The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-02-22
BY JOHN w. LOVE
Scrinns-Howard staff Writer

ScrlppS-h0WdTu Otdn NIltcI
To start again the stream of capt.
tai that used to support the heavy
industries, the investment bankers
of the United States are this week
working on a code of fair practices
which they hope will do more to re-
store confidence than the securities
act can.
Meetings in twenty-siX cities were
held recently to go over the fair
practice rules which committees OF
the Investment Bankers Association
of America have been drawing up
for several weeks.
First gIimpses of the rules by
many of the securities dealers
showed them the requirements were
more stringent than some of them
had been expecting, but the group
advocating their adoption is con-
WINGED that little short of such Sc
verify is needed if the public is 60
ing to return to the securities
markets.
These rules are not to be con-
fused with legislation proposed for
the control of the stock exchanges
The investment bankers are usually
the people who sell new securities
to the public, either stocks or bonds,
while the brokers are the men who
deal for others in the market for
old securities.
The proposed trade practice rules
however, are part of gigantic
movement to regularize all securi-
ties dealings in the country. This
is being violently discussed in all di-
rectionS.
Control Retail Selling
house selling of new Sc
curities is ruled out under the pro-
posed rules except where the GUS
toner gives his written consent
This is part of an important section
dealing with the control of retail
selling. In every way what used to
be known as high pressure selling is
curbed.
Another important group Of rules
would standardize the retail sales
made by investment bankers on the
lover the counter" transactions
These are usually securities not
listed in stock exchanges, and SO
the chances for taking advantage
of the buyer or the seller have al
ways been great. The Roper COM
mittee recently doubted whether
these sales could be regulated at all
but the Fletcher-Rayburn bill in
PRODUCED Feb. 10 goes farther. and
the investment bankers would &C
farther still.
Their effect is to require the
dealer to explain the situation thor
oughly to the customer as tc
whether, for instance, the dealer is
acting for himself in transaction
or for another customer, and to tel
the customer what the commission
amounts to on the deal.
High commissions are said almost
invariably to accompany the diStri-
button of weak or doubtful securi-
ties, and these are easy for the Gus
toner to recognize if he is told
what the commissions are. He can
see how high the pressure is. Nat
urally the commissions will not al
ways be the same. 1t will vary with
the activity of the unlisted markets
and with the speed and difficulty Of
making the sale.
Bank Officers Barred
One Of the sections that ill in
terest anybody who has ever owned
a collateral trust bond requires the
issuer of the bond to announce il
in the newspapers whenever an i'm
portant substitution Of collateral il
made. A mortgage securities house
for example, can't. pull a frs
mortgage out of the collateral in e
collateral trust bond issue and stick
in a second mortgage without tell.
ing the world.
The trustee which holds these Sc
curities Ga bank or trust company
can not be interested in their dis
tribution. No officer Of a bank /:
allowed to participate in syndicate'
anyway.
When it comes to the question o.
deciding whether an important
substitution of that sort has beer
made-a substitution which sub.
stantially affects the character" Of
the property pledged - the dealer
may have to abide by the decision
of the code authority for his dis
trict, and he has to sign in advance