New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1901-07-11
HE SAYS HE WAS UNSOLICITED.
THAT HE SAID THE FIRM HAD
HYPOTHECATED IN A GRIM
NAL MANNER.

Frank Sullivan Smith the assignee of the broker
age firm of Henry Marquand Co., kept busy
yesterday contrad!cting explaining statements
that he was alleged to have made about the firm 8
methods hypothecati ting securities that had been
bought for the accounts Of its customers previous
to its recent failure. He protested that he had
been misquoted In certain papers in way that
placed the firm in the light Of selling securities
belonging to customers, in violation OF law ana
equity. He declared that he had not asserted that
the firm had made itself crimnally liable by by
pothecating the stock of customers
1T Is true thai the firm hypothecated stock
bought for account of customers. Mr.. Smith said
In the afternoon. but that is being done every
day by brokers In the city I not yet In po-
sition tell If there has been Illegal or fraud
ulent hypothecation of stock. 1t will be several
days before the examination of the firms books by
the expert accountants is completed.
"As officer of the court. will 1t be your duty
to report II there has been any criminal sale or
hypothecation of stocksT' he was asked
ut would be my duty to let the persons IN inter-
est know the facts he replied.
One of the experts engaged in the investigation
of the books of Henry Marquand & Co. to whom
Mr. Smith referred The Tribune reporter. said that
II was the rule for brokers to hypothecate STOCKS
when customers bought stocks and put up margins
only. The broker had to buy the stocks, giving his
check for the entire amount of the purchase price
He then borrowed back large part of the price
by using the stocks collateral for a loan at the
bank. Such method enabled broker TO operate
with a smaller cash capital. If a customer put up
the entire cost of stocks. however the broker used
the customers money purchase the stocks ana
he had right to hypothecate the stocks Inc IN
vestigation of the books of Henry Marquano q 90
would show If the firm borrowed money on stocks
which were paid for outright by customers or mad
sold such stocks without authority. Inc expert
said yesterday that the investigation had not dis
closed such transactions but the investigation mad
not been finished and could not be completed for
several days.
Mr.. Smith referred yesterday to the hypotheca-
ton of bonds of the Pittsburg. Shawmut anu
Northern Railroad. saying that while the hrm Oh
Henry Marquand a Co. had a contract TO sell the
bonds It turned that the bonds were partly sold
and partly hypothecated and 1t would appear ina (
the firm wanted retain control or the STOCK on
railroad construction purposes more than $500,
Mr. Smith said, land what bonds or the ralroa9
the members of the fu did hypothecate they mao
a right to hypothecate, LIS technical matter only
and I guess pretty "ei understood between tiie
parties Interested. ~
Mr.. Smith said that the loans OF Henry Mar ar
uuand e. Co. appeared to be well secured put tIe
accounts of the customers had not been hlVesIi,
gated fully enough TO tell how much the hrn wouid
be able to pay the customers II prooaoly
would be a week before he could make a statement
as 10 the and liabilities Of the hrn