The New York herald., 1922-04-08
new BUCKET THREAT
BY STOCK EXCHANGE
Members Face Drastic Dis
cipline if Caught Deal
ing With Outlaws.
PULLERS IN UNDER BAN
Cromwell Tells of Policy to
Get Reports and Trial
Balances Monthly.
TO REMEDY TRADE EVILS
Plea Made to Help Small In
vestors Escape Temptations
Of Dishonest Brokers.

Seymour l.. Cromwell, president OF
the New York Stock Exchange, In a
speech before members and their
partners yesterday. revealed a new
system to insure greater safety to
customers of New York Stock Ex-
change houses. Member houses will
be compelled to take trial balances as
often as once a month and in addi-
ton, the exchange will submit to each
house twice a year a QUESTIONABLE.
which when answered will furnish
the exchange authorities with a re-
liable index of each firms status.
No excuse whatever will be con-
sdered by the exchange for failure to
comply with the requirement as to
trial balances. And as a result, Mr..
through insolvency of a Stock Ex-
change house practically will be
eliminated.
Another important point dealt with
conduct of business by a stock ex-
change house with a bucket shop.
1T has been a sad commentary on
the intelligence of some of our men,
bers." he said. that all warnings. pub
lie and private. which have been given
should have failed to persuade them
that dealing with dishonest non-member
firms can not be tolerated by the New
York Stock Exchange. A, few more
weeks will, I hope. see the end Of
these sinister partnerships
In this connection. the president de-
clared that 1t is not necessary for the
governors OF the exchange to prove
that member knows that he is dealing
with firm taking the side opposite to it's
customers. The exchange need only
prove that the firm with which he Is
dealing is following that practice and
that he did not use sufficient diligence
IN finding out the character of the
business of that firm.
Lax Methods Criticized.
I Mr.. Cromwell attacked the lax
methods or some stock exchange men,
bers In selecting representatives for
branch offices. He was particularly Bit
ter regarding the ''puller-in," whom he
characterized as "the man who wants
to make good with the firm at any. cost
to ethics and high standards of busi-
ness" The puller-in. he declared, musi
go In this conection Mr.. Cromwell
declared soliciting of stock business
over the telephone should be confined
to the business conducted between a
house and Its clients.
Discretionary accounts. as they are
known in Wall Street. that is brokerage
accounts where the customer has given
to an employee of the house the right
to buy and sell without a specific order
on each transaction. were chara cterized
by the president as dangerous and
against the spirit of legitimate business
Many complaints have been made ia
the exchange. he said, based on trans
actions of this kind.
THE customer takes such profits as
may come contentedly," he said. "but
when loss comes. as come 1t must. he
is very apt to feel he has been imposed
upon, IL not defrauded.
Mr.. Cromwell deprecated the tendency
OF small traders>,to speculate. but he
asserted that the exchange should en-
courage and aid legitimate investment
IN small lots. This class OF trader. he
pointed out, Is the meat upon which
the bucket shop thrives and he declared
that one of the exchanges chief prob
lens is how to circumvent plans by
which the bucketeers induce the small
trader to speculate. He raised the dues-
tion as TO whether or not the selling OF
stocks on part payment basis by bona
fide brokers would remedy this evil.
Question of Earning Expenses.
oNf,, ox., belief" he said 'fs that any