New-York tribune., 1909-06-17

/ part of the reporD IS Illuminating. but the X
change. with the penary power over members
and their operations. could provide correctives
the committee says.
on the subject of margins, the report says:
Purcha sing securities on margin is as legitimate
in which part payment Is deferred. We therefore
radical change suggested that margin trading he
PROMPTED In preference therefore. TO recommend
courage speculation upon small margins and upon
its power. prevent members from soliciting and
generally accepting business on less margin than
70 per cent
NOT OPPOSED TO SHORT SALES.
AS to short selling. the report says:
We have been strongly urged to advise the pro
The tbeo that If IS wrong 70 seTee tn sell what
one does not possess. but that such sales reduce
the market price OF the securities involved We do
not think that # is wrong TO agree 70 sell some
thing that one does not now possess. but expects
to obtain later Contracts and agreements TO seIi:
not possess at the time Of the contract are com
restraining unwarranted marking up and down of
prices has been suggested TO us.
In 1912. It is noted. the New York Legislature
passed an act declaring all contracts FOR the sale
Of securities void unless the seller was at the
time the actual owner or assignee or authorized
by the owner to sell the securities. This law
was repealed in 1858 by statute still in force.
The committee does not look with favor on
suggestion made 10 II that there should be
requirement either by law or by rule OF the
Stock Exchange that no one should sell any
security without identifying it by number or
otherwise.
Manipulation Of prices by large interests is
divided by the committee into two classes. The
first. resorted to for making market for issues
OF new securities, IS declared 10 be essential to
the organization and carrying through Of i'm
portant- enterprises. The second class which IS
designed to serve merely speculative purposes
in the endeavor to make profit the result of
fluctuations which have been planned in ad-
vance. is pronounced open 10 serious criticism
the committee adding:
While we have been unable to discover any COM
change itself. we are convinced that the exchange
prevent the worst forms Of this evil by exercis
prevent them. When contin1ed rnanipulation ex1 X
lists. il is patent 10 experienced observers.
WASH SALES" CONDEMNED.
Coming to a consideration Of manipulation
based upon fictitious or wash" sales the report
characterizes such transactions as open to the
severest condemnation. They are, however, for
bfdden by the rules of Ill regular exchanges and
are not enforceable at law; and the report saws
are less frequent than many persons suppose
As TO matched orders" the report says:
Since they are legal and binding. we find dIf-
Where The ac,fttiss iegisatlye remedy But
certain securities become extreme as 10 indicate
officers in charge Of the exchange would be remIss
unless they exercised their influence and authority
upon such members in a way cause them to de-
sis from such suspicious and undesirable activity.
The report recommends legislation designed
to bring within the penalties of the criminal
law certain practices revealed through some Of
the failures Of Stock Exchange houses within
the last two years, saying:
We have taken testimony on the subject Of recent
failures OF brokers. where IT has been discovered
their public declaration Of failure and where their
cTelvlties @ I aIIet dheir insolvency not only caused
etst I l3ss 10 tlelr customers but also, owing TO
their efforts to save themselves from bankruptcy
cases Of this cRarsceP theTe shod be EGF s%
analogous TO that forbidding banks 10 accept de-
posts after insolvency is known; and recon-
mend a statute making il misdemeanor fer a
broker 10 receive any securities or cash from any
chsses or sales for his own account after he has
become insovent; with the provision that a broker
shall be deemed insovent when he has on his
books an account or accounts which, II liqudated
would exhaust his assets. unless he can show that
he had reasona nle ground to believe that such
The % Of q Tsggr4g gg. 6 sts3s ag69Ty h y
exchange, analogous TO that required OF banks
has been urged upon US Yet the relations be-
fdentia nature that do not recommend
examination of their books by any public authority
The books ard accounts of the members of the
exchange should, however. be subjected TO PERIODIC
examination and inspection pursuant to rules and
the result should be promptly reported 10 the gov
ernors thereof
The Stock Exchange management, in the
committees judgment. could under proper
system Of supervision check wrongdoing by
member firms before it had resulted in disaster
involving scores or hundreds of innocent Gus
toners Again. having in mind some recent
cases, the committee makes this recommended
tIon:
When broker sells the securities purchased for
part, except upon the customers default, dis
poses them for his benefit. he should be held
guilty OF larceny, and we RECOMMENDED statute to
that effect.
THE BRANCH OFFICE LURE
AS to the branch offices. concerning which
much has been printed of late. the report says:
Complaint has been made OF branch offices in the
city OF New York. often luxuriously furnished and
liquor. The tendency OF many OF them is to in
the lure of the ticker by the temptation of
creature comforts, appealing thus o many WI
would not otherwise speculate. The governors of
the exchange inform that they realize that soule
these Offices have brought dscredit on the ex-
change. and that certain occasions they have
used their powers TO suppress objectionable feat
ures II seems TO US that legitimate investors and
pelled 30 do business at the main Offices and that
nard and fast rule against all branch Offices I'm
the city Of NeT York might well be adopted by the
exchange.
Reasons for the opinion of the majority of
the committee that Incorporation of the stock
We have been strongly urged to recommend that