The New York herald., 1922-02-24

account Win the DrOkeT at the time
That is to say, If person has been
tion and his account was closed bef
small hope of getting HIS money
back. He would not be a creditor, in
the eyes Of the law, at the time OF
the bankruptcy.
For a person to whom the broker
owes money or stock at the time of
the failure, however, there lie two
courses for recovery:
First, he may file his claim along
with the general creditors and share
in whatever percentage of the total
liabilities finally are met.
Second, he may institute reclama-
tion proceedings for the recovery of
his stock.
Full Paid Securities Exempt.
The matter Of becoming a general
creditor does not require a great deal
OF explanation, inasmuch as the lay
man is pretty generally familiar with
the ordinary courses Of bankruptcy.
1t is largely a matter of filing claim
waiting to see how much the receiver
can salvage out OF the wreckage and
taking a pro rata share, thanking
what gods there be for that. How
much he win recover Of course, de-
pends on the ratio of assets to liabili-
ties.
In order to understand the right of
a customer to reclaim his securities
from the receiver of a bankrupt stock
broker. it is first necessary to under
stand the legal relations between the
brokerage firm and it's customers who
owned '1ong" securities.
A customer who has paid in fun for
his securities is the absolute owner OF
them. The broker has no right to
these securities and no claim on them
He has no right to sell, pledge or 9TH
erwise dispose of them. In an honest
brokerage firm such securities are
usually kept ain the box" which
means that they are kept in the
brokers' safe deposit vault. Whenever
the customer demands such securities
the broker is under legal obligation to
return them.
Has Right to own Securities.
The customers right to have these
securities is not affected by the bank
ruptcy Of the broker and the appoint
ment of a receiver. He has the abso-
lutte right to have his securities de-
livered to him by the receiver IL he
can identify them among the seeuri-
ties coming into the hands Of the re-
ceiver. The simplest case, of course
is where the securities are in the
name OF the customer. In that case
the securities are useless TO the broker
unless the customers Endorsement is
forged, and are therefore almost cer-
tain to be in the box. In this case the
customer is certain to recover, regard
less OF the claims of other customers
If the securities have been indorsed
by the customer they are more likely
10 Dt SOtQ OT pleuSeu ny the DTOkeTl
But IL they do come into the receivers
hands the proof OF ownership IL
equally clear, and the customer car
secure their return regardless Of the
claims of other customers.
Usually. of course, the securities are
not in the name OF the customer, but
stand in the brokers' name so that
they would be good delivery" In
Stock Exchange or loan transactions
Even then It is occasionally possible
to identify particular securities by
certificate numbers or otherwise.
Many often Claim stock.
It often happens. of course, that th'
stock is not readily identifiable and
that there are more demands for stocl
than stock found in possession of thu
bankrupt by the receiver. Such
condition results in conflicting claim:
which are determined according TO th'
circumstances. That would necessarily
mean that all creditors seeking to re-
claim their stock could not recover In
full. They would then fall in the class
OF general creditors for the remaindei