shall be the originator of any issue of securities ( other than 
11 

any of the classes of securities mentioned in Section 3 of the Securities Act of 1933 and other than any security issued by a foreign 

government or political subdivision thereof) where the aggregate 

amount at which such issue is to be offered to the public exceeds 

$100,000, unless the issuer of such securities shall agree with the 

originator as follows : · (a) Term of Agreenients.-To comply with the requirements of 

this section so long as any part of such issue of se~urities shall remain outstanding. 

(b) Annual Financial Statements.-To cause for each fiscal year 

to be prepared by independent public or certified accountants, an 

Income Statement, Surplus Statement and Summary of Changes in 

Reserves for such fiscal year, and a Balance Sheet as of the end of 

such year of the issuer as a separate corporate entity and of each corporation in which it holds, directly or indirectly, a majority of the 

voting stock (hereinafter in this section called a subsidiary) together 

with such further information as may be necessary to di close all 

intercompany holdings and transactions; or, in lieu thereof, eliminating all intercompany transactions, a similar set of consolidated 

financial statements of the issuer, and any or all of its subsidiaries 

accompanied by financial statements of the issuer as a separate entity 

and of any subsidiary not consolidated. 

If any such consolidated statements exclude any subsidiary, ( 1) 

the caption shall indicate the degree of consolidation; (2) the Income 

Statement shall show, either in a footnote or otherwise, the issuer's 

proportion of the difference between current earnings or losses and 

the dividends of such unconsolidated subsidiary for the period accounted for in such Income Statement; and (3) the Balance Sheet 

shall show, in a footnote or otherwise, the extent to which the equity 

of the issuer in such subsidiary has been increased or diminished 

since the date of acquisition as a result of profits losses, und 

distributions. 

Such statements shall show the existence of any default in interest 

or in sinking fund or amortization payments and any arrears of any 

cumulative dividends of the issuer or of any subsidiary whether consolidated or unconsolidated. 

In case there are any substantial items of profit or loss of a nonrecurring nature, such as those arising from the disposal of capital 

assets, they shall be expressely enumerated. If, for any reason, the 

examination of the accounts of any subsidiary shall have been made 

as of a date different from that of the issuer, that fact shall be stated 

either in the certificate of the accountants7 or otherwise, together with 

a statement as to the extent of their examination of the interim transactions. Insofar as practicable the examination of the accounts of 

each subsidiary shall be made by or under the supervision of the 

same accountants who examined the accounts of the issuer, but if 

the accounts of any subsidiary included in any consolidated statement are examined by public or certified accountants other than 

the accountants who examined the accounts of the issuer, such fact 

shall be noted in the certificate of the latter. If a consolidated 

balance sheet includes assets and liabilities of foreign subsidiaries, 

the percentage of total assets and liabiliti.es included which represent 

the aggregate assets and liabilities of all such foreign snhsidiaries 
12 

shall be noted on the balance sheet. The accountant's certificates 

shall state the basis on which the accounts of foreign subsidiaries 

are included in the consolidation and there shall be set forth in the 

certificate or in an appended certificate any substantial differences 

in accounting practice employed by the foreign subsidiary or subsidiaries insofar as such differences shall be known to the certifying 

accountant. 

Every balance sheet prepared in accordance with the above shall 

disclose the basis used to compute the figures at which the principal 

asset items are carried thereon. Where any liability of the issuer 

is secured on any assets o-f the is uer, the balance sheet shall show 

that such liability is secured and if the security consists in whole 

or in part of current assets it shall show such fact and the general 

nature of such current assets. Any contingent liabilities, not 

expressly shown on the balance sheet, shall be shown in a footnote 

insofar as good accounting practice may require. 

Loans or advances between the issuer and any subsidiary or between a subsidiary and another subsidiary, whether or not consolidated, shall be shown either as separate items on the appropriate 

balance sheets or as footnotes to the consolidated balance sheet. 

Amounts due from directors, officers, and employees (not including 

normal accounts arising in the ordinary course of business), and 

securities of the issuer ( if carried as an investment) and securities 

of any subsidiary, shall be shown as separate items on the appropriate 

balance sheets. 

If, for any reason, the issuer or the accountants are unable to 

obtain any information required for the preparation of the statements in the manner prescribed such information need not be given, 

but the facts as to such inability shall be stated in the certificate of 

the accountants. 

(c) Publication of Annual Financial S taternents.-To publish in 

the English language the Income St atement, Surplus Statement, 

Summary of Changes in Reserves, and Balance Sheet required in 

paragraph (b) of this section with the complete certificate of the 

accountants, by releasing copies thereof to the public press, in the 

United States of America, and to furnish copies thereof to each 

security holder of the issuer upon r equest as soon as practicable after 

the close of the fiscal year. 

(d) S tock Dividends.-Not itself, and not to permit any subsidiary, directly or indirectly controlled, to take up as income stock 

dividends received at an amount greater than that charged against 

earnings, earned surplus, or both of them, by the company paying 

such stock dividend. 

(e) S urplus of Swbsidiaries.-Not to treat earned surplus of a subsidiary created prior to acquisition of such subsidiary as a part of 

earned consolidated surplus of the issuer and of its subsidiaries, and 

not to credit any dividends declared out of such surplus of the subsidiary to the income account of the issuer or of any other subsidiary. 

(f) l ntercompany Profits.-To make appropriate reserves, insofar as good accounting practice may require, in respect of profits 

arising out of all transactions with unconsolidated subsidiaries, in 

either the parent company or the consolidated statements mentioned 

in paragraph (b). 
13 

(g) Aeoounting Oh{lfflges.-Not to make any material change in 

depreciation rates or policies or i11 accounting principles or in their 

application without describing such change in the next succeeding 

published balance sheet. 

(h) Independent R e,qistrar.-To appoint a bank or trust company, or other person duly qualified to act, independent of the issuer to act as registrar in respect of the issue of stock involved in 

such origination and to have all certificates of that issue registered 

by such registrar. 

(i) Requirenient of Trustee and Pu,blication of Substitutions in 

Oollateral.-To appoint a bank or trust company to act as trustee 

or cotrustee under any mortgage or trust indenture under which 

such securities are issued ; and that the issuer shall, at least 10 days 

prior to any substitution or release of pledged or mortgaged property which substantially affects the character or value of the property pledged or mortgaged, publish in a daily newspaper of general 

circulation published in the city where the trustee has its principal 

place of business and also in the city where the issuer has its 

principal place of business, notice that such substitution or release 

is proposed to be made. 

SECTION 2. Information Regarding Securities Issued by Subdivisions of States.-(a) No investment banker shall be the originator 

of any new issue of securities issued by a subdivision of any State 

of the United States, unless the issuer of such securities shall 

furnish such originator with an official statement of the issuer 

complying with the requirements of paragraph (b) of this ection, 

and with the data necessary for the purposes of a legal opinion 

complying with the requirements of paragraph ( c) of this section. 

(b) Such official statement of the issuer shall disclose in the 

case of securities . payable from ad valorem taxes: ( 1) the assessed 

valuation of the property subject to the taxing power of the issuer; 

(2) the total bonded debt of the issuer including the amount of 

such issue; ( 3) the population of such issuer according to the most 

recent United States or State census, or if no United States or 

State census is available, an estimate of such population; and (4) 

the fact, if such be the fact, that the bonded debt of such issuer 

does not include the debt of any other subdivision haYing power 

to levy taxes upon any or all of the property subject to the taxing 

power of the issuer. 

( c) Such originator shall, either himself procure or require the 

issuer to procure the opinion of an attorney, other than an officer 

or an employee of the issuer, who is satisfactory to such originator, 

approving the validity of the issue. Such legal opinion shall contain a clear warning statement in regard to any limitation on the 

power of the issuer to tax real estate for the payment of the securities, if there be any limitation. In the case of securities which 

are not payable from ad valorem taxes or which are payable solely 

from a special fund, such legal opinion shall state the means or 

methods provided for the payment of such securities and whether 

there are any prior claims upon such special funds. 

( d) The originator of such securities shall make available to investors, either in the prospectus, if any, or if there is no prospectus, 
14 

in some other manner, (1) the facts disclosed in such official statement of the issuer; (2) the name of the attorney whose opinion will 

be furnished; (3) whether the securities are payable from a limited 

tax on real estate or whether they are payable from a special fund 

only; and ( 4) in the case of securities which are issued in anticipation of the later sale of a refunding issue or issues and where provision is not to be made for payment of such securities at maturity in 

any other manner, the facts in regard thereto. 

( e) o other investment banker shall participate in the distribution of any such issue of securities unless the requirements of paragraphs (a), (b) and (c) of this section shall have been complied 

with and unless such participant shall make available to such investor to whom he offers for sale or sells any such security the information required by paragraph (d) of this section to be made 

available by the originator to each investor to whom such originator 

offers for sale or sells such security. 

(f) The originator of any such new issue of securities, and any 

other investment banker who shall participate in the distribution of 

any such issue, shall, upon request of any purchaser of such security 

from such originator or other investment banker, deliver to such 

purchaser a certified copy of the official receipt of the treasurer of 

the issuer in the form required by the attorney aproving the validity 

of said issue, evidencing the payment to the issuer of the purchase 

price of said issue of securities and the amount thereof. 

SECTION 3. l nterim,s.-(a) In all cases where interim certificates 

or interim receipts signed or executed by an originator are delivered, 

any securities or cash received by such originator upon the issuance 

of such interim certificates or interim receipts shall (until the securities called for by such interim certificates or interim receipts are received and held, in the manner provided in subdivision (ii) of this 

paragraph (a), for the account of the holders of the interim certificates or interim receipts) be held for the account of the holders of 

the interim certificates or interim receipts in the following manner: 

(i) Any cash received upon the issuance of interim certificates 

or interim receipts shall be deposited in a special account with a 

person permitted by law to receive deposits, which person may be the 

signer of the interim certificates or interim receipts, if such person 

is so qualified. 

(ii) Any securities received upon such issuance shall, pending 

the delivery of securities called for by the interim certificates or 

interim receipts to the holders thereof, be segregated from the other 

property of the person signing the interin1 certificates or interim 

receipts in such manner that no person other than the holders of 

the interim certificates or interim receipts can assert any right, title, 

or interest therein. 

(b) In all cases where interim certificates or interim receipts 

signed or executed by the issuer of the securities called for by such 

certificates or receipts are delivered, such certificates or receipts 

shall require the issuer to hold any securities or cash received upon 

the issue thereof in the manner described in the foregoing paragraph 

(a); provided however, that this sub-paragraph (b) shall not apply 

in the case of certificates or receipts issued by national governments. 
15 

( c) In all cases where interim certificates or interim receipts 

sjo-ned or executed by a corporate trustee are delivered, such certificates or receipts shall require the corporate trustee to hold any 

securities or cash received upon the is ue thereof in the manner in 

the foregoing paragraph (a). 

( d) All forms of interims pecified in the foregoing paragraphs 

(a), (b), and ( c) shall by their text clearly indicate their precise 

nature ; the rights of the holders thereof; the ecurity and the 

amount thereof called for; the limitation of time for delivery of 

securities called for, if appropriate; the redemption or repa} ment 

provisions, if appropriate; provision for pa} ment of interest, if 

any; negotiability, transferability or registration provisions, if any; 

assignment form, if appropriate; and the name of the person signing or executing such interim. 

(e) Any investment banker who in connection with the public 

distribution of a new issue of securities receives any pa} ment from 

any purchaser of such securities in advance of delivery of such 

securities in temporary or definitive form, or in advance of the delivery of interim certificates or interim receipts calling for the future 

delivery of such security, shall deliver to such purchaser only a receipt for the purchase price or memorandum of sale evidencing such 

payment; provided, however, that for purposes of economy in exchanges or shipping, there may be delivered in advance of such delivery an instrument to be designated as a "trust receipt" calling for 

future delivery of the security in temporary or definitive form, which 

"trust receipt" shall be executed by a corporate trustee and secured 

by deposit of cash or collateral with such corporate trustee, who shall 

hold such cash or collateral for the benefit of the holders of such 

"trust receipts" pending delivery of the security in temporary or 

definitive form. 

(f) No investment banker shall deliver, in connection with the 

public distribution of any new securities, to the purchaser of such 

securities, any instrument entitling the holders to the future delivery 

of such securities, unless such instrument complies with the approRriate provisions of this section. The titles ' interim certificate " and 

'interim receipt" shall be used only in accordance with the definitions of paragraph ( t) of Article II. 

SECTION 4. Titles of New I ssues.-An investment banker shall 

not be the originator of any new issue of securities ( except public 

securities) for distribution to investors, or participate in the distribution of any such new issue, which issue has a title which is 

misleading as to the lien, terms, or priority of such issu0 • If any 

new issue of public securities shall have a title which is misleading 

as to the lien, terms, or priority of such i ue, the facts with regard 

thereto hall be stated in the prospectus, if any or if there is no 

prospectus, in some other manner disclo ed to each purchaser of such 

security. 

j SECTION 5. Interrelated Direct01·ates and Managements.-Any investment banker who is the originator of a new is ue of securities, shall, if such investment banker or any partner or principal officer 

thereof shall be an officer or director of the is uer company, disclose 

such fact in the prospectus. 

48307°-425-137-34-3 
16 

.ARTICLE V-RULES PERTAINING PRIMARILY TO SELLING SYNDICATES 

AND SELLING GROUPS IN CONNECTION WITH NEW ISSUES OF 

SECURITIES 

SECTION 1. Statement of I s,sue Price.-Except as to public securities where the price received by the issuer is a matter of public 

record, the prospectus shall state the price received by the issuer for 

any new issue of securities offered for sale to the public, or the formula by which such price can be ascertained, or if there is no prospectus such price or formula shall be disclosed in some other manner 

to each person purchasing such new security from any member of 

the selling syndicate or selling group. SECTION 2. Three-Day Notice of Organization of Selling Syndi- cate or Selling Grou,p.-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 membershin in such selling group, at such times that, in the usual course of 

delivery, such prospectus or description will be received by all such 

investment bankers on approximately the same day and at least three 

days ( excluding Sundays and holidays but including the day of 

delivery) before the date on which it shall be proposed to make the 

public offering of such securities. 

SECTION 3. M embe1·ship in Selling Syndicates and Selling 

Groups.- No investment banker proposing to organize a selling syndicate or a selling group shall invite or permit any person to be a 

participant in such selling syndicate or a, member in such selling 

group unless such person is an investment banker actually engaged 

in the investment banking business. 

SECTION 4. Price.-(a) Each selling syndicate agreement and selling group agreement shall set forth the price at which the new securities are to be sold to the public or the formula by which such 

price can be ascertained. No participant in a selling syndicate or 

member of a selling gToup shall, during the life of such selling syndicate or selling group, offer the new securities being distributed by 

such syndicate or group at any price below such public offering price. 

(b) It shall be deemed a reduction of the offering price mentioned 

in paragTaph (a) of this section :for a participant in a selling syndicate or a member of a selling group to allow any deduction, abatement, conces ion or commission whatsoever, either directly or indirectly; provided, that any investment banker may allow to another 

investment banker a commission or conces ion if and to the extent 

that provision is made therefor in the agreement creating the selling 

syndicate or the selling group. 

(c) In any transaction with any investment banker located in 

a foreign country no commission or concession as provided in paragraph (b) of this section shall be allowed to such foreign investment 

banker unless he effectively agrees (1) that, in making any sales, 

during the life of the selling syndicate or selling group, to purchasers outside of the United States of the security in connection 
17 

with which he received such comm1ss10n or concession, he will 

conform to the provisions of paragraphs (a) and ( b) of this section 

to the same extent as though he were subject to the selling syndicate 

or selling group agreement; and (2) that, in making any sales, 

during the life of the selling syndicate or selling group, to purchasers within the United States of the security in connection with 

which he received such commission or concession, he will conform 

to the provisions of this Section 4 and of Sections 6 and 7 of this 

Article V to the same extent as though he were ubject to the selling 

syndicate or selling group agreement, and al o (if he received such 

commission or concession from a registered investment banker) that 

he will conform to the provisions of Section 7 of Article IX to the 

same extent as though he were an investment banker registered under 

Article X. 

( d) Any investment banker located in the United States receiving 

a commission or concession as provided in paragraph (b) of this 

section shall, in making any sale of the security in connection with 

which he received such commission or concession during the life of 

the selling syndicate or selling group, be subject to the provisions 

of this Section 4 and of Sections 6 and 7 of this Article to the same 

extent as though he were a participant in the selling syndicate or a 

member of the selling group distributing such security. 

SECTION 5. Presyndicate Sales.-N o investment banker shall organize, manage, or participate in a selling syndicate or selling group 

to offer a new issue of securities to the public if, within thirty days 

prior to the formation of such syndicate or group, he shall, at a price 

lower than the offering price to the public, have sold or given a right 

to purchase, or shall have assisted the issuer in selling or giving a 

right to purchase, any part of such new issue to any person other 

than an investment banker otherwise than as an essential step in the 

plan for the sale to the public of such new issues of securities. 

SECTION 6. Trades in Connection with New Issues.-No inve tment banker who is a participant in any selling syndicate or a rn.ember of any selling group shall enter into any agreement or arrangement with any purchaser of the new securities being distributed by 

such syndicate or group whereby, either directly or indirectly, as a 

condition of the purchase, such investment banker will accept any 

other securities ( except securities which are being refunded or redeemed in connection with or by means of such new issue of securities, or any securities maturing within six months after the date of 

such transaction) in trade in payment of all or any part of the purchase price of such new securities. The foregoing provision shall 

not, however, prevent such investment banker from accepting such 

other securities as agent for sale, in which case the investment banker 

shall make the usual charge for such services and such investment 

banker may allow the purchaser of the new securities to apply towards the purchase price thereof any net proceeds realized from the 

sale of such other securities. 

SECTION 7. R equirenient of Down Payment.-(a) Except as hereinafter provided in paragraph ( c) of this section, whenever n, participant in a selling syndicate, or a member of a selling group, accepts a subscription subject to allotment for the purchase of a new 

security to be distributed by such selling syndicate or selling group, 
18 

he shall require the person making the subscription to deposit with 

him a down payment of not le s than 5% of the public offering price 

on the securities subscribed for. 

(b) Except as hereinafter prm ided in paragraph ( c) of this section, whenever new securities are subscribed for subject to allotment 

from the manager by a participant in a selling yndicate or a member 

of a selling group he shall at the time of such subscription make a 

down payment of not less than 5% of the public offering price. 

Such down payments shall be deposited by the manager in a special 

account with one or more incorporated banks, trust companies, or 

persons permitted to receive deposits, provided, however, that they 

shall in all cases be deposited with a bank, trust company, or person 

other than the manager. 

( c) No down payment as required by paragraph (a) of this sec- tion shall be required from any purchaser who may be prevented by 

law from making such payment in advance of the delivery of the 

security purchased; and the participant or member who accepted 

the subscription of such purchaser shall furnish the manager of the 

selling syndicate or selling group evidence of such fact satisfactory 

to the manager, and in such case such participant or member shall 

not be required to make the down payment as required by paragraph 

(b) of this section; and the fact that such down payment is not re- qmred in any such case shall not be considered as a concession under 

Section 4 of this Article. The requirements of paragraph (b) shall 

not be compulsory in the case of a selling syndicate where all the 

participants were parties to the purchase from the issuer of the 

new security to be distributed. 

SECTION 8. R eqwirem,ents a,s to Conformations of Sales.- No participant in a selling syndicate and no member of a selling group 

shall confirm a sale or a subscription from any purchaser unless-

(a) Such participant or member has reasonable grounds to be• 

lieve that such purchaser is bona fide and responsible; 

(b) A copy of the prospectus, if any, has been delivered to such 

purchaser or accompanies the confirmation; 

( c) Such sale does not violate or evade any provision of the selling syndicate or selling group agreement or of the Rules; and 

( d) A partner, duly accredited executive or branch office manager 

has approved such sale as complying with paragraphs (a), (b), 

and ( c) of this section. 

Failure of a participant in a selling syndicate or a member of a 

selling group to comply with the provisions of the foregoing paragraphs (a), (b), ( c), or ( d) of this section, shall not be deemed a 

violation of this section if not wilful and if such participant or 

member gives notice, as soon as such failure is discovered, to the 

manager of the selling syndicate or selling group, stating the cir- cumstances attending such failure . 

. ~ECTIO~ 9. Oe~·tificates. to Be Furnished M anager.- Each participant rn a selling syndicate and each member of a selling group 

shall, upon request of the manager, furnish to the manager a certificate signed by a principal officer or partner of such participant 

or member that he has examined the records of sales made by such 

participant or member, and that the provision of Sections 7 and 8 

of this Article were complied with in respect of such sales. 
19 

SECTION 10. Extension of the Original Period of the Selling Syndicate.-!£ provision is made in any selling S) ndicate agreem~nt for 

the extension of the original period of the selling syndicate, such 

extension shall only become effective upon the consent of participants in the selling syndicate representing 75% in interest of the 

selling syndicate. 

SECTION 11. P1rohibition of Participation 1.1.,-ith Bank Offece1·s.-

No inve tment banker to his knowledge shall participate in any selling syndicate in which any officer of any bank or trust company 

has a participation as an individual. 

SECTION 12. Disclosure of Interest of Directo1·s and Officers of 

lssuer.-No investment banker to his knowledge shall participate 

in any selling syndicate in which any director or any officer of the 

issuer of the new securities with relation to which such selling syndicate was formed has a participation, as an individual, unless he discloses such participation in the prospectus, if any, or if there is no 

prospectus then in some other manner, to any person purchasing the 

security from such investment banker. 

SECTION 13. Distribution of Syndicate Funds j Expenses.-The 

manager of any syndicate shall distribute the amount due to syndicate participants promptly after the close of the syndicate. Upon 

request of any participant, the manager shall render to him a statement of expenses, which statement shall show the aggregate amounts 

of: (1) payments to manager, if any; (2) legal expenses; (3) advertising expenses; ( 4) expenses for printing, engraving, mailing, 

telegrams and cables ; and ( 5) other expenses. 

SECTION 14. Disclosure of M anage1·'s Right to Pwrchase Securities.-If the manager of any selling syndicate or any selling group 

is given the right under the selling syndicate or selling group agreement to buy securities in the open market for account of the selling 

syndicat€ or selling group, such fact shall be disclosed in the prospectus, if any, or if there is no prospectus, then in some other manner, by each participant in the selling S) ndicate or member of the 

selling group to any person purchasing the securitie. from such 

participant or member. 

If to the knowledge of the manager of any selling syndicate or 

selling group the manager of any other syndicate or group formed 

in connection with the distribution of the securities to be distributed 

by such selling syndicate or selling group has the right to buy in the 

open market any securities of such issue for the account of such other 

syndicate or group, then the manager of such selling syndicate or 

selling group shall disclose such fact in the pro pectu , or, if there 

is no prospectus, in some other manner, to each participant in the 

selling syndicate or each member of the selling group and such fact 

shall be disclosed in like manner by each participant in the selling 

syndicate or each member of the sellin~ group to each person purchasing such securities from such participant or member. 

SECTION 15. Pwrchases of Securities in Open i1!larket in Anticipation of Public Offering of New lssue.-Except as to public securities 

sold by the issuer thereof at public sale, if either ( 1) the manager of 

any selling syndicate or the manager of a selling group, or (2) to 

the knowledge of any such manager, the is uer or originator or any 

other syndicate formed in connection with the distribution of any 
20 

new issue of securities to be distributed by or through such selling 

syndicate or selling group, purchases any of the outstanding securities of the issuer 111 the open market within ten days prior to the 

date on which such securities are first offered to the public, such 

fact shall be disclosed by the manager to all participants in the selling syndicate or member of the selling group, and shall also be 

disclosed, either in the pro pectus or in some other manner, by each 

participant in the selling syndicate or member of the selling group 

to any person purchasing the securities from such participant or 

member; provided, howeYer, that no disclosure shall be required 

under this Section 15 of any purchases of outstanding securities of 

the issuer made for the purposes of a sinking fund. 

SECTION 16. Disclosure of Interest in Distribittion.-Any participant in a selling syndicate, and any member of a selling group, who 

has any direct interest in the distribution of a new security other 

than as a member of a selling group, shall disclose such fact, either 

in the prospectus or in some other manner, to any person purchasing 

the securities from such participant or member. 

SECTION 17. Copies of Selling Syndicate Agreements and Selling 

Group Agreements to Be Filed.-Every manager of a selling syndicate or selling group shall, promptly after such selling syndicate 

or selling group is formed, file a copy of the selling syndicate agree1nent or the selling group agreement with the Investment Bankers 

Code Committee by mailing such copy, postage prepaid, to said Committee addressed to its executive office. Copies of selling syndicate 

agreements and sellin~ group agreements so filed need not contain 

the names of any of tne parties thereto, except the manager. 

ARTICLE VI-RULES PERTAINING PRIMARILY TO RETAIL SALES AND 

PURCHASES 

SECTION 1. "Oi,er the Cownter" Transactions.-In view of the 

unusual and complicated nature of "over the counter" transactions 

whether in "listed" or " unlisted " securities, it is provided that if 

the investment banker buys for his own account and risk from his 

customer, or sells for his own account and risk to his customer, he 

shall buy or sell at a price which is fair, taking into consideration 

market conditions in respect of such security at the time of the 

transaction, the expense of executing the order, and the fact that 

he is entitled to a profit; and if he acts as agent for his customer in 

any such transaction, he shall not charge his customer more than a 

fair commission or service charge, taking into consideration market 

conditions in respect of such security at the time of the transaction 

and the value of any sen ice he may have rendered by reason of his 

experience in and knowledge of the market for such security. 

SEC'TION 2. lnf01·rnation to B e Fu,1·nished Upon Confirming of 

Customer's Orders.-U pon confirming any customer's order for the 

purchase or sale of any security if the investment banker (1) is to 

act as principal in the transaction; or (2) is controlled by, or controls, or is under common control with, the issuer, the investment 

banker shall inform the customer of such fact upon the written 

memorandum of such confirmation. 

SECTION 3. l nforrnation to be Gi,ven Upon Delivery of Memorandum of Transactions.-Any investment banker who has a transaction 
21 

with a customer involving the purchase or sale of any security shall, 

at or before the completion of the transaction, deliver to the customer 

a written memorandum of such transaction containing the following 

information : 

(a) whether such investment banker acted as principal or as agent 

for the customer ; 

(b) if the investment banker acted as agent for the customer, the 

amount of the commission or service charge charged to the customer 

by such investment banker, and if another broker has been used, and 

any part of the commission has been paid to such other broker, the 

amount so paid shall be stated as a separate item; 

( c) if such investment banker acted as agent for the customer, 

the name of the person from whom the security was purchased or 

to whom the security was sold and the day, and the hours between 

which, the transaction took place, or that the information referred 

to in this paragraph ( c) will be furni hed upon writtR.n request of 

the customer for whom the investment banker acted as agent; and 

( d) if no written confirmation of the customer's order shall have 

been given, the information as required by clause (2) of Section 2 

of this Article. 

SECTION 4. Broke1·age Transactions.-!£ in any transaction involving the purchase or sale of any security the investment banker 

purports to act as an agent to buy or sell on behalf of a custonier, 

such investment banker shall not act as a principal in such transaction, nor, without the consent of his customer, repre ent any other 

principal in such transaction. 

SECTION 5. Guarantees.- N o investment banker shall, in any transaction involving the purchase of any security for the account of the 

customer or involving the sale of any security to a cu tomer agree 

with the customer, either directly or indirectly, to guarantee tha.t 

the market v-alue of the security as it was at the time the security 

was bought for or by the customer will be maintained. or that the 

business of the issuer of such security will be succe . ful in earning 

profits, or that the issuer will meet its promises and obligations; provided that the restrictions of this section shall not apply in respect 

of transactions in any note, draft, bill of exchange, or banker's 

acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace. or any renewal 

thereof the maturity of which is likewi e limited. 

SECTION 6. R epurchase Agreements.-N o investment banker shall, 

in any transaction involving the purcha e of any security for the 

account of a customer or involving the sale of a ecurity to a customer, agree with the customer, either directly or indirectly, to 

repurchase the security from the cu. tomer; proYiclecl that the restriction of thi. ection shall not apply in respect of tran actions in 

obligations of the United States or any security gauranteed as to 

principal or interest by the United State , or of tran actions in any 

note, draft, bill of exchange, or banker' acceptance which ha a 

maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of 

which is likewise limited, or to any repurchase agraement with any 

person whenever such repurchase agreement is limited to sixty days 

and is used as a substitute for borrowing. 
22 

SECTION 7. R etail Partial Payment Transactions.-No investment 

banker shall take or carry any account or make a transaction for 

any customer under any arrangement which contemplates or provides for the purchase of any security for the account of the customer or for the sale of any security to the customer, where payment 

for the security is to be made to the investment banker by the 

customer over a period of time in installments or by a series of 

partial payment unless 

(a) In the event such investment banker acts as an agent or 

broker in such transaction he shall, immediately, in the regular 

course of business, make an actual purchase of the security for the 

account of the customer, and shall inunediately, in the regular 

course of business, take possession or control of such security and 

shall maintain possession or control thereof so long as he remains 

under obligation to deliver the security to the customer. 

(b) In the event such investment banker acts as a principal in such 

transaction, he shall, at the time of such transaction, own such 

security and shall maintain possession or control thereof so long as 

he remains under obligation to deliver the security to the customer. 

No investment banker, whether acting as principal or agent, shall 

in connection with any transaction referred to in this section make 

any agreement with his customer under which the investment banker 

shall be allowed to pledge or hypothecate any security for any 

amount in excess of the indebtedness of the customer to such investment banker. 

SECTION 8. Information Received in Otlier Oapacities.-An investment banker who receives information as to the ownership of securities in the capacity of paying agent, transfer agent, trustee, or in 

other similar capacity, shall under no circumstances make use of such 

information for the purpose of soliciting sales or exchanges except at 

the request and on behalf of the issuer. 

ARTICLE VII-RULES PERTAINING PRIMARILY TO SALESMEN 

SECTION 1. Supervision.-Any investment banker who employs any 

salesman shall supervise the sales methods of such salesman and his 

correspondence in relation to offers of securities for sale to investors; 

and any sale made by any such salesman to any investor, other than 

another investment banker, shall be approved by a partner, duly 

accredited executive, or branch office manager of such investment 

banker. Such approval shall be evidenced by a written endorsement made upon a copy of the memorandum of sale mentioned in 

Section 3 of Article VI, and each memorandum so approved shall 

be made a part of the permanent records of such investment banker 

and retained in his files for at least three years. 

SECTION 2. Experience and Qualifications.-(a) _Exce~t as he~einafter provided in paragraphs (b) and ( c) of this section, no investment banker shall employ any person to act as a salesman unless 

( 1) such person ~hall ha ~e had a~ least tw:o years' e~pe:ience in the 

investment banking business or in a business a principal part of 

which related to securities; (2) shall be at least twenty-one years 

of aae; and (3) shall be of good moral character; provided, however~ that any person who has not had two years' experience in the 
23 

investment banking business or in a business a principal part of 

which related to securities but who has been employed by an investment banker for a period of at least six months, and who is otherwise 

qualified as provided in clauses (2) and (3) above in this paragraph 

set forth, may be employed by any investment banker as a salesman 

if the compensation of the person so employed to act as salesman 

shall be a straight salary and shall not include, in whole or in part, 

commissions upon securities sold. 

(b) Any investment banker desiring to employ any person to act 

as a salesman, may make an application to the Regional Code Committee of the district in which such person is to be employed for 

permission to employ such person as a salesman. If a majority of 

the members of such Committee shall, after due hearing and consideration of such application, be of the opinion that the person proposed to be employed as a salesman i-s, by reason of his age, experience, standing and reputation, fully qualified to act as a salesman, 

such committee may in writing advise the investment banker who 

made such application to that effect, in which event such investment 

banker may employ such person without regard to any of the requirements of paragraph (a) of this section except the requirement set 

forth in clause (3) thereof. 

(c) Nothing contained in either paragraph (a) or (b) of this 

section shall be construed to prevent any investment banker from 

continuing to employ as a salesman any person who is so employed 

by such investment banker at the effective date of the Rules. 

SECTION 3. Solicitation at Residences .-No salesrn an shall call in 

person upon, or telephone to, any customer or prospective customer 

at his home or residence for the purpose of selling to, or offering to 

sell to, or soliciting an offer to buy from such customer or prospective customer, unless such customer or prospective customer shall 

have previously given written permission therefor to the investment 

banker employing such salesman. As used in this section the term 

"salesman" shall include any investment banker, or any partner, 

officer, or employee thereof who does any act or thing in this section 

described. This section shall not apply to the solicitation of business 

persons, retired or professional persons, or farmers. 

SEarION 4. Orders taken by Salesmen.-Any investment banker 

who employs any salesman shall require that all orders taken by 

such salesman for the purchase of or subscription to any security 

shall be subject to acceptance and confirmation by such investment 

banker. 

ARTICLE VIII-RULES PERTAINING PRIMARILY TO INVESTMENT 

COMPANIES 

SECTION 1. If any investment banker has agreed to manage, or 

give investment advice to the management of an investment company 

(sometimes known as an "investment trust") all or part of the 

securities of which are held by the public, or if any partner or 

officer or employee of any investment banker is an officer or director 

of any investment company all or part of the securities of which 

are held by the public. 

(a) Such investment banker shall not for his own account sell to 

or purchase from such investment company any securities unless a 
24 

majority of the members of the board of directors of such investment company are not such partners, officers, or employees, and 

unless the transaction is previously a pp roved after full disclosure 

by a majority of such members of the board of directors of the 

investment company. 

(b) Such investment banker shall use his best efforts to cause the 

investment company to prepare and distribute to its stockholders 

quarterly statements and annual financial statements, such annual 

statements to conform to the standards for such annual statements 

required by Section 1 of Article IV hereof. 

( c) If such investment banker has received any compensation or 

commi sion £or acting as agent for the investment company1 or if 

such investment company has purchased from or sold to such investment banker any securitiesi or if the investment company has engaged in any other transact10n ·in which the investment banker has a 

financial interest, the investment banker shall use his best efforts to 

see that full disclosure 0£ such transactions is made by the company 

to the stockholders at an annual or special meeting. Where the 

investment banker has acted simply as broker £or the execution of 

orders on a securities exchange it shall be sufficient disclosure if the 

total amount of securities dealt in and the total amount of commissions received shall be stated. 

( d) Such investment banker shall not enter into any management 

or advisory service contract with such investment company providing for the payment to the investment banker of any fee or for any 

other compensation for managing or advising the management of 

the investment company unless the contract therefor has been submitted to and approved by the stockholders of the investment company. 

( e) Such investment banker shall use his best efforts to cause the 

investment company not to use the term "trust" as part of the title 

of such investment company unless the use of the term "trust" is 

justified as a matter of law. 

ARTICLE IX-MISCELLANEOUS RULES 

SECTION 1. Investment lYlanagement.-No investment banker who 

is receiving a fee for managing the account 0£ any customer or £or advising a customer with respect to his investments shall sell to, or 

buy from, such customer for his own account or as agent £or any 

other person unless he shall have obtained the previous written 

or telegraphic approval of such customer to each such transaction. 

SECTION 2. Discretionary Accownts.-N o investm.ent banker who 

is authorized to purchase or sell securities for account of a customer 

in his discretion shall sell to, or buy from, such customer for his own 

account or as agent for any other person unless he shall have obtained the previous written or telegraphic approval of such customer to each such transaction. 

SECTION 3. S egregation of Age,ncy Fwnds.-Any investment banker 

acting as sinking fund agent, principal or coupon paying agent, 

dividend paying agent, or in any similar capacity, who holds any 

funds or securities in any such capacity shall hold such funds or 

securities as trust funds or trust securities unless the terms of such 

agency agreement expressly otherwise provide. 
25 

SECTION 4. Quotations.-N o investment banker shall publish or 

circulate, or cause to be published or circulated, any notice, circular, 

advertisement, newspaper article, investment service, or communication of any kind which purports to quote or to give a quotation 

of any transaction as a purchase or sale of any security unless such 

investment banker believes that such transaction was a bona fide 

purchase and sale of such security, or which purports to quote the 

bid price or asked price for any security, unless such investment 

banker believes that such quotation represents a bona fide bid for, or 

offer of, such security. If nominal quotations are used or given 

they shall be clearly stated to be only nominal quotations. 

SECTION 5. Offers to Buy and Sell.-No investment banker shall 

make any offer to buy or sell any security at a stated price fro1n 

or to any person unless such investment banker is prepared to purchase or sell, as the case may be at such price. 

SECTION 6. Compensation ;J Gratuities.-No investment hanker 

shall, directly or indirectly, give, permit to be given, or offer to give, 

anything of value--

(a) to any employee, agent, or representative of another person 

for the purpose of influencing or rewarding the act of such employee, agent, or representative in relation to the business of the 

employer of such employee the principal of such agent, or the 

represented party, without the knowledge and consent of such employer, principal, or represented party; or 

(b) to any officer or employee of any hank, trust company, or 

insurance company except for services actually rendered or to be 

rendered, and in no case without the knowledge and consent of such 

bank, trust company, or insurance company; or 

( c) to any person for the purpose of influencing or rewarding the 

action of such person in connection with the publication or circulation in any newspaper, investment service, or similar publication 

of any matter which has, or is intended to have, an effect upon the 

market price of any security, provided that this paragraph (c) shall 

!lot be construed to apply to matter which is clearly paid advertising; or 

(d) to any director, official, officer, or employee of any issuer, 

for the purpose of influencing or rewarding the action of any such 

director, official, officer, or employee, in connection with the issue 

or sale by such issuer or any person controlled by such issuer of 

any new securities of such issuer or of any such controlled person. 

For the purposes of this section the giving of anything of value 

to a member of the fa.mily of any person shall be regarded as the 

giving of a thing of value to such person. 

In order to comply with the requirements of the National Recovery Administration it is expressly stated that nothing in this 

Section 6 hall be construed to apply to the free and general distribution of articles conunonly used for advertising. 

SECTION 7. Registered Investment B(lfnkers.-(a) No registered investment banker shall, in any transaction with any investment banker 

not registered under Article X hereof, allow or grant to such nonregistered investment banker any allowance, commission, or discount 

usually and customarily to b_e allowed to another dealer; nor shall 

any registered investment banker join with any investment banker 
26 

not registered under Article X hereof in any syndicate or group 

contemplating distribution to the public of any issue of securities; 

nor shall any registered investment banker sell any security to or 

buy any security from any investment banker not registered under 

Article X hereof, except at the same price at which at the time of 

such transaction such registered investment banker would buy or sell 

such security, as the case may be, from or to a person who is a member of the public not engaged in the investment banking business. 

(b) The provisions of paragraph (a) of this Section 7 shall not 

apply to an investment banker in a foreign country who j_s not 

eligible for registration under Article X hereof, but in any transaction with any such foreign investment banker, where an allowance, 

commission, or discount is allowed, a registered investment banker 

shall as a condition to such transaction secure from such foreign 

investment banker an agTeement that, in making any sales to purchasers within the United States of securities acquired as a result 

of such transaction, he shall conform to the provisions of this Section 

7 to the same extent as though he were an investment banker registered under Article X. 

( c) No investment banker who is not a registered investment 

banker shall represent that he is a registered investment banker, 

and no registered investment banker shall advertise or hold himself 

out to the public as a registered investment banker except as shall 

be permitted by regulations from time to time prescribed by the 

Investment Bankers Code Committee. 

SECTION 8. Distrfot Rules.-Every investment banker shall, with 

respect to any transaction in any district, comply with any additional Rule established in such district as provided in Sections 5, 

6, and 7 of Article XI hereof. 

ARTICLE X-REGISTRATION OF INVESTMENT BANKERS 

SECTION 1. Regist1~ation Agreement.-Each investment banker 

who registers u11der this Article thereby agrees with every other 

investment banker who registers under this Article to comply with 

all decisions and interpretative rulings of the Investment Bankers 

Code Committee under any provisions of this Article, and to comply 

with the Rules : 

For any failure to so comply the registered investment banker 

who is guilty of such failure shall be subject to the penalties prescribed in Section 8 of this Article X, but such failure shall not.., 

in itself, giv€' rise to any civil liability to any other registered 

investment ba.nker, or to any other person. 

SECTION 2. Eligibility for Registration.-Any investment banker 

who is actually engaged in the investment banking business in the 

United States shall be eli~ible to be registered under this Article. 

If the principal office 01 any such person is located in a foreign 

country, any branch office in the United States may be designated 

as a principal office for the purposes of this Article. 

SECTION 3. Applications for R egistration.-Any investment 

banker desiring to be registered, shall file with the Regional Code 

Committee of the district in which the principal office of the applicant is located, an application in such form as shall be prescribed 
27 

by the Investment Bankers Code Committee and approved by the 

Administrator. Such application shall be in writing, in duplicate, 

stating-

(a) The name of the applicant; 

(b) The address of the principal office and of all branch offices 

of the applicant; 

(c) If the applicant be a partnership, the names, addresses, and 

business addresses of the partners including special or limited partners, specifying as to each whether he is a general or limited partner; 

(d) If the applicant is other than an individual or partnership, 

the name of the State or country where the applicant is incorporated 

or organized, and the names, residences and business addresses of 

its directors and principal officers and of each stockholder owning 

more than 10% of any class of the ca pit al stock of such applicant; 

and 

(e) The length of time the applicant or its predece sors have been 

engaged in the investment banking busines . SECTION 4. Supplenientary Stat nients.-In the event that any 

change hall take place in the per onnel of th e partners, director , 

principal officers or stockholders of any registered investment banker 

with respect to whom information i required by the proYision of 

Section 5 of this Article to be gi,en such investment banker shall, 

within thirty days after such change has occurred, file with the 

Regional Code Committee of the district in which the principal 

office of such investment banker is located~ a supplemental statement 

in writing, in duplicate, setting forth all such changes in personnel, 

and the information required by paragraphs ( c) and ( d) of Section 

3 of this Article with respect to any such new partner, director, or 

principal officer. 

SECTION 5. Action on Applioations by R egional Code Oo1111m,ittee.- Upon the receipt of any application for registration the Regional 

Code Committee shall cause such inve tigation to be made as such 

Committee may deem necessary and proper to determine if such 

applicant is actually engaged in the investment banking business, 

and if the facts stated in such application are true and complete; 

and said Committee shall, if requested by the applicant, give the 

applicant a hearing thereon. As soon as may be practicable thereafter, such Collllnittee shall forward one copy of such application to 

the Investment Bankers Code Committee with a certificate of the 

action of such Regional Code Committee with relation thereto. 

SECTION 6. Action on Applications by Investment Bank ers Code 

Oomniittee.-Upon receipt of any application for registration by the 

Investment Bankers Code Committee, as provided in Section 5 of this 

.Article, the Investment Bankers Code Committee shall, if satisfied 

that the applicant is eligible to be registered in accordance with the 

requirements of Section 2 of this Article, and that no untrue statement has been made in the application, register such applicant as a 

registered investment banker under this Article. The said Committee shall at the request of the applicant, give the applicant a hearing 

thereon, at which hearing the applicant shall be entitled to be heard 

in person and by counsel, and to submit any matters which he 

may desire to present. 
28 

SECTION 7. Oomplaints.-Every registered investment banker shall 

keep in each office maintained by him a copy of the Code and of the 

Rules and of all amendments from time to time made thereto, and 

of interpretative rulings made by the Investment Bankers Code Committee and approved by the Administrator, which shall be available 

for the examination of any customer who makes req_uest therefor. 

Any person feeling aggrieved by any act of any registered investn1ent banker may complain in regard thereto to any Regional Code 

Committee. If such Regional Code Committee is in a district other 

than the district where the principal office of such investment banker 

shall be located, such Committee shall make such preliminary investigation in regard to the complaint as may be practicable and shall 

fonyard the complaint and the findings of such Committee to the 

Regional Code Committee of the district in which is located the 

principal office of the investment banker against whom the complaint 

is made which latter Committee shall thereupon proceed to investigate the matter and to conduct such hearings in regard thereto as it 

may deem necessary and proper. 

vVhen any complaint is filed against any registered investment 

banker with any Regional Code Committee of the district in which 

the principal office of such investment banker is located, or when 

any complaint is forwarded to such Committee from any other 

Regional Code Committee, notice shall be given in writing to the 

investment banker complained against, specifying the nature of the 

charges and fixing a date for a hearing. Such Committee may make 

such investigations in regard to the matter as it may deem necessary 

and proper, provided any investment banker who is involved in such 

charges shall be entitled to be heard in person and by counsel, and 

to submit any matters which he may desire to present. 

If any Regional Code Committee of the district in which the principal office of any registered investment banker complained against 

is located shall determine that there has been a violation of the Code 

or of these Rules or of any amendment thereto, or of any interpretative ruling made by the Investment Bankers Code Committee and 

approved by the Administrator, such Committee shall transmit a 

report of its findings and the evidence adduced, together with its 

recommendations, to the Investment Bankers Code Committee for 

action by that Committee in regard to the matter. 

If any regi tered investment banker complained against shall so 

request, the Investment Bankers Code Committee shall grant such 

in-vestment banker a hearing, at which hearing such investment 

banker shall be entitled to be heard in person and by counsel, and 

to submit any matters which he may desire to present. 

For the purpose of investigating complaints against registered 

investment bankers, the Investment Bankers Code Committee, and 

any agency authorized by it, shall have the right to require the investment banker to submit a report in writing in regard to the matter 

involved in the complaint, and such Committee shall have the right 

in the manner and to the extent provided by the by-laws of the Committee when approved by the Administrator to inspect the books, 

records, and accounts of such investment banker with relation to the 

matters involved in the complaint. Any refusal on the part of any 

registered investment banker to make any report as called for under 
29 

this section, or to permit an inspection of books, records, and accounts, as may be validly called for under this section, shall be 

sufficient cause for suspending or canceling the registration of such 

investment banker. 

SECTION 8. Penalties.-(a) The Investment Bankers Code Committee, in the administration and enforcement of this Article, may 

prescribe penalties not in excess of $500.00 for each violation, against 

any registered investment banker for any violation of the Rules or 

for any neglect or refusal to comply with orders, directions, or 

decisions of the Investment Bankers Code Committee for the enforcement of the Rules, including interpretative rulings made by 

said Committee and approved by the Administrator, or suspend the 

registration of such investment banker for a definite period, or 

cancel the registration of such investment banker, as such Committee 

may, in its discretion, deem to be just. 

(b) The Investment Bankers Code Committee may cancel the· 

registration of any investme~t banker for any cause for which registration could be refused as provided in Section 2 of this Article. 

( c) The Investment Bankers Code Committee may impose a fine 

not 1n excess of $600 for each violation against any registered investment banker, or m.ay suspend the registration of any such investment banker for a definite period, or may cancel the registration of 

any such investment banker, if, in the opinion of said Committee, 

such investment banker has been guilty of repeated violations of 

the principles contained in Article III hereof. Within the meaning 

of this paragraph, it shall be deemed to be a repeated violation of 

such principles by a registered investment banker if such investment 

banker, having be~n notified by the Investment Bankers Code Committee that he is violating or has violated a principle, continues 

thereafter to violate such principle. 

( d) In all proceedings under this Section the Investment Bankers 

Code Committee shall grant any accused investment banker the opportunity to have a hearing, at which hearing such investment 

banker shall be entitled to be heard in person and by counsel, and 

to submit any matter which he may desire to present and a full record shall be kept of the proceedings. 

(e) In any case where the Investment Bankers Code Committee 

shall impose any fine against any registered investment banker or 

shall suspend or cancel the registration of any registered investment 

banker, the registered investment banker against whom such fine is 

imposed or whose registration shall be suspended or cancelled shall 

have the right to appeal to the Administrator for a review of the 

facts upon which the action of the Investment Bankers Code Committee was based in the matter of the imposition of such fine or the 

suspensfon or cancellation of such registration, and the Administrator shall have the right, in his discretion, to stay the effect of the 

action of the said Committee until the further order or the final action on the matter by the Administrator, to review the facts as found 

by the Investment Bankers Code Committee, a cl to take further evidence, if he deems necessary, and the Administrator may modify, 

affirm, or set aside the action of the Investment Bankers Code 

Committee in respect of such fine, suspension, or cancellation of 

registration. 
30 

SECTION 9. Procedure.-The Investment Bankers Code Committee 

shall determine the manner and fonn of its proceedings to be conducted under this Article, and may consider and take action upon 

any matter at any regular meeting or at any special meeting, and in 

holding any hearing or conducting any investigation under this 

Article said Committee may act by one or more duly designated members, but in such event a report of the facts as found shall be submitted to a meeting of the full Committee for its final action. 

No member of any Regional Code Committee or of the Investment 

Bankers Code Committee shall in any manner, directly or indirectly, 

participate in the determination of any question affecting his personal interests, or the interest of any person in whom he is directly 

or indirectly interested. 

SECTION 10. Powers.-The InYestment Bankers Code Committee 

shall be vested with all the powers necessary and appropriate to · carry out the provisions of this Article, and it may adopt such rules 

issue such orders and directions, and make such decisions as it shall 

deem proper and appropriate therefor. 

SECTION 11. lnterp1·etat-ive Rulings.-The InYestment Bankers 

Code Committee may, from time to time, present to the Administrator proposed interpretative rulings based on the Rules, which 

rulings shall be made in the light of the general principles set out 

in Article III hereof, and said Committee is hereby authorized to 

give a liberal interpretation of the Rules, according to the spirit 

and intent thereof, in order to effectuate the policy and purposes 

of this Article. Such interpretative rulings shall, upon approval 

by the Administrator, become operative as part of the Rules applicable to registered inYestment bankers as provided in Section I of 

this Article X. 

SECTION 12. The List.-The Investment Bankers Code Committee 

shall furnish to each registered investment banker a list of all registered investment bankers and of all suspensions and cancellations of 

registrants. 

Any registered investment banker may, at any time, withdraw 

from such registration and by so doing relieve himself of any further 

obligation as a registered investment banker upon giving notice in 

writing to the Regional Code Committee of the district in which his 

principal office is located and to the Investment Bankers Code Committee of his desire to so withdraw and upon paying any amounts 

due from him. 

SECTION 13. E xpenses of Oorrvmittee.-Every registered investment 

banker agrees to make to the Investment Bankers Code Committee 

from time to time contributions to defray the expenses of the administration and enforcement of the Code and the Rules in the same 

manner provided in Section 6 of Article III of the Code. 

ARTICLE XI-ADMINISTRATION 

SECTION 1. Statislics.-In order to provide stat1stical information regarding investment conditions from time to time, the Investment Bankers Code Committee is hereby authorized, within its discretion, to seiect a Confidential Agency to obtain from all investment 

bankers <X~rtified reports of such character and in such form as the 

Investment Bankers Code Committee may prescribe. Such Con-
31 

fidential Agency shall be in no way engaged in the investment banking business or interested in or connected with any investment 

banker. All such information so received shall be held as secret and 

confidential between such Confidential Agency and the reporting 

investment banker. 

Such Confidential Agency shall analyze and digest the reports, 

and shall disclose to the Investment Bankers Code Committee only 

the general findings, which shall be available to all investment 

bankers who assent to the Code and to all registered investment 

bankers. 

SECTION 2. Re.gional Oode Oommdttees.-

( a) Local Di,stricts.-In order to facilitate the administration and 

enforcement of the Code and Rules, local districts are hereby established, the boundaries of which districts shall be as set forth in 

Schedule A. appended hereto. The Investment Bankers Code Committee may, from time to time, relocate such boundaries, and may 

increase or decrease the number of such districts. 

(b) Regional Oode Oommittees.-In each district established as 

provi~ed in paragraph (a) of this ~ction, there .shall .be o~ganized 

a Reg10nal Code Committee as hereinafter provided in this paragraph. The number of members of each of said Regional Code 

Committees shall be either three, five, or seven persons as determined 

by the Investment Bankers Code Committee. Said members shall 

be elected by vote of investment bankers assenting to the Code and 

having their principal places of business within the district for 

which such election is being held. Nominations of persons to be 

elected shall be made by the Investment Bankers Code Committee, as 

:follows: If the number to be elected is three, the nominations shall 

consist of five persons; if the number to be elected is five, the nominations shall consist of eight persons; and if the number to be 

elected is seven, the nominations shall consist of eleven persons. No 

person shall be nominated unless he is a person occupying an active 

executive office or position in the organization of an investment 

banker assenting to the Code and is a person having his place of 

business in the district for which he is nominated. 

The Investment Bankers Code Committee shall cause a printed ballot containing the names of all persons nominated in the manner 

specified to be mailed to each investment banker assenting to the 

Code and having his principal place of business in the district for 

which the election is to be held. Such ballots, in order to be counted, 

must be returned to such place and on or before such date as shall 

be fixed by the Investment Bankers Code Committee, and to be at 

least fourteen days after the date of the mailing of said ballots. 

Each investment banker entitled to vote at such election shall have 

the right to cast one vote for each of the number of persons who are 

to be elected, and the persons receiving the greatest number o:f votes, 

being that number of persons to be elected, shall thereby be elected 

members of said Committee. The term of office of each person so 

elected shall be fixed by the Inve tment Bankers Code Committee 

and specified in the nomination, and he shall serve until his successor 

shall be elected. Any vacancy occurring in the membership of any 

Regional Code Committee shall be filled by appointment made by the 

Investment Bankers Code Committee for the unexpired term. 
32 

The Regional Code Committees shall report all of their actions 

to and shall a.t all times and in all matters be answerable to the 

Investment Bankers Code Committee. 

SECTION 3. General Du.ties.-Such Regional Code Committees 

shall act as agencies of the Investment Bankers Code Committee for 

the administration and enforcement of the Code and the Rules in 

their respective districts. 

SECTION 4. Ewpenses.-~1embers of such Regional Code Committees shall serve without pay. Funds to meet the necessary and actual 

expenses of each uch Regional Committee for administering this 

Code will be provided by the Investment Bankers Code Committee 

out of the funds collected by said Committee under the provisions 

of Section 6 of Article III of the Code and Section 13 of Article X 

hereof, but all such expenses shall be subject to approval by the 

Investment Bankers Code Committee. Any such Regional Code 

Committee may be authorized to raise additional funds for such expenses in accordance with regulations prescribed by the Investment 

Bankers Code Committee with the approval of the Administrator. 

SECTION 5. Additional Loca~ Rules.-Any such Regional Code 

Committee may, from time to time, propose additions to the general 

rules of fair practice herein provided, as may be deemed desirable 

for such district and are not inconsistent with the provisions of the 

Code or of the Rules. Any such Additional Rules of fair practice 

shall be submitted to a vote of all investment bankers located in such 

district who have assented to the Code, and if approved by a majority 

of those voting, shall be submitted to the Investment Bankers Code 

Committee and upon approval thereof by the Investment Bankers 

Code Committee and by the Administrator, such additional rules 

shall become effective in said district. 

SECTION 6. JJf odification of Additional Local, Rules.-Any such 

Regional Code Committee may, from time to time, propose a modification of any addition to the rules of fair practice for its district, 

or of any portion of such additional rules, and upon approval of 

any such proposed modification by the Investment Bankers Code 

Committee and by the Administrator, such modification shall become 

effective in said district. 

SECTION 7. Cancellation of Local, Rules.-The Investment Bankers Code Committee, with the approval of the Administrator, may at 

any time, and from time to time, cancel any addition to the rules 

of fair practice ·for any district, or any portion of any such additional rule. 

SECTION 8. lnvestigations.-Each Regional Code Committee may, 

of its own volition, and shall, at the request of the Investment Bankers Code Committee, investigate any matter pertaining to an alleged violation of the provisions of the Code, or of any rule of fair 

practice effective in said district. In making any such investigation such Regional Code Committee shall as a fact-finding body, 

and in any case where in the opinion of said Committee a violation 

has occurred, such Committee shall report its findings of fact, together with its recommendations, to the Investment Bankers Code 

Committee. In any instances where the Investment Bankers Code 

Committee shall direct any Regional Code Committee to make any 

investigation, as provided in this Section 8, it shall be the duty of 
33 

the Investment Bankers Code Committee to provide or make provision for the expense of such investigation in accordance with the 

requirements of Section 4 of this Article. 

SECTION 9. Privileged Oomm1wnlieation.'s.-(a) Any communication from a customer of any investment banker addressed either to 

the Investment Bankers Code Committee or to any Regional Code 

Committee, with respect to or involving any complaint against any 

such investment banker, shall be deemed to be a privileged communication, and the name of the writer of such communication shall 

not be disclosed by any such Committee: provided, however, that 

the name of the writer of such communication and the nature of the 

charges contained therein may be made known to the accused investment banker or in connection with proceedings arising out of 

said complaint. 

(b) No communication from any investment banker addressed 

either to the Investment Bankers Code Committee or to any Regional 

Code Committee with respect to or involving any complaint against 

any other investment banker, shall be deemed to be a pri v1leged 

communication, and any such communication may be dealt with by 

said Committees, or either of them, as said Committees, or either of 

them, may deem just and proper in the circumstances, but in any 

proceeding arising out of any such complaint the accused investment banker shall enjoy the right to be informed of the name of his 

accuser, of the nature and cause of the accusation, and to be confronted with the investment banker making such accusation. 

SECTION 10. Waiver of Rules.-Any rule contained in the supplementary provisions or hereafter established pursuant to these supplementary provisions may be waived in whole or in part, in any 

particular case, by the Investment Bankers Code Committee, in the 

manner provided in this Section 10. Any investment banker desiring to secure such waiver in any particular case shall make written 

application therefor to the Investment Bankers Code Corrunittee. 

The Committee shall consider such application at its next meeting, 

or the Chairman of the Committee may, by mail, or otherwise, ask 

each member of the Committee for his individual opinion, and if a 

majority of all the members of the Committee shall be of the opinion 

that such waiver will not permit any unfair trade practice, and will 

not be detrimental to the public interest, the Committee after the 

approval of the Administrator shall advise the applicant investment 

banker in writing to that effect, and upon receipt of such advice such 

waiver shall become effective, with respect to the particular transaction, to the extent provided therein. 

SECTION 11. Liability of Members of Investment Bankers Code 

Committee and R egional, Code Com1nittees.-No member of the Investment Bankers Code Committee or of any Regional Code Committee shall be liable, except for willful fraud, to any investment 

banker or to any other person for any action taken by such member 

in his capacity as a member of any such Committee in connection 

with the administration or enforcement of the Code or Rules or of 

any provision of these supplementary provisions. 

SECTION 12. Speoial Comm,ittees.-At any time upon there being 

filed with it a petition signed by not less than ten investment bankers 

assenting to the Code, the Investment Bankers Code Committee shall 
34 

appoint a committee composed of assenting investment bankers to 

investigate and report upon any special problem set forth in said 

petition. If the question to be investigated involves any particular 

branch of the investment business a majority of the committee so 

appointed shall be members actively interested in the particular 

branch of the investment business involved. The Committee so appointed shall report to the Investment Bankers Code Committee and 

the Code Committee shall give consideration to the recommendations in said report. 

SECTION 13. Labor Oomplavnts.-Vntil such time as its organization for handling labor complaints is approved by the Administration, neither the Investment Bankers Code Committee, nor any 

Regional Code Committee shall attempt to investigate or adjust 

complaints of violations of the labor provisions of this Code, and 

all such complaints shall be referred to the State Director for Compliance having jurisdiction in the area where the complaint arises, 

or otherwise handled as The National Recovery Administration may, 

by rules or orders hereafter established, direct. 

Approved Code No. 141-Amendment No. 2. 

Registry No. 1707--04. 
SCHEDULE "A" 

Territorial boundaries of the several local districts e tablished as provided 

in Section 2 of Article XI, are as follows : 

1. California Di trict: State of California. 

2. Central States District: States of Illinois, Indiana, Iowa, Nebraska, and 

Wisconsin. 

3. Eastern Pennsylvania District: Counties of Tioga, Lycoming, Union, 

Snyder, Juaniata, Perry, Cumberland, and Adams in the State of Pennsylvania 

and all the remainder of the said State lying east of such counties, and the 

State of Delaware. 

4. Michigan District: State of Michigan. 

5. :Minnesota District: States of Minnesota, Montana, North Dakota, and 

South Dakota. 

6. Mississippi Valley District: The counties of Schuyler, Adair, Macon, 

Randolph, Boone, Cole, Osage, Maries, Phelps, Dent, Shannon, and Oregon in 

the State of Missouri and the remainder of the said State lying east of such 

counties; the States of Kentucky, and Arkansas; and the counties of Henry, 

Benton, Decatur, and Hardin in the State of Tennessee, and the remaining 

counties of the State lying west of such counties. 

7. New England District: States of Maine, New Hampshire, Vermont, l\lassachusetts, and Rhode Island. 

8. New York District: States of New York, Connecticut, and New Jersey. 

9. Northern Ohio •District: Counties of Mercer, Auglafze, Hardin, Marion, 

Morrow, Knox, Co hocton, Guernsey, and Belmont in the State of Ohio and all 

of the remainder of the said State lying north of such counties. 

10. Ohio Valley District: Counties of Darke, Shelby, Logan, Union, Delaware, 

Licking, Muskingum, Noble, and l\lonroe in the State of Ohio, and all of the 

remainder of the said State lying south of such counties. 11. Pacific Northwest District: States of Oregon, Washington, and Idaho. 

12. Rocky Mountain District: States of Colorado, Arizona, Ne,ada, ew 

Mexico, Utah, and Wyoming. 

13. Southeastern District: States of Maryland, Virginia, West Virginia, 

North Carolina, and South Carolina, and the District of Columbia. 

14. Southern District: States of Louisiana, Mississippi, Alabama, Georgia, 

and Florida; the counties of Stewart, Houston, Humphreys, Perry and Wayne 

in the State of Tennessee and all the remainder of the said State lying east 

of such counties; and the counties of Newton, Jasper, Tyler, Polk, San Jacinto, 

Walker, Grimes, Brazos, Milan, Williamson, Burnet, Llano, l\lason, Menard, 

Schleicher, Crockett, Pecos, and Jeff Davis in the State of Texas and all the 

remainder of the State lying south of such counties. 

15. Southwestern District: Counties of Putnam, Sullivan, Linn, Chariton, 

Howard, Cooper, Moniteau, Miller, Pulaski, Texas, and Howell in the State of 

Missouri and all of the remainder of the said State lying west of such counties; 

the States of Kansas and Oklahoma; and the counties of Sabine, San Augustine, 

Angelina, Trinity, Houston, Madi on, Robertson, Falls, Bell, Lampasas, San 

Saba, McCulloch, Concho, Tom Green, Irion, Reagan, Upton, Crane, Ward, 

Culber on, Resb'es, Hudspeth, and El Paso in the State of Texas und all the 

remainder of the said State lying north of such counties. 

16. Western Pennsylvania District: Counties of Potter, Clinton, Center, 

Mifflin, Huntingdon, and Franklin in the State of Pennsylvania and all of the 

rE;!mainder of the said State lying west of such counties. 

(35) 

0 


UNIVERSITY OF FLORIDA 

II I II IIIIII Ill Ill lllll lllll II IIIIII II IIIIII Ill Ill 111111111111111 

3 1262 08585 2845