The New York herald., 1922-02-24


securities and return the excess cash.
That balance does not belong to the
broker or to tie receiver. 1t belongs
primarily to the customers whose Sc
curities were in that loan in proper
ton to the amount of their claims.
This is subject to one limitation.
Where a broker has violated his duty
to his paid in full customers and has
pledged some of their stock in the
same loans will, securities of margin
customers the paid in full customers
claim against the surplus of the loan
is placed in class A and the margin
customer in class B. The surplus re-
ceived from the loan is first dis
tributed to the class A until they are
paid in full and the balance, if any, is
divided among class B. In no event,
however, does failure to reclaim Sc
I curities or the cash realized from
their sale take away from a customer
his right to participate in the general
fund and he can lose nothing by at
tempting reclamation other than the
expense to which he may be put.
Suit often Inadvfsable.
While 1t is possible to recover in
this manner there frequently arises a
very considerable question regarding
TIE advisability of reclamation pro-
ceedin2s. From the standpoint of the
! general creditor reclamation proceed
lngs usually are not advisable, accord
ing to Richard b. Hand, So Wall
street. of counsel for the reclamation
committee of l.. w. Wagner G. Co.,
creditors. Mr.. Hand said:
Every successful claim opcrates to
reduce the amount available for dis
tribution to the general creditors
| Neither is recourse to reclamation
! proceedings particularly advantageous
to the receiver or trustee. The more
claims of this nature filed the more
work the receiver and his counsel will
nave to perform, and no commissions
are paid on securities reclaimed.
| From the standpoint Of the long
customer the answer varies in each
particular case. Two factors are most
important: Cd the amount OF securi-
ties at the time of the failure and (2)
the cost of reclamation PROCEEDINGS.
ut is obvious that these proceedings
1 cannot be successful IL there are at
the time of the failure no securities on
hand Of the kind the customer was
carrying. II the broker before the
failure sold ali the securities in his
7 possession or pledged them for the
last cent he could get it would be
little Or no Use to attempt reclamation
proceedings.
! "On The other hand, If the broker
had legally lived up to his obligations
toward his customers and his long
| stock account was in good condition
the great ma jority of his "iong" Gus
toners VINO resorted to these proceed
ings would receive a large percentage
of their claims, perhaps. in numerous
cases, ever be restored to the position
that they occupied at the time of the
bankruptcy.
Two Bankruptcies Compared.
| "1n the case OF f. d. Dier & Co, for
example, it is reported that there are
| little or no securities on hand and
very small equities in the loans. It
nigh well be useless to institute rec
lamation proceedings in such a case
unless, OF course, a particular Gus
toner could identify some particular
| security which appears to be on hand.
In the case of =. w. Wagner & Co,
however. it IS reported that the stock
accounts were in very good condition
and that the loans had large equities.
In such a case the majority of long
customers resorting to reclamation
proceedings will succeed In regaining
all or most OF their claims.
"The second factor is the costs OF
proceedings. The burden on the indi-
vidual claimant comes rather high.
For that reason customers OF bank
rupt concerns frequently organize to
render more practical such work and
to keep down the expense to a figure
which is within the reach OF ALL
'1n a failure where there are a large
amount OF securities on hand and
loans showing n large equity, II is un-
doubtedly to the advantage OF n long
customer to undertake reclamation. II
he succeeds he may find himself re-
stored TO the same position he was in
when the broker failed. If he sue
ceeds, in part. he gets that much more
than the general creditor. If he loses
entirely in reclamation he still is en-
titled to receive the same pro rata
share that he would have received had