Evening star., 1934-02-21
INVESTMENT BANK
CHANGES DRAF TED
Some Code Leaders Desire
Also to Create Separate
Bond Exchange.
BY CHARLES r. .SPEARE
Special Dispatch to the Star.

NEW YORK, February Ain the
old era of easy money and quick
profits. the nomenclature of Wall
Street contained certain picturesque
terms and phrases which described
the method of distributing securities
oy investment dealers to the public.
For instance, one house offered its
clients an issue in advance of an
other syndicate member, so "it beat
the gun" Firms and individuals put
IN subscriptions to a popular offering
and sold out on the immediate prem
lum, never having advanced any
money. They took a free ride" or,
as a special concession, the country
banker was 'let in on the ground
moor by receiving a discount of "a
OF l per cent or perhaps a small
syndicate participation IL or 2 per
cent under the market, and the pesti-
ferrous bond salesman went his ring
ing the doorbell" round from dawn
till dewy eve."
Code Changes Cited.
All this is to be changed by the
cooe which the investment bankers
OF the United States have been dis
cussing in 26 cities this week. II you
do not believe it, read Articles V. vi
ana VII Of this document. This
orlngs the ultimate consumers of
bonds to a common level, where thev
al pay tile same price for what they
buy are equally protected during the
lie OF the issue they hold, and, un-
less they give their permission in
writing, do not have to devote a GER
tain portion Of each business day to
answering telephone calls or meet
ing In person the representatives of a
bond-selling organization.
With the rigid securities act set
up IN form that will handicap their
traoe In new capital issues, the in
Vestment bankers, like the officials of
tne stock Exchanges, are fastening
10 confess their former faults by MAX
ing sure they do not again become
a part Of common practice They are
rooVlng out evils In Syndication and
distribution that have turned so many
against Wall Street in the last few
years.
Inc code OF the investment bankers
Will be a hair shirt to MANY mem
bers OF the A. B. A but there are
enough willing to wear it to make II
tne fashion in 1894 and thereafter
Some of the investment bankers who
nave been actively engaged in prepar-
lab Ine new code also believe now *
lhe time to separate dealings in bonds
from trading in stocks They ARGUE
tfiat the rules laid down for stock ex-
change practice in both the Dickinson
and Fletcher reports should not apply
TO dealings in bonds as they do to
transactions in stocks.
Want Separate Exchange.
They advocate a New York bond
exchange, physically apart from the
New York Stock Exchange, with its
members subject only to their own
rules and as distinct from the latter
exchange as the cotton exchange is
from the produce or metal exchanges.
A firm or an individual might be
member Of both exchanges. The eff
fort would be 10 enlarge the scope of
ofhclaI control of dealings in bonds SO
that much OF the trading now being
done over the counter would come
under the supervision of the bond ex-
change. This would broaden the
markets for Treasury and municipal
issues and for the large number of
unlisted public utility and industrial
loans.
One good effect, 1t is claimed, would
be to keep stock salesman out of the
bond market and bond statesmen from
becoming solicitors of stock business
when demand contracted in the par
ticular field Of the one or the other
One provision of the investment
bankers code is that no salesman may
be employed on commission who has
had less than two years experience IN
the security business. 1t was quite
common in 1928-29 for automobile or
shoe statesmen to turn bond statesmen
overnight and gather in commissions
of $4,000 to $4,000 a year from the
guillible public.
Copyright. 1884,