n 
 
 You and Your Broker 
 
 YOUR DUTIES ^ND RIGHTS AS CUSTOMER 
 HIS OBLIGATIONS TO YOU AS AN AGENT 
 
 A Handbook fir inves- 
 tors and Traders which 
 Explains the Terms and 
 the Methods of Brokerage 
 
 COMPILED FRO 
 | APPEARED IN THE 
 
 M ARTICLES WHICH HA\ 
 MAGAZINE OF WALL STREET 
 
 
 
 
FOREWORD 
 
 HIS booklet is compiled solely for the purpose 
 of educating the broker's client in the intricacies 
 of the brokerage business. There are so many 
 chances for misunderstandings between broker 
 and client, that much of the broker's time is occupied in 
 explanation, and, on the other hand, the customer, not 
 understanding the reasons for certain acts on the part of 
 the broker, decides without due consideration, that he is 
 being taken advantage of. The various chapters in this 
 booklet cover all the recognized subjects of controversy. 
 
 In addition, the addenda contains the rules for transfer 
 and delivery, which in the past have been very acceptable 
 to the managers of branch offices and correspondents. 
 
 All the information given has appeared in The Maga- 
 zine of Wall Street at various times. That which was in 
 some of the older numbers has been brought up to date to 
 apply to present conditions in the business. 
 
 It is especially valuable for the investor or the trader, 
 as it is the only compilation which goes into the subject 
 from the viewpoint of both client and broker. 
 
 In the case where the illustrations do not conform to 
 the particular method of the broker, the basic principles are 
 set forth, so as to be applicable to every situation. 
 
 Articles and arrangement by 
 
 ROBERT L. SMITLEY. 
 
 Regulations covering transfer of stocks and bonds by 
 permission of James L. Mayberry. 
 

 CONTENTS 
 
 How to Choose Your Broker 1 
 
 Why Securities Should Be Transferred 3 
 
 What is a Fair Interest Rate and Why? 7 
 
 The Eight Way to Give an Order 10 
 
 How to Read a Broker's Statement 14 
 
 How Margin is Computed 18 
 
 Delayed Deliveries The Stock Power 22 
 
 Various Reasons for Complaints 26 
 
 The Authorization and Proxy 31 
 
 Lost Certificates The Safe Deposit 35 
 
 The Course of An Order 39 
 
 Transfer Taxes How to Check Them. 44 
 
 Rules for Transfer of Stocks and Bonds 48 
 
 New Jersey Regulations 51 
 
 Corporation Requirements 52 
 
 New York Stock Exchange Rules 53 
 
 Notarial Acknowledgment Forms 56 
 
 COPYRIGHTED 1917 
 
 BY 
 THE TICKER PUBLISHING Co., INC. 
 
Choosing Your Broker 
 
 THE majority of customers of brokerage firms know very little about 
 the firms with which they do business. In most cases, the customer 
 becomes a client on account of his personal acquaintance with the 
 manager or one of the partners ; because he is attracted by an advertisement 
 or market letter; because the firm has a reputation for making money for 
 its customers ; or the association might come about through banking con- 
 nections. It makes but little difference how the customer happened to become 
 a client, he should know all there is to know about the firm with which he is 
 dealing. 
 
 Safety First 
 
 No sane man deposits his money in a bank until he has made a study of 
 the officers and directors of the bank, noted its latest statements, and assured 
 himself that the bank is a very strong institution. And it is a peculiar fact 
 that very few if any, sane men ever take the precaution to investigate their 
 brokers. 
 
 It is a known fact that the firms with large capital, whose business is 
 very large know about the "pools" and the incidentals of some particular 
 stock before the movement up or down is apt to begin. Many of these 
 large firms apportion a participation for each of their customers in these 
 "good things" and it is the desire of every trader to belong to such a 
 clientele. This particular service of the larger firm may offset the desire 
 for the more personal service of the smaller firm. 
 
 The Matter of Personality 
 
 Personality often enters into the relation of broker and client to an 
 undesirable degree so far as the interests of the client are concerned. When 
 a client is placing his money for banking, speculation or investment, it is 
 the duty of such client to make an impersonal investigation. He may find 
 that the most unattractive personality offers the safest service and the best 
 information. Neither incorporation of the exchanges, or any governmental 
 control will help the client in solving this problem. He must do it for him- 
 self. The old rule, "Let the buyer beware," is as important in the selection 
 of a broker as in any other form of business. 
 
 Suggestions to Follow 
 
 The following are a few general suggestions for the client to follow in 
 the investigations as to where it is best to open an account : 
 
 1. Decide, according to the nature of the proposed business, whether 
 you desire personal attention with a small firm, or the advantages of a large 
 firm. 
 
 2. If the intention is to carry large debit balances in the account, the 
 large firm is preferable. 
 
 3. An investigation of the personality of the members of the firm is 
 very necessary. Are they big spenders, or noted as heavy speculators, or 
 are they conservative with good moral reputations and accredited with the 
 ability of discerning financial acumen? 
 
 1 
 
 :-^ 
 
4." HoW'do'tliey treat their employees? Are they well paid and do they 
 work under good physical conditions ? 
 
 5. What kind of a man is the customer's manager ? 
 
 6. Is the firm rated with the financial agencies, such as Dun's or 
 Bradstreet's and what is the general opinion of its resources among its 
 competitors? What do the partners tell you about the approximate capital 
 which is invested in the business ? 
 
 7. What are the facilities for keeping the customers well informed? 
 Does the firm keep up to date in its subscriptions with the financial mag- 
 azines, the news bureaus, the statistical agencies, and general business con- 
 ditions? Will the customer be informed regularly regarding dividend 
 periods, assessments reorganizations and other important data, or will the 
 customer be permitted to wander through the financial mazes alone? 
 
 8. Is the detail of the office so well organized that the client may get 
 information about his account at once and with accuracy ? 
 
 9. Has the firm such connections as will enable it to at once locate 
 the best markets, get the earliest data regarding new market movements, 
 and secure participation in new and good investments and speculations? 
 
 10. Will the firm permit trading with inadequate margin the greatest 
 of all financial sins and will the rules ever permit an account to fall below 
 a ten per cent, basis ? 
 
 11. Does the firm enjoy easy access to all good markets for the pur- 
 chase or sale of securities, or does it have to charge an extra commission 
 to effect a proper execution of orders ? 
 
 12. Is the "Floor Member" efficient, always at his post, reporting your 
 transactions at once, or will you suffer delay? Does the ticker, or official 
 report of transactions, correspond with the reports of your broker? 
 
 13. When you have stocks or bonds paid for, does your broker put 
 them in an envelope marked as your personal property until such a time as 
 you contract a debit account with him, or does he use what you own 
 "outright" to carry on his business ? 
 
 14. What is the character and standing of the other customers whom 
 you may happen to meet ? Are they investors, speculators, or chance takers ? 
 
 Ask the above questions, and more of a like nature, if you desire, but 
 always remember the old motto, "Caveat Emptor." 
 
Transfer of Securities 
 
 The old saying that "Possession is nine points of the law," was and is 
 never more applicable than in the case of owners of stocks and bonds. 
 There are few, however, who realize just what "possession" means in this 
 case. The fact that one may have the actual securities in his safe deposit 
 vault or have his broker's account show him to own such securities, is not 
 nearly so determinate a meaning of the word as when the securities are 
 actually registered in his name and such registry appears upon the books of 
 the company. 
 
 Whenever securities are really owned, they should, without exception, 
 be transferred on the books of the company and registered on their face 
 in the name of the owner. 
 
 If a controversy should occur between broker and client, the broker 
 has the burden of proof on his shoulders in making any claim; for the 
 company recognizes as owner only the name on its books, corresponding to 
 the number on the certificate. If the owner, neglects to hay? fofL St 0fk 
 transferred to his own name the legal burden of proof rests with him. 
 It is universally recognized that the defendant in any action, whether of a 
 legal or merely arbitrary nature, has the advantage of the aggressor. The 
 registration of securities, therefore, is a distinct insurance in favor of the 
 owner, and it does not cost him one cent. 
 
 Penalty of Non-Transference 
 
 The brokerage clerk will tell any stock owner that about the most 
 difficult feature of his work is to collect dividends for customers who have 
 refused or neglected to have the certificates transferred. An instance 
 recently occurred in the case of a holder of Nipissing Mines stock. A 
 customer held two thousand shares and received it from his broker just 
 before the dividend paid previous to that declared as of December 31, 1915. 
 The certificates were in forty or more different names, all unknown to the 
 present holder. The company paid the dividend to its registered holder, not 
 recognizing the real owner, because the latter had not transferred the stock. 
 The owner realized his misfortune too late, for the company will not collect 
 the dividends for him. The broker succeeded in collecting all except for 
 - two hundred and twenty shares. The owner of two hundred shares had 
 disappeared in Alaska and the twenty share man could not be found at any 
 registered address. 
 
 It should not be necessary to point out the moral in the above case. 
 To make matters worse, the broker always charges a commission of one 
 per cent, of the dividend when he does collect for the client. Suppose the 
 stock had been American Tobacco, which pays 5 per cent, quarterly. The 
 loss to the owner would have been in the nature of a disaster. 
 
 Chances In Not Transferring 
 
 The chances in not transferring non-dividend stocks that is the 
 chances for loss are not so great ; nor do they come often, but when they 
 do come they are serious. An example is the case of the Wabash stocks, 
 before the recent re-organization. Let it be supposed that Brown owned 
 500 Wabash common. He knew that the stock did not pay a dividend and 
 never would, so he never bothered to have it transferred to his name. When 
 
Wabash went into the receiver class, Brown was in British Columbia, or 
 very ill in a hospital. The company sent out announcements and the receiver 
 sent out his plan for re-organization to the registered stockholders of the 
 500 shares but nary a word did Brown see. In consequence he did not 
 pay his assessments or go into the new company and his stock became 
 worthless. (It so happened that in the Wabash case it was cheaper for the 
 owner to allow his holdings to pass as worthless and buy the "when issued" 
 stock), but this was not the case in the Missouri Pacific situation or many 
 others. There are some non-dividend paying stocks which combine with 
 other concerns and issue Tights. Unless the owner is accustomed to scan 
 all newspaper advertisements and to frequent brokerage offices, he stands a 
 chance of missing a valuable document from the company, unless the stock 
 is in his name. Recent instances of this nature are the Driggs Seabury- 
 Savage Arms combine and the United Fruit Co. rights. How many owners 
 of Braden Copper, who have neglected to transfer the stock, could tell just 
 how much Kennecott or cash they were entitled to ? How many holders of 
 Guggenheim stock could tell how much Kennecott, cash, Smelters, Ray and 
 Chino they should get, or how much cash was left with the company rep- 
 resenting equity in their stock? The importance of registering every share 
 of stock owned in the owner's name cannot be emphasized too strongly. 
 
 Sanitary Considerations 
 
 Before leaving this phase of the subject, there is one other element 
 which should induce every owner to register stock in his name. It is that 
 of cleanliness and newness. A clean, new certificate, without powers-of- 
 attorney stamped all over its back, is a much better possession than a dirty 
 crumpled, indistinct piece of parchment, on which the reading is recognized 
 with difficulty. This feature is an added phase of the insurance. 
 
 In Case of Death 
 
 The owner must desire to protect his heirs in case of death. Not long 
 ago the owner of 100 shares of a non-dividend paying stock brought it to 
 a broker for sale. He had held the stock for a period of five years, and as 
 the stock did not pay a dividend and never promised to, had not transferred 
 it to his own name. When the broker made delivery of the stock to the 
 purchaser, the latter at once recognized the name in which the certificate 
 stood to be that of one of the Wright brothers who had died some months 
 previously. 
 
 It required many months of legal red tape to elapse before the real 
 owner could get his money from the sale. This is but one of the pitfalls 
 for the careless owner. If he had died also, in the above case, the complica- 
 tions would have been serious. Transfer the stock to your own name 
 at once and sign it, in blank, on the back, if you wish to make things easy 
 for either yourself or your heirs. 
 
 In Case of Sale 
 
 A fourth kind of insurance by having stock in your name is in the 
 matter of the sale. There is no question then as to forgery, and no doubt 
 as to the right of the individual, on the face of facts, to dispose of the 
 security in any way that he sees fit to do so. It is only a few years ago 
 that the newspapers were full of the accounts of the forgery of some La- 
 clede Gas stock. It is easy to imagine an innocent purchaser having one 
 
 4 
 
of these forged certificates delivered to him on a purchase, not selling it 
 for five years, and then having the purchaser find it to be a forgery. If he 
 had made efforts to have the stock transferred at once to his own name, the 
 loss, if any, would not fall upon him ; for he could at once return the stock 
 to his broker, who has ten days in which to return a "bad" delivery to the 
 original seller, before he can be forced to participate in any loss of this 
 nature. 
 
 Lost Certificates 
 
 But there is a fifth kind of insurance and really a very important one: 
 lost certificates. How much easier it is to get a new certificate from the 
 company if it is lost in the owner's name, than if lost in someone else's 
 name! The various corporations have different rules in the matter of a 
 lost certificate, but in a general way they are: notification to the transfer 
 office to have the transfer stopped ; notification to the various exchanges on 
 which the stock is traded ; advertisements in various newspapers, and finally 
 a bond covering double the value of the certificate. 
 
 These rules are easily complied with in case the stock is in the owner's 
 name. If it is not, proof of legal ownership must be rigidly established, the 
 owner must notify the registered owner, even if he be in the trenches in 
 Flanders, and various other legal steps must be observed in addition to 
 the ordinary usages. It is inconceivable how any owner of stock can refrain 
 from having the securities transferred at once to his own name, after realiz- 
 ing the chances he takes in not doing so. 
 
 Matter of Expense 
 
 The large odd lot brokerage firms have forced the general brokerage 
 firms to accept stock sold to them by transfer. This uses up the original 
 sales tickets on which the revenue stamps are affixed. Unless the customer 
 permits the broker to give his the customer's name to the seller, the 
 stock will be delivered to the broker in the broker's name. If at a later 
 date the customer instructs his broker to transfer the stock to his own name 
 from that of the broker's, additional revenue stamps are required. 
 
 The stock exchange does not permit the broker to pay for these addi- 
 tional stamps, so that a second charge must fall upon the customer. It is 
 therefore advisable for the customer, if he intends to pay for the stock, to 
 have it transferred to his own name immediately upon information of the 
 purchase by his broker. This is a very important feature of the brokerage 
 work in Wall Street today but very few customers take advantage of the 
 situation and delay in instructing the broker to use their names. If all such 
 cash customers lived up to their duty, which duty is to their own advantage, 
 the broker and customer would be better satisfied. This act upon the part 
 of the customer also insures him against the so-called "bucketing" of his 
 orders in a questionable broker's office, and insures him against any loss 
 in case of the failure of the firm with which he is dealing. 
 
 The situation in bonds is somewhat distinct from that of stocks, because 
 there is always a better market for bearer, coupon bonds than for registered 
 bonds. But there is also a way for protection in bonds in most cases. 
 Almost all issues of bonds provide for the registering of the principal only. 
 The broker can take any ordinary coupon, bearer bond purchased and 
 have the principal of the bond registered. The coupons remain as they 
 
were, bearer coupons. The owner may then fill out a separate bond power 
 to cover this particular bond, and before its sale have the bond re-transferred 
 to "Bearer," to make it a bearer bond for delivery. Bearer bonds are, by 
 far, more negotiable than stock certificates. 
 
 There is, therefore, more reason why protection should be sought in 
 this class of investment than in other forms of securities. Economically, a 
 bond is a negotiable instrument, while a stock is not, but the endorsement 
 of the stock in blank has made the stock to all intents and purposes a 
 negotiable instrument in Wall Street procedure. But in purely legal pro- 
 cedure, the bond is easier to transfer as property. There are no taxes to 
 pay in either transferring the principal of the bond to a name or back to 
 bearer, other than the inheritance tax in case of the owner's death. It is 
 therefore advisable for the investor to insure himself against forgery, theft 
 and loss by registering the principal of his bonds. 
 
 Read Your Certificates 
 
 How many owners, on receiving a certificate of stock, read all that is 
 printed thereon? Very few. This should never be neglected. During the 
 recent rise in the International Mercantile Marine stocks, innumerable 
 people sold what they thought was stock only to find out on presentation 
 of the certificate to their brokers that it was Voting Trust Certificates which 
 they owned. Delays therefore ensued, while the broker sent the stock to the 
 Hudson Trust Co. at Hoboken, N. J., for exchange and the customer was 
 compelled to pay a double Federal tax before his sale could be made. 
 
 Is your purchase callable at a price far below that at which it was pur- 
 chased, as in the case of the Supulpa Oil Pfd. shares formerly traded in on 
 the New York curb? Is it a voting trust certificate? Is it only a tem- 
 porary certificate exchangeable for definitive certificates at a later date? 
 Was it purchased with a syndicate and is it "Withdrawn from Sale" or not ? 
 Many an investor thinks he has something and finds he has nothing. There 
 are today in existence Montana Power Co. installment stocks which have no 
 value until certain contracts materialize, and these may never materialize. 
 It is possible to deliver one of these certificates to a purchaser who thinks 
 he has bought regular common stock. Unless he reads very carefully, he 
 may find himself saddled with a loss. Read and understand everything 
 printed on a certificate of stock and read every word of the body of the bond. 
 
 Some Rules to Follow 
 
 Valuable suggestions for the investor are: 
 ^1) Have the stock registered in your name at the time of purchase. 
 
 (2) Read the body of the certificate with care and understanding. 
 
 (3) Be sure and ask for and send in a dividend order to the transfer, 
 office. 
 
 (4) Register the principal of your bonds whenever permissible. 
 
 *f5) Collect all official data sent out by the company and put it away 
 with your security, after you have read and digested it. 
 
 (6) Understand the purpose and value of your rights when offered by 
 the company. 
 
 The above rules carefully followed, will give to you all to which you are 
 entitled and are an insurance, without expense, against theft, loss and 
 forgery. 
 
Loaning Rates on Securities 
 
 UNLESS one has been actively engaged in all phases of the brokerage 
 business, the question of interest rates is usually an enigma. Fur- 
 thermore, it is difficult to explain in just ordinary words because so 
 many technical features enter into the subject. The inquiry department of 
 The Magazine of Wall Street has had hundreds of inquiries on interest 
 matters and this article, in a measure, is a general reply to all these in- 
 quiries. 
 
 The subject had best be divided into three captions and each one dis- 
 cussed separately : Call and Time rates, Stock rates, and the Brokers' rates. 
 
 Call Money 
 
 The so-called renewal rate for call money which is published in the 
 daily newspapers, has really very little to do with the actual situation ex- 
 cept to determine a sort of "clearing rate" for the day. Money may open, 
 be lent, on the Stock Exchange at about 1 1 :30 a. m. at 2 per cent, and 
 possibly a million dollars may pass from the bank to broker at this rate. 
 The renewal rate is then established and communicated to all those in- 
 terested. The broker may be borrowing from ten to fifty million dollars 
 from many financial institutions, and he at once tries to renew his call loans 
 at 2 per cent. If these loans had been standing at 3 per cent, the day pre- 
 vious, it is barely possible that one million out of ten will reduce to the 
 renewal. The rest continue to stand at above 3 per cent., or 3 per cent., or 
 may be 2^2 per cent. But, if the broker's customers are carrying many 
 industrial stocks, he will have to make special loans, and all industrial loans 
 average from y 2 per cent, to 1 per cent, above the renewal. The banks 
 all know that it would be impossible for the broker to pay all loans which 
 do not renew at the renewal rate, and even if the broker tried to pay them, 
 the sudden demand for money would force the rate up higher than before. 
 In addition to this feature, many financial institutions do not loan above 
 6 per cent., notably the National City bank. After a period of high money, 
 these banks do not reduce their interest so rapidly, although they may put 
 out new money at the prevailing rate. 
 
 The Average 
 
 A typical day's average for the broker on the first or second day of 2 
 per cent, money is as follows, basis ten million : 
 
 $500,000 odd lots (less than 100 shares for each collateral) at $y 2 per cent. 
 $1,000,000 special loan, possibly on active curb stocks at 3 per cent. 
 $3,000,000 industrial money at 3 per cent. 
 $1,000,000 industrial money at 2% per cent. 
 $2,000,000 regular money not marked down, at 2^ per cent. 
 $3,500,000 regular money at renewal at 2 per cent. 
 
 The average, therefore, is 2.825 per cent., which is quite a difference 
 from the renewal rate quoted in the newspapers. 
 
 All brokers find it to their advantage to protect themselves and their 
 customers by taking about T /4 to 1-3 of their money on time at a specified 
 rate. This prevents sudden calling of too many loans and is a kind of 
 insurance for the general average if money should be very high on the 
 
call. If the broker at the present time, averages his $3,000,000 time money, 
 part of which will no doubt be "industrial or special" at about 3^4, he will 
 be doing very well. The reader's attention is called to the fact that a 
 regular loan usually consists of 60 per cent, rails, full 100 share lots and 40 
 per cent, good industrials, full 100 share lots. 
 
 The above time money may range all the way from 5 per cent, down 
 to 3 per cent, and the broker's average now, in connection with call money 
 would be a combination of the two elements, or 3.04 per cent., on a day 
 when money renewed at 2 per cent. 
 
 But there is yet another element. Many customers deal in curb or 
 outside securities which the banks will never admit to loans. It is therefore 
 imperative that the broker loan the customer the money. The broker never 
 values his money less than 6 per cent., and if his capital amounts to 
 $2,000,000, this third element must be averaged in with the former. On 
 the above basis, the real average for the day would be 3.433 per cent., and 
 money renewed on the Stock Exchange at 2 per cent. 
 
 The Bank's Position 
 
 There is a clique of banks furnishing funds to brokers whose loan 
 clerks confer daily to establish their own renewal, notwithstanding what the 
 Exchange renewals may be. There are other banks which never loan 
 below 2^2 per cent., and yet others whose minimum is 3 per cent. For 
 the large borrower, it is necessary to deal with these high priced banks, 
 as it is only possible for a bank to loan one firm a specified amount based 
 on its capital. In all, there are only about seventy-five financial institutions 
 in New York loaning call money, but when the call rate reaches 4 per cent, 
 and 5 per cent, out of town banks like the Continental and Commercial of 
 Chicago, the Union Trust Co. of Pittsburgh and hundreds of others enter 
 the field, either direct or through New York correspondents. 
 
 Stock Loans 
 
 In accordance with the rules prevalent in New York, deliveries of sales 
 of stock must be made before 2:15 p. m. the following day, except in the 
 case of Friday sale, when delivery is made on the following Monday. If 
 the sale is a "short" one, if the stock is coming from out of town or from 
 abroad, or for any other reason which prevents actual delivery of the cer- 
 tificate sold, the broker must borrow it. The business of loaning stocks is 
 kept up on the floor of the exchange from 9 :45 a. m. to 3 :30 p. m. This 
 is sometimes the salvation of a firm with inadequate capital, or one doing 
 more business than its capital should permit. The lender gets market value 
 for the stock lent and it is kept at market value during the period of the 
 loan. The lender of the stock pays interest on the money he receives, 
 except in certain exceptional cases, and he does not have to put up 20 per 
 cent, margin from his capital. 
 
 If the stock lent is an active one and there is plenty about the "street," 
 the lender will pay the renewal rate of call money for the day on the total 
 sum he has received from the borrower. If the supply of the stock is very 
 low, the rate decreases in a ratio governed by supply and demand. For a 
 very inactive stock like National Biscuit or Sears Roebuck, the rate would 
 probably be "flat." The lender of the stock gets the use of the money 
 without paying any interest. When a real large short interest, or an 
 artificial one, appears in a stock it very often loans at a premium. In other 
 
words, the lender not only gets the use of his money free, but gets a bonus 
 for lending his stock. The premium usually runs by the day and is based 
 on the par of funds. The usual premiums run from l /$ per cent., or $25 
 per day per 100 shares to 1-256% or a little over thirty-nine cents per day 
 per 100 shares. Sundays are never counted in computing premiums and 
 it is the custom now to omit Saturdays from a charge day. 
 
 The loaning rate of stocks, like the renewal rate of call money does 
 not always represent the true condition of the short interest in a stock. It 
 is very likely that the recent premiums on New Haven and Industrial 
 Alcohol did represent a large short interest, for the floating supply of these 
 two stocks were not large at times. The writer recalls a time when certain 
 large speculators were carrying thousands of shares of Amalgamated 
 Copper, but even after selling these shares they were not delivered and the 
 brokers openly borrowed fifty thousand shares at one time. Many firms do 
 not like to show their actual position in the market and arrangements to 
 borrow are made privately. Not many weeks ago a certain Stock Exchange 
 firm borrowed thirty thousand shares of Steel common by arrangement over 
 the telephone wire. 
 
 Risks 
 
 There are many risks for the firm lending stocks. A sudden rise in 
 the market may cause a failure to the borrower and the stocks would have 
 to be bought in "under the rule" at a much higher price and therefore a 
 loss. But several large firms make it a practice to loan stocks only when the 
 rate is low, flat or at a premium. One large firm saves between fourteen 
 and fifteen thousand dollars each year by taking advantage of this situation. 
 
 The Customer's Status 
 
 The general custom is to give the owner of stock, which is loaned at a 
 premium, the full premium. The firm does not get, or should not get this 
 advantage. In the case of short interest accruing from stock borrowed for 
 a short account, the customer rarely gets any profit from this, unless the 
 short sales are very large when he may demand that his broker divide the 
 short interest on a basis of 3^ or 1-3 to the customer. Very few customers, 
 however, take advantage of their opportunities to make money through 
 short interest. 
 
 The margin account of a customer is usually charged from Y^% to 
 4% above the average cost of money to the firm. In addition to this, few 
 customers realize that they are paying compound interest on a monthly 
 basis. The interest charge on an account is determined by these elements : 
 the average cost to the firm for the month, the added increment to pay 
 for handling the account, and the class of stocks carried. If the customer 
 is carrying an account made up of 100 share lots, half active rails and half 
 active industrials, he will be charged the minimum rate by his broker; if he 
 is carrying various odd lots, he may pay J4 to 1% more ; if it is all industrial, 
 the rate will probably be */>% more than the minimum, but if the account 
 consists of inactive issues or unborrowable curb issues, the minimum will be 
 6%, and if money has ruled high for the month, may be more than 
 6%. It costs much money and there is considerable risk in margin accounts. 
 It is only fair that the broker make enough from this phase of his business 
 to cover these costs. 
 
Elemental Principles of Buying and Selling 
 Securities 
 
 THE MAGAZINE OF WALL STREET receives hundreds of inquiries bear- 
 ing on the relationship, in a business way, of client and broker. These 
 inquiries are very seldom so serious as to require legal interference, and 
 almost all of them bear upon some misunderstanding on the part of the 
 client with the ordinary customs of brokerage. This chapter purposes to 
 deal with some of the very elementary rules and regulations of the brokerage 
 business. They may be well known to the consistent trader or investor, 
 but the casual investor or the beginner should observe them carefully. 
 
 The Order 
 
 When the client has made a careful study of the firm with which he 
 purposes to trade, has investigated its responsibility, appreciated its repu- 
 tation for good service, and is satisfied with the integrity of the partners, 
 he desires to give an order for the purchase or sale of securities. If the 
 order is given over the telephone the client must first be certain that the 
 recipient of the order is a responsible person ; that is, a partner, the office 
 manager, one of the customer's managers, or the accredited order clerk. 
 It is well to be certain of the name of the representative of the firm receiv- 
 ing the order over the telephone and when the order is given the man who 
 receives it should be obliged to repeat it back, after writing it down, so as 
 to avoid all errors. The telephone order should also be confirmed by letter 
 from the customer. If the order is given at the office of the broker it may 
 be verbally given, but it should be written on a regular order form and 
 signed by the customer. Every safeguard possible should surround the 
 giving of an order and when the order is filled the customer must make 
 certain that he receives a written notice within a very reasonable time. 
 
 Safeguards 
 
 \Vhen the customer desires to change the limit or price of an order 
 already placed with the broker it is very necessary not to forget to cancel 
 the original order. This oversight has been the cause of large losses ; for 
 the broker, especially when busy, places the burden of correctness of orders 
 on the customer. In an active office so many hundreds of orders are placed 
 every day that the order department becomes mechanical, much as a type- 
 setter of manuscript. 
 
 In an active market, when the ticker is far behind in time, the customer 
 may be surprised to find his market order filled at a price points or fractions 
 of points some distance away from the ticker price at the time he placed the 
 order. If he is in the broker's office at the time, he may verify the purchase 
 or sale price by following the ticker. If he is at a distance from the office 
 he must rely upon the integrity of his broker. On a fairly active day in 
 stocks, orders placed before the opening of the market should be given not 
 later than 9:45 A. M., because the confusion on the Exchange during the 
 last fifteen minutes before the opening is so great that a late order may be 
 filled some minutes after the opening and the opening price lost. In this 
 case the broker cannot be held responsible. 
 
 10 
 
On all inactive stocks, the client should ask for the bid and offered 
 price before placing a market order, also if the order is for an "odd lot," 
 less than 100 shares, and the opening of the stock reads on the tape "5000 
 Union opened from 140 to 137" the client must be satisfied with any fair 
 average. The custom is for the odd lot brokers to make an opening price 
 for odd lots arbitrarily between the above prices and all clients must abide 
 to this decision. 
 
 Stop Orders 
 
 The "stop order" has caused more controversies than any other kind of 
 an order because the general run of customers do not understand what a 
 stop order means. Suppose the customer owns fifty shares of U. S. Steel at 
 107 and gives his order to the broker to sell this fifty shares at "104 stop." 
 There are three possibilities for the fulfilling of this order. The order is 
 not good until Steel sells at 104. As soon as a sale is made at this price 
 the stop order becomes effective. If other brokers are bidding 104 for 
 more Steel, the customer will get 104 for his fifty shares. If only one 
 order was desired at 104 and the original sale was made on this one bid, 
 leaving the best bid at 103%, the customer will get the latter price. The 
 stop order at 104 is not a limited order. It never means that the customer 
 will get 104 for his stock, although he may get this price. It means that as 
 soon as a sale is made at 104 the stop order automatically becomes a 
 "market" order for any price. If the customer entered this order Monday 
 evening, when Steel closed at 105, and on Tuesday morning Steel opened at 
 102, the customer would receive a price of 102 or less on his order to sell 
 "stop" at 104. 
 
 If the customer had his stop order in to sell his Steel at 104, and the 
 following day Steel opened 10 points lower, or at 94, the order, automatically 
 becoming a market order, would be filled at the best obtainable price near 
 94 the opening price. 
 
 The customer must always bear in mind that the placing of a stop order 
 is not a guarantee that he will get the stop price. The result may be very 
 much lower, but the stop order is the best obtainable insurance for the 
 trader. 
 
 Bond Orders 
 
 Orders in bonds are rarely if ever given at the market, unless the issue 
 to be purchased or sold is a very active one. It is always safe to get a quo- 
 tation on bonds before giving an order. On the Exchange the bond dealers 
 are the most arbitrary of any class of security dealers and great care must 
 be used in this department. Almost all members of the Exchanges find it 
 best to give their orders to the regular bond dealers who form a class by 
 themselves. Whenever possible, ask for a "firm" bid or offer which means 
 that such quotation is not apt to be withdrawn at once. 
 
 Curb Orders 
 
 When giving orders in Curb securities, unless the customer has an 
 accurate knowledge of the market, it is much safer to put in a limited order 
 first and ask for a quotation. Sometimes the difference between the bid and 
 offered price is very far apart and there is no way to check up the purchase 
 by watching the ticker, for there is no ticker. Curb orders must be very 
 carefully given and practically entire reliance must be placed in the broker. 
 
 11 
 
There does exist a so-called official list of Curb sales, but it is not accurate 
 by any means because there are no regular reporters such as the Stock Ex- 
 change uses, and the broker may report his sale on the Curb or he may not. 
 
 Official Lists 
 
 If the customer gets his report of a purchase or sale at a price which 
 does not appear on the ticker reporting such sales for the Exchange ; if, in 
 addition, the newspapers and so-called official stock exchange list does not 
 show a transaction at this price for the day, the customer may make his 
 broker prove such a transaction, and if it is correctly compared with the 
 broker at the other side of the transaction it must be placed on the official 
 lists as sent out by the Exchange. If the official lists will not print such a 
 transaction, there is something wrong which should be investigated by the 
 customer at once, even to taking the matter up with the broker whose name 
 appears upon the report as having been the second party to the transaction, 
 or the Secretary's Department of the New York Stock Exchange. 
 
 Unlisted Orders 
 
 The most dangerous pitfall for the customer relative to orders is in the 
 inactive, unlisted stocks or bonds traded in "over the counter," or private 
 sales between brokers. Giving a market order in this class of security is 
 inviting a loss. Brokers of this nature make their livelihood by trading for 
 their own account and not as agent, so everything depends upon the integrity 
 of the broker. In every transaction of this nature at least two "unlisted" 
 brokers should be made to compete on a quotation and the quotation should 
 be given on the "firm" basis. In untechnical language, the broker should 
 be asked for a quotation which would remain constant for several minutes 
 for the purpose of comparison. If the customer is dealing through a regular 
 commission house in this class of stock or bonds, he may ask the firm to 
 give him the name of the "outside" or "unlisted" broker quoting or demand 
 several quotations. 
 
 Kinds of Orders 
 
 An order given during the day, unless otherwise specified, means that 
 it is only good for the day on which the order was given. If the customer 
 sends in a letter, "Sell 100 Steel at 105," the broker is privileged to accept 
 this order for the day only. The customer may mean the order to be good 
 until filled, but he must say so in his letter, or he must not object if the order 
 is cancelled at the end of the day. 
 
 The following are various forms of orders : 
 
 1. The simple command without other notation means good for the 
 day only. 
 
 2. An order accompanied by the letters G. T. W. means that it may be 
 kept good until the closing of the market on the Saturday following the day 
 the order was given. Good This Week. 
 
 3. An order marked G. T. C. means that it is good, or to be kept alive 
 until countermanded. Its life is at the command of the customer. Good 
 Till Countermanded. 
 
 The G. T. C. order is the favorite order of the investor and its perma- 
 nent feature until filled, makes it the best of the order systems. Customers 
 should always specify this G. T. C. when giving orders so as not to confuse 
 the broker with a day order. 
 
 12 
 
4. Stop orders may be placed under any of the above three forms. 
 
 5. Unless otherwise marked any of the above four forms means that 
 the customer, when the transaction is completed, expects to deliver or re- 
 ceive the stock or security before 2:15 P. M. the following day, except in 
 case of Friday when the transaction is completed on Monday. 
 
 6. If the customer desires to sell a security which he will not be able 
 to deliver to the broker for two or three days, he may sell "at three days" or 
 "seller three," which gives him the privilege of waiting that time or making 
 delivery on one day's notice to the buyer. 
 
 7. Another form of selling or buying is with a thirty-day extension, 
 which follows the three-day form in like manner. 
 
 8. Estates selling securities which need legal papers, or Western cus- 
 tomers, or foreign customers, selling inactive stocks or bonds which cannot 
 easily be borrowed, often sell "delayed delivery" which is in reality a kind 
 of gentlemen's agreement between the brokers to wait any reasonable length 
 of time for the completion of the transaction. 
 
 General Suggestions 
 
 In cases where the purchase or sale of "when as and if issued" securi- 
 ties are involved, it is well to consult the broker before placing the order to 
 find out what kind of contracts are necessary. The same applies to reorgani- 
 zation securities where the certificates are not issued. 
 
 Do not lose your temper when you believe that you have been unjustly 
 treated ; for there may be a perfectly good reason. If in serious doubt, con- 
 sult authorities, such as the Inquiry Department of the MAGAZINE OF WALL 
 STREET, and present both sides of the case and all the facts. Only as a last 
 resort consult the legal features of a difference. Oftentimes a compromise 
 can be effected and it costs less. Be absolutely clear and in giving a bond 
 order, always describe the bond in full, giving the "due date" of the bond, 
 and interest periods. Be certain to designate "common," "preferred" or 
 "first preferred," etc., when dealing in stocks, and if the stock is in pro- 
 cess of reorganization, where a committee issues certificate of deposit, desig- 
 nate that you desire to deal in certificates and not stock. 
 
 13 
 
The Broker's Statement How It Should 
 Be Checked 
 
 THE writer is not guessing when he states that 90 per cent, of the men 
 and women who have speculative accounts do not know how to prove 
 their monthly statements from the broker, or, if they do know how, they 
 are careless in checking the statement. Not one of these careless customers 
 would permit a tradesmen's bill to be paid without going over it carefully, 
 but the same element of risk on account of errors enters into the broker's 
 statement as well as the tradesmen's. Nearly all accounting in some one or 
 more phases is subject to possible errors and all brokerage firms use the form 
 of "Errors and Omissions Excepted" when rendering a statement. 
 
 The Simple Form 
 
 There is no universal form of statement rendered by brokers, but all 
 the forms used can easily be reduced to the fundamental elements: Cash 
 credits or debits, Purchases and Sales, and Interest. The form shown with 
 this article combines all the three fundamentals. John Jones deposited 
 $1,000 and also received a dividend from his Steel com. : these are the cash 
 transactions. He purchased Steel and Anaconda and sold part of his Steel 
 and Anaconda: these are the purchase and sale items. He was charged 
 interest, which completes the fundamental possibilities of a Long Account. 
 Put yourself in Jones' place and check up the statement. 
 
 The first item, a credit of $1,000, was put up as margin. This is to be 
 checked with the customer's memory or his check stub. The second item, 
 the purchase of 100 Steel at 108, must be examined. The commission is 
 $12.50 and the total proves to be correct for the debit side. The third item 
 is a credit of a cash amount of $300, which is a dividend on 100 Steel com. 
 For convenience, we will permit Steel to be ex-dividend and payable the 
 same day. Jones must find out that Steel paid 3% and be sure he received 
 $300 credit. Then there is a sale of 50 Steel, which is a credit. The sale 
 is at 106 and the commission of $6.25 and also $1 New York State tax is 
 to be deducted from the total credit, which was $5,300. In the next instance 
 Jones purchased 100 Anaconda, to which $12.50 commission must be added, 
 and later sold this Anaconda at 83^. On the sale the $12.50 commission 
 is to be deducted and Jones must find out the par value of his stocks, which 
 will show him that since Anaconda is only $50 par value, the New York 
 State tax to be deducted from this credit is only $1 and not $2, for the tax 
 is based at the rate of 2 cents for every $100 par value of stock or fraction 
 thereof. 
 
 There is left, to check, the item of interest. Nearly all brokerage book- 
 keeping is based on the 6% method for convenience of the bookkeeper. This 
 is later reduced to the rate which is to be charged, whether 2, 3 or 4%. A 
 simple and easy proof for Jones is to multiply the principal amount by the 
 number of days between the day the debit or credit originated and the last 
 day of the same month, then mark off three places from the right of the 
 total and divide by 6. This result is 6% of the item. On the example shown 
 the difference in favor of the debit side of interest is $23.28. The broker 
 charges Jones 3%, so that he is debited one half of the amount at 6%, or 
 $11.64. Jones will then add up both sides of the account to find if it is 
 
 14 
 
properly balanced and also add the amount of stocks purchased and the 
 amount sold, to balance these. Finally he will check the money and the stock 
 brought down for the next month. 
 
 Short Accounts 
 
 The average brokerage firm separates "Short Accounts" from "Long 
 Accounts." There are some who do not do this and the customer should 
 request that the two accounts be kept separate and two statements rendered 
 monthly instead of one statement. The broker, as a rule, will allow a credit 
 interest on margin deposited for a short account, but does not allow interest 
 on the credit balances. However, when a short account reaches very large 
 proportions, sometimes the broker will allow the customer a share of the 
 interest which the broker gains from lending the money to borrow the stock 
 for the customer. 
 
 There are times, also, when the broker will charge 4% or 5% interest 
 on a Long Account, but only allow 2% interest for margin deposited for a 
 Short Account. There are also instances where brokers charge the pre- 
 vailing average interest rate for the month on debit balances but only allow 
 the customer 2% on credits on the theory that small amounts cannot be 
 loaned out at a good rate. The customer has a perfect right to object to 
 such a method and may insist that all margin be deposited in his Long Ac- 
 count and credit be given at the same rate as the charge. If the customer 
 has two accounts, Long and Short, no item of interest will appear in the 
 statement of the Short Account. It is the best plan for the customer to have 
 his broker divide the accounts as designated. The confusion of the lay mind 
 in checking is thereby avoided. 
 
 It is the customer's duty to find out why a certain rate of interest is 
 charged, if he has any doubts as to the propriety of his broker's charge. 
 
 Compounding the Interest 
 
 The broker renders the customer a statement at the end of each month. 
 If the customer has a debit balance of $12,000 the interest at 6% for the 
 first month will be about $60. This is added to the debit balance and the 
 interest charge, at the end of the second month, is based on the debit of 
 $12,060. Thus the interest is compounded twelve times a year. If the 
 customer had borrowed this $12,000 at his bank on a year's note there would 
 be but one interest to compute. A great many customers, therefore, find it 
 convenient to pay the interest charge each month, thus saving the interest 
 on interest. If the customer retains a credit balance less than $500 with 
 his firm and the account is not active ; that is, if no purchases or sales are 
 made, the law prevents the broker from allowing any interest whatsoever. 
 
 Watching the Dividends 
 
 All dividends accruing on stock purchased belong to the customer and 
 not to the broker. The broker is also liable for these dividends. But, to 
 be on the safe side, the customer should find out as soon as a stock is pur- 
 chased, how much it pays in dividend, when the books close (the com- 
 pany's books) for payment to stockholders of record, and the date the divi- 
 dend is paid. When the monthly statement is rendered, part of the check- 
 ing should be to determine if the customer has been credited the dividend 
 in full and on the proper date. If the customer is "short" stock he must be 
 
 15 
 
charged with the dividend, for it belongs to the individual from whom the 
 stock is borrowed. It is necessary here also to be certain that the charge 
 is a correct one. 
 
 If the dividend accruing to the customer comes from a foreign corpora- 
 tion such as the Canadian Pacific Railroad Co. or the Dome Mines Co. Ltd., 
 the broker is forced by the Income Tax law of this country to deduct 2% 
 from the amount unless the customer furnishes an ownership certificate 
 claiming exemption under the tax law. For the ordinary U. S. citizen 
 desiring to claim such exemption the form of certificate, number 1000B, is 
 used, and for the firm, 1001. 
 
 Checking the Bonds 
 
 Bonds purchased or sold for the customer offer the greatest difficulty. 
 These should be checked for errors very carefully. Unless otherwise speci- 
 fied, bonds are sold "with interest." The customer who buys a bond with 
 
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 interest due on April 1 which is purchased on March 1 pays interest to the 
 seller from the preceding interest date, which is likely to be in this case 
 Oct. 1. The customer is then entitled to the full coupon due on April 1. 
 No coupons will be cashed without an ownership certificate and it is the 
 duty of the customer to provide his broker with such ownership certificate 
 before the date of April 1. 
 
 The extension of the charge for the purchase may easily be proved by 
 figuring the interest at the bond rate from the previous period of payment 
 on the 30 days a month basis. Usually the broker itemizes his interest in the 
 statement. If he does not do this the customer should insist upon it. 
 
 Customers must make certain that they are not charged interest on 
 When Issued trades. The broker has simply given a contract for this class 
 of purchase and no money passes unless the price on such purchase falls 
 rapidly, when the broker, who purchased, may be asked to deposit margin 
 
 16 
 
covering such difference in price with a trust company. In this case the 
 customer is properly charged with interest on the amount so paid. 
 
 The customer should ask about the loaning rates for stocks which he is 
 carrying in his account. If such stocks should loan at a premium that is, 
 if the demand for borrowing is so great that the borrower is willing to pay 
 a bonus the customer is entitled to such premium or bonus. This item 
 should be credited to him on his statement and it is possible to check it by 
 estimating the number of days the stock loaned at a premium and multiply- 
 ing by the premium rate. Thus if 100 New Haven loaned at a 1/16 premium 
 for 5 days the credit to the customer should be 5 times $6.25 or $31.25. 
 
 Another item to investigate is charge for collection on out-of-town 
 checks. The Federal Reserve system now has a definite charge for every 
 locality and it is very easy to get such a list of charges from the bank where 
 the customer's account stands and check it against any such charges appear- 
 ing on the statement. 
 
 The very first thing for a neophyte in the business to do is to have his 
 brokers explain every item of the statement. And it is not only errors of 
 commission, but errors of ommission, which may cause trouble. Therefore 
 the customer must fortify his knowledge by a thorough knowledge of the 
 business before entering it. The knowledge of the par value, dividend rate 
 and dividend date of all stocks dealt in, the knowledge of the why and 
 wherefore of the interest charge, the certainty of the commission charges 
 on the Stock Exchange, Curb and Unlisted departments all these are 
 part of the customer's necessary education. It is better to get this educa- 
 tion first hand, by inquiry, than to get it by experience and monetary loss. 
 
 17 
 
The Matter of Margins Rights of Broker 
 and Client 
 
 MARGIN is the equity actually belonging to the customer who has 
 an account with his broker. If a man owns a house and lot for which 
 he has paid $10,OOOand on which he has placed a $6,000 mortgage, his equity 
 is $4,000. This $4,000 is his margin in the property. If he buys 100 Steel 
 at 113 and gives his broker $1,000, his margin is $1,000, and there is no 
 economic difference between the real estate deal and the stock deal. Should 
 the property decline in value to $8,000, the margin would be reduced to 
 $2,000. If, in the second case, Steel declines to 110, the equivalent of 3 
 points on the 100 shares, the margin is reduced $300 and becomes $700. In 
 brokerage, relating to stock and bonds, margin is figured on the basis of 
 points : each point loss on 100 shares reducing the margin $100 and each 
 point gain increasing the margin $100 on 100 shares of stock, or on ten 
 $1,000 bonds. The clearest idea for the customer to utilize in understand- 
 ing margin is to think of it as an installment on the purchase of stock or the 
 buying of an option. To quote Todman "If he deposits a ten point margin 
 on a stock selling at par, he can carry ten times as much stock as he could 
 if he had to pay the full purchase price, and his profits or losses are cor- 
 respondingly increased." The margin for a "short" account is considered 
 in exactly the same manner, only the situation is reversed in the matter of 
 price. The rise in the market decreases the margin in this case. 
 
 Therefore the margin on a "long" account can -be denoted in formula 
 as follows: 
 
 Selling price Debit Balance-r-No. Shares = Point Margin. 
 The Margin on a "short account" can also be in formula : 
 Credit Balance Purchase Price-f-No. Shares = Points Margin. 
 
 
 
 Margin Card 
 
 JfayJ* 
 
 96 
 
 II, 0.00 
 
 990 
 
 9.600 
 
 20.^79 
 
 1.070 
 
 ledger Account 
 
 
 
 DR. 
 
 lto 
 
 /OO Mul otnw 
 
 44* 
 
 CR. 
 
 11.312 
 
 e.m 
 
 vf 
 
 1. Market price at close of March 22. 
 
 2. Actual difference of balance of ledger a/c. (subtract Cr. from Dr.). 
 
 3. Excess of sales value over actual debit. 
 
 4. Divide 210 share long into 1070 = 5 + points margin. 
 
 5. Success Mines not figured as any value. 
 
 6. Allowance must be made for interest and commissions. 
 
 7. Steel margined to 105, Utah to 91, Bond to 90. 
 
 \. St. Paul sold profit enters into ledger balance. 
 
 18 
 
The Amount 
 
 There is no set rule regarding the amount of margin necessary for the 
 customer to deposit for speculative purposes. This amount depends upon 
 two elements : the kind of security speculated in and the conservative or 
 anti-conservative position of the brokerage firm. However, custom has 
 decreed certain rules of a general nature which rules generally act as a basis 
 for marginal transactions. The ten per cent, margin on active securities 
 dealt in on the New York Stock Exchange is about the minimum that any 
 "good" firm will accept and the customer is much better protected by keep- 
 ing a margin of from 20% to 50%. This 20% rate would cover specula- 
 tion in stocks like the active copper issues, Utah, Ray, Chino, and Anaconda, 
 or in rails such as St. Paul, New York Central, Union Pacific or Atchison. 
 An inactive stock or a very high priced stock such as Delaware, Lackawanna 
 & Western, National Biscuit or Bethlehem Steel (before the change in 
 parity), would probably demand a very much higher margin, but the amount 
 would depend upon the judgment of the broker who carries the account. 
 There are really very few curb securities which are carried on margin un- 
 less they are of a nature which the broker can use in his loans. Such 
 issues as Magma, Midvale Steel, Lima Locomotive and some of the motor 
 stocks are acceptable and can be carried much as regular Stock Exchange 
 stocks. Other issues with a low par value and low price can be carried on 
 a ten point margin by the customer, and in this case the broker usually 
 loans the difference from his own capital. The better grade of oil stocks 
 and mining stocks and some industrials are of this class. Mining stocks 
 selling at cents per share are seldom, if ever, classed as marginal stocks 
 by conservative firms doing Stock Exchange business and mining stocks 
 which are mere prospects, are debarred from marginal rights. 
 
 Unlisted and Bonds 
 
 Very few firms will accept unlisted securities on margin, except where 
 the particular unlisted security has been "brought out" by the same firm 
 with which the customer is trading. The market for unlisted stock is 
 usually so wide, the bid and offer prices usually are points apart instead of 
 eighths apart, that there would be little chance of protection for the broker 
 in time of panic. But if Jones & Co. introduced American Manufacturing 
 Co. to the public, they have a certain knowledge of the market, so if the 
 trader desires to carry this stock on margin, he is apt to be successful with 
 Jones & Co. while no other broker would even think of accepting the ac- 
 count. However, there are exceptions to every rule and almost all brokers 
 will accept the better grade of Public Utility unlisted stocks as margin to- 
 day. Stocks like Cities Service and Republic Ry. & Light are in this class. 
 It must be remembered, however, that in all the stocks mentioned as illustra- 
 tions, the consideration which the broker has in mind is not value but 
 marketability. 
 
 Listed bonds are very little better as margin so far as the broker is 
 concerned than unlisted bonds. Bonds are considered as good margin 
 material when they are not used in large quantities. 
 
 The Legal Side 
 
 According to the general laws of nearly all states, the broker cannot 
 sell the account of the customer trading on margin to protect himself with- 
 out first giving due notice to the customer. 
 
 19 
 
If due notice has been given and the broker arrives at the stage of pro- 
 ceedings where the account may be sold, the law states that the sale must 
 be at a public market. The New York Stock Exchange, the Consolidated 
 Exchange and the Curb market are not public markets, and ordinarily the 
 broker must legally advertise the sale and sell at public auction. The 
 reader will readily see that such protection for the broker is no protection 
 at all. Thus, the custom arose for the broker to make an agreement with 
 each client when trading relations began, giving the broker permission to 
 use his, the broker's, discretion when it was time to sell out an account. 
 In addition to this initial agreement which each customer is usually asked 
 to sign, the broker has printed on his notices an agreement of this nature: 
 
 It is agreed between broker and customer: 
 
 1. That all transactions are subject to the rules and customs of the New 
 York Stock Exchange and its Clearing House Cor the Consolidated Exchange, 
 or the New York Curb Association, etc., etc.) 
 
 2. THat should the broker advance all or part of the purchase money, he 
 reserves the right to sell the customer's securities at said broker's discretion 
 at any time without notice and at public or private sale, when in said broker's 
 opinion the condition of the account warrants such action. 
 
 3. That all securities from time to time carried in the customer's marginal 
 account or deposited to protect the same, may be loaned by the broker, or may 
 be pledged by him either separately or together with other securities, either for 
 the sum due thereon or for a greater sum, all without further notice to the 
 customer. 
 
 Illustrations 
 
 1. Smith buys 100 Steel com. at 113 and gives his broker $2,000. The 
 broker figures the margin by dividing the 100 shares into the $2,000 which 
 gives Smith 20 points margin. 
 
 (For the purpose of illustration and to avoid too many figures, there will 
 be omitted from the illustrations the items of commission and incidental charges. 
 As above, the commission for buying and selling the one hundred shares would 
 be twice */& of 1% or $25, and the interest item would depend on the time the 
 stock was carried in the account.) 
 
 If Steel com. declines to 93, a twenty point loss, the broker would sell 
 the 100 shares, provided Smith did not place more margin. The stock cost 
 $11,300 and was sold for $9,300, a difference of $2,000, just the amount of 
 the margin. 
 
 2. Smith gives the broker $2,000 Reading gen. 4% bonds, market value 
 $2,000 and buys 100 Steel at 113. Every $1,000 bond is equivalent to 
 10 shares of stock in margin figuring. Smith has now 120 shares of stock, 
 or a margin of 16 2/3 points. The broker has loaned Smith the full purchase 
 price of the Steel, $11,300. If the price of Steel drops to 95 and the value 
 of the bond to 90 the margin will be wiped out. The broker will sell 100 
 Steel for $9,500 and the bonds for $1,800, a total of $11,300 which he 
 originally invested for Smith. 
 
 3. Smith gives his broker the $2,000 bond and buys 100 Steel at 113 
 as above, but in addition he purchases 1,000 Success Mines on the Curb at 
 45 cents ($450). The average broker will not even include this stock in the 
 margin and will deduct the $450 at once from Smith's margin credit. If the 
 bonds drop to 90 ($1,800) the broker will sell the Steel at 99%. 
 
 20 
 
First position in example 3: 
 
 .$2,000 Rdg. 4% bond $ 2,000 
 
 100 Steel 11,300 
 
 Value of account $13,300 
 
 Cost of 100 Steel 11,300 
 
 Equity or Margin $ 2,000 
 
 Second position in example 3: 
 
 $2,000 Rdg. 4% bond $ 1,800 
 
 100 Steel 9,950 
 
 $11,750 
 Less cost of Success 450 
 
 Value of account $11,300 
 
 Cost of 100 Steel 11,300 
 
 Equity or Margin $ 
 
 In the third example shown, the broker would protect himself by 
 placing a stop order on Steel at 99^ and the Rdg. bond at 90. When these 
 two were sold the account would be even, eliminating the matter of com- 
 missions and interest, and the broker woud probably turn over the Success 
 Mines to the customer to do with as he desired. When the stock declines 
 or advances as the case may be, so as to come near the limit of margin fur- 
 nished, the broker may demand any one of three actions by the customer: 
 to supply additional margin, take up the account in full direct, or have it 
 transferred to another firm. 
 
 The famous Hughes Commission reported the following on margins: 
 
 "Purchasing securities en margin is as legitimate a transaction as a pur- 
 chase of any other property in which part payment is deferred. We therefore 
 see no reason whatsoever for recommending the radical change suggested, that 
 margin trading be prohibited. . . . Two practices are prolific of losses 
 namely, buying active securities on small margins and buying unsound securities, 
 paying for them in full. . . . The amount of margin which a broker re- 
 quires from a speculative buyer of stocks depends, in each case, on the credit 
 of the buyer ; and the amount of credit which one person may extend to another is a 
 dangerous subject on which to legislate. ... In preference, therefore, to 
 recommending legislation, we urge upon all brokers to discourage speculation 
 upon small margins and upon the Exchange to use its influence, and, if neces- 
 sary, its power, to prevent members from soliciting and generally accepting busi- 
 ness on a less margin than 20%." 
 
 21 
 
Transfer of Stock Safeguarding Against 
 Unreliable Firms 
 
 ** /^ENTLEMEN: About three weeks ago I purchased 200 shares of 
 ^J Green Monster Mining stock through Messrs. Brown & Jones, and 
 sent them a check to pay for the stock in full. I asked them to transfer it to 
 my name and send it to me. I have written to them twice and all the reply 
 I get is that the stock is in transfer. I am afraid that something must be 
 wrong and I am quite worried. Are they responsible people and can you 
 tell me why I should have to wait so long?" 
 
 (Signed) JOHN SMITH. 
 
 The above letter denotes two things : The first that the writer has not 
 investigated the brokerage firm sufficiently to have confidence and the 
 second that he knows little about the conditions relating to the transfer of 
 stock. The subject is a large one and has a multitude of side details which 
 need not be a part of the knowledge of the investor, but the investor should 
 know the fundamental principles of transferring stock and the various rea- 
 sons which cause delays and trouble. In addition to this, there are safe 
 plans for the investor, living at a distance from his broker, to follow. It 
 is the purpose here to instruct in such fundamentals and offer a suggestion 
 or two for safeguarding against an unreliable firm or an over-sensitive 
 imagination. 
 
 The Form In Use 
 
 The purchase of shares of stock outright makes the purchaser a partner 
 in the corporation and, both for the new owner's protection and the safe- 
 guarding of dividends, his shares should be registered in his name, both on 
 the certificate representing ownership and on the company's books. When 
 the stock is purchased it reaches the broker in a former owner's name. On 
 the back of the certificate appears the following form : 
 
 For value received hereby sell and transfer unto 
 
 (1) Shares of the Capital Stocl< 
 
 represented by the within certificate, and do hereby irrevocably appoint and 
 
 constitute (2) Attorney to transfer the said stock on 
 
 the Books of the Within named Corporation, with full power of substitution in. 
 the premises. 
 
 Dated 
 
 In the presence of (3) 
 
 The certificate, when it reaches the broker has been signed by the 
 former owner in space (3), also duly dated and witnessed. Everything else 
 is left blank. The investor has instructed the broker to make the stock out 
 in his, the investor's name, so the broker's clerk fills in on line (1) "John 
 Smith, 123 Adams St., Chicago, 111.," and sends it to the transfer office. 
 The transfer agent of the corporation then issues a new certificate to John 
 Smith. Line (2) in the above form is filled in by the transfer agent of the 
 corporation when actual transfer is made, but this granting of attorneyship 
 is used also to make the stock non-negotiable, as, for example, when send- 
 ing through the mails. The customer owning and selling the stock may 
 desire to send it to New York from Michigan. He does not know to whom 
 the stock has been sold, so he simply gives his broker attorneyship to make 
 the transfer, by filling in on line (2) "Brown & Jones." When Brown & 
 
 22 
 
Jones receive the certificate they in turn stamp on the back another attorney 
 form and sign in blank, so that the next buyer or the transfer agent can 
 be attorney at the actual moment of transfer. 
 
 The Business Almanac summarizes the care which should be observed 
 in making a transfer. If the name is filled in wrong on line (1) there is 
 endless red tape necessary to undo the error. It is always safe for the in- 
 experienced to have a broker or bank do the transferring, and where legal 
 papers are necessary, novice attempts are disastrous: 
 
 "Transfer agents often insist upon being satisfied as to the genuineness of 
 the signatures on the back of the stock certificates, especially in cases where 
 the parties to the transaction are unknown to them. In such cases, it may be 
 found necessary to have the signatures attested by a notary, or guarantee^ 
 by some bank or brokerage house, with whom the agents have frequent trans- 
 actions. Any error in the making out of the new certificates, or their loss, 
 should be reported at once to the transfer agents. 
 
 "Administrators, trustees, guardians, etc., should use great care in making 
 stock transfers. Such persons should not, of course, have stocks transferred 
 to themselves, as individuals, but to themselves 'as administrators, guardians, 
 trustees, etc.,' as the case may be. Husband and wife should not transfer stock 
 one to the other, except through the transfer agent, unless the laws of the 
 state of their legal residence permits such transfers to be made direct." 
 
 Reasons for Delay 
 
 If the firm with which the investor is dealing is a responsible one and 
 is not of the "bucket shop" variety, it desires to expedite the orders for 
 transfer as quickly as possible. But there are various reasons for delays 
 and oftentimes the firms do not instruct the client as clearly as they should 
 
 IRREVOCABLE STOCK POWER 
 
 ICttnnt all Mtn bg 
 
 ItHtto J&PrUJH have Bargained, sold,..assigned, and transferred, and by these presents 
 do bargain, sell, assign, and transfer unto .^. ._... 
 
 _STOCK of 
 
 standing in...^..,...uiame on the books of the 
 
 represented^ certificate No. _,.:_____ ^ __; .. herewith 
 
 ... do hereby constitute and apjpomt...J#?^4/^._^ ^ 
 
 and lawful Attorney, IRREVOCABLY, fon/<?*^'....and in.. J #^Lr.-name and stead but 
 use, to sell,, assign, transfer, hypothecate, pledge and make over all or any part of tlie said 
 stock, and for that purpose to make and execute all necessary acts of Assignment and transfer thereof, 
 and to substitute one or more ocrsons with like full power, hereby ratifying and confirming all that 
 
 nby* said Attorney or.jfe<A/ substitute or substitutes shall lawfully do by virtue hereof. 
 
 3tl J8ttUfi5 Hbma-5/ . -have hereunto set__ .^f^._hand and seaT at 
 
 Signed, Sealed, and delivered in the presence ol 
 
 23 
 
regarding such reasons. The following are some of the various reasons for 
 these delays: 
 
 1. It is very possible that the transfer books of the corporation may be 
 closed, either for a dividend adjustment or for a meeting of stockholders or 
 directors. Sometimes the books of the transfer department are not open to 
 any change for four or five weeks. The broker will have to hold the stock 
 in his possession until the date for re-opening the books arrive. 
 
 2. Sometimes, especially in inactive issues of securities, there is con- 
 siderable delay in the delivery of the stock by the seller to the purchaser. 
 For example, Commonwealth Ry., Light and Power stock or Advance 
 Rumley bonds, both of which are dealt in "over the counter," and not in a 
 regular market, may be sold by a man in Denver to a New York broker 
 whose customer lives in Florida. The situation with respect to the delay 
 here is quite obvious. 
 
 3. It often happens, especially in mining stocks, that there is no transfer 
 office in New York City, but that the actual transfer must be made in San 
 Francisco, or at a mining office in Idaho. These out-of-town transfer 
 offices are notorious for taking their time, and incidentally charging a small 
 amount for each certificate issued, plus registered mail amount, so that the 
 broker very often has to write two or three letters before he can hurry the 
 delivery of the new certificate from the transfer office. 
 
 4. In cases of reorganizations or the deposit of stock with holding or 
 protecting committees, there is usually always a delay. As a rule there is 
 a stated date set for such operations and so much stock is delivered to the 
 transfer office at once that the clerical detail involved prevents quick 
 service. 
 
 5. Sometimes it is necessary for the broker to make a double transfer 
 to get the right amounts. Suppose three clients purchased a total of 90 
 shares of Reading the same day at the same time. The buyer would re- 
 ceive either a 90-share certificate from the seller "through transfer" to his 
 own name, or he might receive a 100-share certificate and give ten shares 
 in change; but, if he accepted the shares through the transfer office to his 
 own name, not wishing to give up the name of his clients, he would be com- 
 pelled to send the certificate purchased back to the transfer office, filled in 
 on line (1) to all three clients' names denoting the number due each. 
 
 Suggestions for Protection 
 
 If the client is of a nervous disposition or has cause to safeguard him- 
 self in every way, he may pay the broker a portion of the purchase price and 
 instruct the broker to send the certificates of stock to him through some 
 bank, with draft attached for the amount due. When the amount is col- 
 lected through the customary banking methods, he will be in actual possession 
 of his stock and may transfer it himself. But, being somewhat ignorant of the 
 necessary procedure, he fears to do this ; for he may make a serious error 
 in "filling" in the names, so there is suggested another idea in this con- 
 nection. 
 
 Almost everyone who can afford to purchase stock or make an invest- 
 ment has a bank account. All banks, no matter how small, have New York 
 correspondents, either direct or indirect. When the purchase is made of 20 
 Steel common by Mr. Smith, of Helena, Mont., through Messrs. Brown & 
 Jones, of New York, Mr. Smith has already sent his check or money order 
 for one-third or one-half the sum to the above-named brokers. On receiving 
 
 24 
 
notice of the purchase of the stock, Mr. Smith makes his arrangements with 
 the First National Bank of Helena, and writes instructing his New York 
 brokers as follows: 
 
 New York City: 
 
 Gentlemen : I have received your receipt for $1,000, which I recently 
 sent to you and also notice that you have purchased for my account 20 
 shares of Steel common at 116, which with your commission amounts to 
 $2,322.50. My bankers are the First National Bank of Helena, Mont., and 
 their New York correspondent is the Sixty-Fourth National Bank. Please 
 deliver the 20 shares of Steel common with bill of sale and tax stamp at- 
 tached to the customer's security department of the Sixty-Fourth National 
 Bank of New York City, who have been instructed to pay you $1,322.50 for 
 the above-mentioned shares. JOHN SMITH. 
 
 First National Bank, 
 Helena, Mont. : 
 
 Gentlemen: Please instruct your correspondents in New York City, 
 the Sixty-Fourth National Bank, to accept from Messrs. Brown & Jones 
 20 shares of U. S. Steel common and pay them $1,322.50. You may charge 
 me the above amount in my account with you. Please instruct the Sixty- 
 Fourth National Bank to ship the 20 shares to you for my account by 
 registered mail, in the name of "(Mrs.) Jane O. Smith, 321 Beachwood 
 Place, Helena, Mont." Messrs. Brown & Jones have been instructed to 
 attach the necessary sales ticket and cancelled revenue stamps, and you 
 may charge me also the necessary amounts incidental to the transfer. 
 
 JOHN SMITH. 
 The Detached Power Method 
 
 Another method of protection, not quite so sure in its insurance, is for 
 the client to make a deposit of partial payments as in the former instance, 
 and then send his broker a detached Power of Attorney, as shown in the 
 graphic with this article. The broker is fully protected in case you do not 
 pay the amount due and can go ahead with the transfer at once. When you 
 are assured by your broker, or the transfer office, if you desire ultra pro- 
 tection, that the certificate is really in your name, you may send the balance 
 due and the actual certificate with the detached Power of Attorney may be 
 sent at once. This method is also used by those who desire purchases in 
 their names but desire to leave the stock with the broker for collateral on 
 other purchases. 
 
 The Meaning of Transfer 
 
 Smith makes the following comment on transfers : "The act of placing 
 a certificate of stock or a registered bond in the name of a new owner" . . . 
 "The new owner of a stock which is in receipt of dividends or of a regis- 
 tered bond upon which interest is paid, should have it transferred into his 
 name before the closing of the transfer books for a dividend or for interest, 
 for the check for the dividend or for interest will be sent to the person in 
 whose name the stock or bond stands." 
 
 Every transfer office has its own rules and regulations in the matter 
 of transfers relating to estates, trustee funds, corporation holdings of other 
 corporations and errors and lost certificates. The banker or broker, acting 
 as an agent, will usually be glad to perform this service for clients, and it 
 is much safer to have transfers effected in this way. 
 
 25 
 
How Often Do You Complain? Have You Sold 
 
 the Right Stock? Odd Lot Prices Margin 
 
 Calls Stop Orders 
 
 many complaints do you average in a month?" 
 This question was asked by the writer and the reply come from 
 the manager of a large "wire" Stock Exchange firm, "about one hundred." 
 At first thought this total seems enormous, but there is such a diver- 
 gence of opinion between customers and brokers on matters pertaining to 
 the brokerage business, that it is really remarkable that the average is not 
 larger. You can say all manner of mean things to a man and not start an 
 argument, but the moment you hit his pocketbook, trouble begins. 
 
 Interest 
 
 The largest number of complaints are based on matters pertaining to 
 Interest and Orders. The most frequent complaint about interest is in 
 connection with the rate charged for the month. Those customers who pay 
 any attention to this detail, usually follow the averages quoted in the daily 
 newspapers and mentally take a balance, or average, for the month. When 
 their statements arrive, they find that the charge is from one to one and a 
 half per cent, higher than their calculations and, without other investigation, 
 they decide that the broker is a plain everyday robber. But just to confirm 
 their suspicions, they usually drop into some other broker's office and ask 
 the customers' man his charge for the month. This customers' man is on 
 the lookout for new business ; he knows why the question is asked and 
 quotes a rate in accordance with the complainant's idea. Maybe he gets 
 the account. But if the customer is fair, he will go back to his broker and 
 tell his story. It is ten chances to one that he will find out that there is 
 little if any difference in rates between the two firms, based on the kind of 
 an account he has or the quality of the securities he is carrying. He will 
 also learn that there is a vast difference between the average rate of the 
 broker and the average call newspaper rate. 
 
 Switching about from broker to broker is very much like changing 
 doctors every week or so. The broker learns to diagnose the client's wants 
 just as the doctor does, and if he is prevented from gaining such diagnosis 
 because the customer is impatient, the loss falls on the customer. It is 
 often better to stick to the same broker so long as he is honest and does his 
 best, rather than to take chances with strangers who have little interest in 
 giving personal service. 
 
 Orders 
 
 Orders are the basis of a multitude of troubles. Very often, the broker 
 takes a loss to save letter writing, heated controversies and the loss of 
 customers. He may take this loss when he is absolutely in the right. And 
 it is the "odd lot" orders which most often cause the complaints. The 
 customer must never forget that "odd lots," amounts of stock less than 100 
 shares, are not executed by the brokerage firm through which the custolmelPs""" 
 Business is done. There are four or five firms, with members on the floor 
 of the Exchange, who do not do business for individual customers. Their 
 
 26 
 
customers are all the other brokerage firms dealing- direct with the public. 
 The odd lot orders are filled by these firms on the basis of time, so far as 
 market orders are concerned. The delay in getting a written order to the. 
 J'jodd lot" broker on a very busy day is sometimes serious, butJthefi~is no 
 
 _p__ pre ven tsg_t 
 
 "I gave you an order to sell 35 shares of Delaware & Hudson at 1 p. m. 
 when it was selling on the tape at 122. Here is your report at 119. The 
 stock sold at 121^, 121, 120%, 120y 4 , 120, 119J4, 119 and 118% and do 
 you thing I am going to stand for this ?" 
 
 This is a sample kick. What is the broker to do? He has picked out 
 the "odd lot" firm which he thinks gives the best service. It is true that 
 the customer's order was sent over the telephone a few moments after the 
 stock sold at 122. But, while the order was on the way over the 'phone, 
 written by the 'phone clerk, and sent by messenger to the floor member of 
 the "odd lot" firm dealing in Delaware & Hudson, some regular broker had 
 hammered the market, on every bid price down to 118% and had possibly 
 sold 1,000 shares in one minute's time. By the time the odd lot order 
 reached the proper person the best bid was 119. One could not expect the 
 odd lot broker to give more than the market price ! 
 
 The result is that the customer's broker tries to argue with the odd 
 lot representative. Sometimes he is able to get a better price and at other 
 times he is unsuccessful. Rut in any event, the concession is usually made 
 fry tbf 4d lot firm, or th 
 
 Wrong Securities 
 
 A member of another large firm suggested that the writer call attention 
 to complaints arising because the broker has sold or bought the wrong kind 
 of security. Not so long ago one could trade in Marine Pfd., Marine Pfd. 
 Central Trust Co., Certificates of Deposit, and Marine Pfd., New York 
 Trust Co. Certificates of Deposit. A customer held 100 shares of the New 
 York Trust Certificates and gave an order to sell 100 shares of Marine 
 Pfd. Certificates. The sale was made on the Exchange where only the 
 Central Trust certificates were dealt in. The broker could not deliver the 
 one kind against the other sold, for it cost a dollar a share to transfer the 
 New York Trust kind into stock, a double tax of $4 to transfer to stock 
 and another double tax of $4 to transfer to the Central Trust certificates. 
 Did the customer kick and complain? Of course he did. But, if he had 
 considered that the order clerk did not know what he possessed, that the 
 time for action was limited, and that it is generally supposed that a customer 
 knows what he has, Mr. Customer would have realized that the negligence 
 was on his part. 
 
 There are quite a few customers who have sold Texas Co. full paid 
 certificates when they should have sold stock and quite a few more who 
 have done the opposite. No doubt they have all made complaints. 
 
 Bond Orders 
 
 But when it comes to bonds, chaos rules. Unless the customer states 
 the due date on the bond, its interest periods, and any other necessary data 
 appearing in the indenture, at the time of sale or purchase, it means trouble. 
 The writer has personally seen hundreds of dollars lost because of care- 
 lessness in giving bond orders. Sometimes this falls on the broker and 
 
 27 
 
sometimes on the customer. There is usually a variance of price between 
 registered and unregistered bonds of the same issue. In an issue of New 
 York City bonds, some were engraved by the New York Bank Note Co. 
 and part by the American Bank Note Co. Quite a few owners sold New 
 York Bank Note engraved bonds on the New York Stock Exchange, where 
 they could not be delivered. There are other issues of bonds where only 
 certain numbers are listed for sale. These numbers may run from 1 to 
 5,000 for each $1,000 bond. Mr. Customer may have bond number 5,021, 
 and if it proves to be an undeliverable bond, he will certainly enter a vigor- 
 ous complaint. 
 
 Stop Orders 
 
 Stop Orders have caused many heartaches. Stop orders have lost many 
 a customer and no one loves a stop order but the specialist in the stock, 
 who can judge his market by the amount of these orders he carries on his 
 books. If Mr. Customer would only realize that a stop order is not a 
 limited order, but a market order the moment his price is reached, he might 
 not find so much fault with his broker. But this seems to be one of those 
 unteachable facts. Then again, the customer seldom tries to act in co-opera- 
 tion with his broker in stop orders, or the broker may not help the customer. 
 It is not always wise, especially in an inactive market to place stop orders 
 too far away from the market price. If a customer has 700 shares for sale 
 on stop at 114 and the market is 118, it is often far better to order the 
 broker to place the stop with the specialist when the market reaches 115 
 than to give it out at once. This prevents the general public from "getting 
 wise" to the real condition of the market. Floor traders and specialists 
 have a remarkable habit of "gunning for stops." On the other hand, when 
 the market is too active and "jumpy," stops at too close range are very- 
 dangerous. The writer was once given an order to buy 100 Union Pacific 
 at 140 and sell it at a one point stop. The Union was purchased and reported 
 to the 'phone clerk. The market took a sudden downward trend and in 
 less than thirty seconds the stop was reached and the 100 shares sold at 139. 
 The telephone clerk was very busy and the report for the purchase and sale 
 reached the customer at the same time. He thought he had a real complaint, 
 but the broker knew he hadn't. However, it was a difficult point on which 
 to convince the customer. 
 
 Transfers and Dividends 
 
 Complaints about transfer delays are multitudinous. The facts relating 
 to delayed deliveries of purchases, the closing of the transfer books, or the 
 case of an out-of-town transfer office, were brought to the attention of 
 readers on page 23 of this book. These complaints are readily answered and 
 as a rule there is no serious difficulty over them. 
 
 Another firm mentioned the fact that out-of-town customers were con- 
 tinually complaining that they did not receive dividend checks, although 
 stock had been transferred to their names. The usual answer to this is 
 that such customers had neglected to file proper dividend notices directing 
 where checks should be sent, etc., with the transfer companies. Other 
 customers complained that deductions had been made on dividends of 
 foreign corporations credited to them, as in the case of Canadian Pacific or 
 Dome Mines. This deduction was necessary because they had failed to 
 file Income Tax Ownership certificates with their brokers. 
 
 28 
 
Margins 
 
 The writer during his interrogatory travels happened to mention the 
 word "Margin." The partners, clerks, customers' men and correspondence 
 clerks grew pale at the word. When can an account be sold out ? What is 
 the proper margin? What constitutes margin? These are the questions 
 which have started many an angry word and changed many an account. 
 
 In the first place, every careful firm doing a margin business, makes an 
 agreement with the customer at the time he opens his account. This agree- 
 ment is in effect that the broker will have the privilege of selling out the 
 account to protect himself when said broker believes the time has come for 
 this action. Of course it is not to be supposed that the broker will sell out 
 an account just because he happens to want to do it; for custom has ruled 
 that he must call for margin from the customer and give the customer a 
 fair chance to send the required margin. On the other hand, the broker 
 has the right to determine whether the margin sent is what he wants or does 
 not want. Cash, Certified Check, Draft or "Accepted Check" are always 
 good. But margin in the form of other stocks, bonds, or notes, no matter 
 how valuable to the customer, may not seem good margin to the broker. 
 The broker is acting in exactly the same capacity as the banker. No bank 
 will accept a loan unless it is satisfied with the collateral offered, which is 
 usually passed on by the directors or the head of the department in charge. 
 In like manner no broker may accept collateral which he does not wish. He 
 may demand actual legal tender, if he so desires. The Inquiry Department 
 of THE MAGAZINE OF WALL STREET has had many a letter of complaint 
 against the broker because the customer had been sold out after sending 
 additional "mining stock" as collateral for margin. The complainant had no 
 real complaint and he had to be told so, but it was often hard to make him 
 understand. 
 
 _^xtJnless the market has reached a panicky stage, bullish or bearish, it is 
 usual for the broker to give his client plenty of time to respond to a margin 
 call. But if the broker has used due diligence to get word to the client 
 either by telephone or by mail to the given address, and then the customer 
 does not respond, under the usual agreement, it is permissible to sell or 
 buy in the account, as the case may be. 
 
 Statements 
 
 Complaints about statements are in many cases apt to arise because the 
 speculator or investor does not know how to read his statement. It is 
 unfortunate that so many different forms are used by the various firms. Of 
 course, outside of clerical errors, which can be remedied at once when taken 
 up with the broker, the usual differences center about commissions and 
 interest. The item of interest has already been discussed, and there should 
 never be trouble about commissions which are always determinate except 
 in unlisted securities. The customer having an active account should 
 demand a list of regular charges made by the New York Stock Exchange, 
 The Consolidated Exchange and the New York Curb Association. If 
 stocks are dealt in on the Boston, Philadelphia, Chicago, Pittsburgh, Mon- 
 treal or other Exchanges, these charges should be asked for in advance 
 and kept on file. Chicago, for example, has a minimum charge, and there 
 are many firms doing business on the New York Stock Exchange which 
 have a minimum charge of $2. This information should always be asked 
 
 29 
 
for and given in advance; otherwise complaints are sure to be part of the 
 daily troubles. Usually brokers take it for granted that customers are 
 acquainted with such details and customers take it for granted that they 
 should have been told. Surely no customer would sell real estate without 
 finding out the commission, and, therefore, why place the responsibility on 
 the broker in every case? There is a set rule for commissions in every 
 market except the so-called unlisted, or "over the counter" market and 
 where such securities are traded in, it is wise to ask for the commission to 
 be charged before the order is given. 
 
 Complaints about telephone, telegraph, or personal service and atten- 
 tion are of such a nature that no rule can be set or the subject discussed in 
 this chapter. It goes without comment that the broker owes much to the 
 client in this feature, and the only suggestion with relation to this feature 
 is, that, if the customer is not satisfied, he should search until he finds 
 service which he desires. Some customers prefer small firms, others large 
 firms; some wish to be notified of changes in price during the day and 
 others do not wish to be bothered. This is a matter for personal adjustment. 
 
 30 
 
Do You Use Care in Signing Proxies? Have You 
 
 Been Assessed Without Cause ? Personal 
 
 Liability Stock Troubles 
 
 THE art of signing one's name to documents without knowing just what 
 such signature might lead to, is an old one and is daily practised 
 with disastrous results. It seems rather paradoxical that a business man 
 who is accustomed to read contracts with the greatest care should attach 
 his name to printed legal forms without careful reading, but it is done 
 daily. This might be expected in some degree where uninformed women 
 are concerned, but nearly every reader of this article has at some time or 
 other been careless in this detail. In ninety-nine per cent, of the cases, 
 there has been no damage, but the remaining one per cent, has caused 
 heartaches and much self-condemnation. 
 
 The Authorization What It Cost One Man 
 
 During the latter part of October, 1916, and November of the same 
 year, The American Hide & Leather Co. decided to readjust the accrued 
 preferred dividends of its company and sent out to stockholders an authoriza- 
 tion form, a copy of which is shown in the accompanying graphic. The 
 reader will note the closing sentence: 
 
 "It is understood that I am not liable for any expense or Committee charges 
 incurred under this power of proxy and of attorney in excess of one dollar per 
 share of stock now by me held, and that I am to be furnished, from time to time, 
 with a statement of results and efforts of the Committee." 
 
 Mr. Jones, of Helena, Mont., owned 100 shares of American Hide & 
 Leather Preferred. He received the notice shown in the graphic, thought 
 that the committee of prominent men knew best and signed the document. 
 This signature was affixed on November 13, 1916. Mr. Jones then sold his 
 Hide & Leather Preferred and forgot all about the authorization. Maybe, 
 Mr. Brown bought the stock and possibly Mr. Green bought it, but no one 
 knew; for the purchaser did not transfer the certificate, which remained 
 in Mr. Jones's name. 
 
 AUTHOR;IZA-TION 
 
 la order to co-operate with the stockholders of the American Hide and Leather Company in an eadeavor to readjust the 
 accrued preferred dividends, secure proper representation on the Board of Directors and remedy .certain unsatisfactory con- 
 ditions and methods, I, ............................... _ ..................... _ ................ _ _ } owner of 
 
 shares of stock, certificates numbers ........................ .............. ...... _..., hereby constitute and appoint the Committee heretofore 
 
 formed, consisting of Anderson Price, Frederic Drew Bond, Hans P. Freece, or a^majority of them, or their successors, as my 
 true and lawful attorney and proxy to act for me the same as though I were personally acting, to vote at any meeting of stock- 
 holders, to interrogate the officials of ,the American Hide and Leather Company with regard to the management of the Company's 
 affairs and to demand such finsncial and operating statements from them as I might, or could, or would, be legally entitled to so 
 demand, to institute and. prosecute suits, and for this purpose to consult and employ counsel, and, in general, to do any and 
 all things which, in the judgment of the Committee, shall be advisable and necessary, to carry out the Ibove-named purposes. It 
 is understood that I am not to be liable for any expense or Committee charges incurred under this power of proxy and of attorney 
 in excess of one dollar per each share of stock now by me held, and that I am to be furnished, from time to time, with a statement 
 of results and efforts of the Committee. 
 
 Pated, .. >1916 . Signed: 
 
 Witness: ( 
 
 31 
 
When Mr. Jones opened his mail one morning at his office, he found a 
 bill from The American Hide & Leather Co. asking him to send his check 
 for $100. Mr. Jones spoke mentally as follows : "Why, I have sold my 
 stock. I have no further interest in the matter, so let the next man settle." 
 He tossed the request in the waste basket and dismissed it from his mind. 
 
 But not for long. A second and more urgent request came. Jones com- 
 menced to think, for he was a financially responsible man. He wrote to 
 the committee and explained that he had sold the stock before the assess- 
 ment was levied, so that it properly belonged to the man who made the 
 purchase. In due course, this reply came from the lawyer for the com- 
 mittee. 
 
 Mr. H. J. Jones, 
 
 Helena, Mont. 
 Dear Sir: 
 
 Replying to your favor of April 7 in reply to mine of March 27, in ref- 
 erence to your indebtedness to the Protective Committee of the Preferred 
 Stockholders of the American Hide & Leather Company, I beg- to state that, 
 according to your authorization, dated Nov. 13, you obliged yourself to pay 
 to this committee $1.00 for each share of stock held at the time of your sign- 
 ing this authorization. 
 
 The fact that you sold your stock thereafter does not in any way affect 
 your obligation. 
 
 It is not the fault of this committee that you sold your stock. It had no 
 control over your actions.. Therefore, we expect to hear from you by return 
 mail with your check enclosed. 
 
 Very truly yours, 
 
 Hans P. Freece. 
 
 This cost Mr. Jones an even $100. Please take warning. 
 
 The Proxy Question Are You Sure You Are Right? 
 
 During the past few years The Distillers Company of America had an 
 internal dissension. The present officers and directors of the company were 
 attacked by others who had previously held control of the company, on 
 a matter of policy. The cause and result of the difference are not pertinent 
 to this article in themselves, but the controversy was of vital importance to 
 every stockholder. Mr. Jones, of Helena, Mont., owned 100 shares of this 
 stock. 
 
 The object of both contestants was to get a majority of proxies from 
 stockholders who would not be able to attend the meeting, and of course 
 the side holding the majority of votes, represented by the proxies, would 
 obtain control and direct the future of a company which was having a hard 
 time to stand up under the storm of Prohibition Gains. As usual, one fine 
 morning Mr. Jones found a proxy from the company, as he judged, and he 
 carelessly signed it, as he was directed, without reading the subject matter. 
 He was accustomed to do this in every case. A few days later he received 
 another proxy. With this proxy came a letter condemning the men who 
 were directing the affairs of the company, and stating that unless this 
 second group of men gained control, the Distillers Company would prob- 
 ably "go to smash," or words to that effect. Mr. Jones did not recall that 
 he had signed a previous proxy for others, so he signed this second one. 
 The signing of the second proxy at a later date voided the first one. 
 
 Now Mr. Jones was a partner in the Distillers Company. But all he 
 thought about, as a partner, was how his dividends might be affected. He 
 did not find out all he might have found out by making a careful investi- 
 gation, but he "took a chance" and a chance like this might have thrown 
 the control of "his" company into hands which would not develop the 
 
 32 
 
future to the best advantage of the "little partner," the small stockholder. 
 
 Recently there has been some kind of an effort made to get the small 
 stockholders together so as to make their work effective and to direct all 
 their voting efforts towards the best interests of the corporation in which 
 they hold stock. It is really the duty of every stockholder to find out all 
 about the company in which he is a partner. These recent efforts of co- 
 operation have been somewhat successful, and the Inquiry Department of 
 THE MAGAZINE OF WALL STREET can bear witness to this fact. 
 
 If the stockholder is carrying his stock on margin with a brokerage 
 firm, he may not hold this stock, which he owns, and on which he is borrow- 
 ing money from his broker, in his own name. It is very likely that the 
 broker has transferred the stock to his, the broker's name, as a matter of 
 marginal protection. However, the client is the actual owner, and, if he 
 retains his interest in the corporation as he should, it is his privilege to 
 direct his broker to send in a proxy, or refrain from sending one in, or 
 even get the broker's proxy made out to himself for use at the meeting 
 of the stockholders. 
 
 Personal Liability Stocks Why They May Be Expensive 
 
 The old Minneapolis & St. Louis R. R. Co. was incorporated under 
 the laws of Minnesota and Iowa. Under the peculiar state laws of Minne- 
 sota the stockholders are liable for heavy assessments, and it is always the 
 stockholder of record who is liable. Jones may have had 100 shares in his 
 name in 1904, and, if the stock was assessed in 1916, even though Jones had 
 sold it in 1905, he would be called upon to pay this assessment. This sit- 
 uation could exist only with the proviso that the certificate was still in Jones' 
 name on the date of assessment. In this very connection there were several 
 lawsuits and in every case the courts ruled that Jones had to pay. 
 
 Bank stocks, Trust Company stocks and many Express stocks, such as 
 Adams Express, are personal liability stocks. Under the rules of the 
 New York Stock Exchange the purchaser is forced to give the seller a 
 "name" for transfer at the time the stock is delivered against sale. 
 
 Suppose Jones owned 100 shares of Adams Express stock and sold it. 
 Furthermore, let us suppose that the buyer did not transfer the stock out of 
 Jones' name and that three years after the sale, Adams Express was heavily 
 assessed. Jones, if he was financially responsible, would be compelled to 
 pay the costs, although he was not the actual owner. Many holders of this 
 class of security, at the time of sale, serve notice at once on the transfer 
 office of the company in question that they are no longer possessed of cer- 
 tificate number 12436F and will not be responsible for what may happen in 
 the future. Even this plan is not always successful in shifting the obliga- 
 tions involved. Nearly all large brokerage firms, possessed of this class of 
 security, arrange to transfer the stock to the names of one or more of their 
 clerks who are not overburdened with worldly goods. 
 
 Assessments Loss From Not Paying Them 
 
 When a stock calls for an assessment and it is voted on by a majority 
 of the stockholders at a regular meeting, it is necessary for the holder to 
 pay such assessment or lose his stock. In some cases, however, the stock 
 may be traded in as "assessment, unpaid," first paid, second paid, etc. But 
 this is in case that a definite date has not been set for such assessments. 
 
 33 
 
Those stockholders of the old Wabash Railroad who did not pay the assess- 
 ments have worthless paper on their hands at the present time. There are 
 men still alive who owned Northern Pacific when it was assessed, who 
 refused to pay the money desired, and today they have waste paper to show 
 for their original purchase. Stockholders of Missouri Pacific who did not 
 deposit their stock under the reorganization plan and arrange to pay the 
 assessments of course lost what they originally paid for. 
 
 Whenever these Protective Committees are formed, whenever it is 
 possible to exchange stock of a wabbly company for certificates of deposit of 
 a holding committee, or whenever an assessment is called for, the wise 
 thing to do is to GET ADVICE. Usually the legal complications involved 
 are too much for the layman, and it is proper and right for the broker or 
 the Personal Inquiry Service Department of THE MAGAZINE OF WALL 
 STREET to be called upon for advice and direction. In almost all cases a 
 final date is set for depositing stock and making payments of assessments. 
 The broker customarily informs the customer of such dates and gets his 
 permission to act, but this service is a voluntary one on the part of the 
 broker, and it is doubtful if he can legally be held for any error or laxity 
 in this connection. 
 
 34 
 
Lost Certificates How to Prevent and Insure Against 
 
 Theft What to Do Whom to Notify Value 
 
 of the Safe Deposit 
 
 WHAT is the first thing to do when you find out that you have lost 
 a certificate of stock? What would you do if you discovered that 
 you had lost a coupon bond unregistered? 
 
 The danger from this source is always present, no matter how carefully 
 plans are made. It is not more than a year ago since the registered mails 
 were looted on the way from Baltimore to New York. Many of the stolen 
 securities were found, but some were never recovered. The heavy loss fell 
 upon the sender and in one or two cases, the sender happened to be of the 
 individual type and not a firm or corporation. It might just as well have 
 been a reader of THE MAGAZINE OF WALL STREET. It is an insurance to 
 know. 
 
 If you own stock, have it registered in your name. This is the first 
 step in insurance. There are two ways of safeguarding this stock. The 
 first, when it is in the possession of the owner, and the second when it is left 
 for safekeeping with the bank or the broker. 
 
 Safe Deposit Vaults or Your Broker 
 
 The safe deposit vault is the greatest protection for the man who retains 
 his own securities. At all times there should be two lists kept of the hold- 
 ings, one in the safe deposit box, with the securities and the other should be 
 kept in the personal files of the owner, either at his home or at his office. 
 These lists should show, when the stock, or security was purchased, from 
 whom it was received, a description of the security in full, with the number 
 of the bond or certificate, and the date it was placed in the vault. 
 
 If the bank or broker retains the security, and it is paid for and in the 
 name of the owner or the custodian's name such custodian should be 
 asked to furnish a memorandum monthly showing that the original certificate 
 or bond is kept in a private parcel separate from the assets of the firm or 
 bank. A guarantee should also be asked to show that the members of the 
 firm or a responsible officer has actually checked the security, looked at it 
 and can vouch for it. There should be nothing left to clerks in this matter. 
 Many a firm has failed and its customers have later found out that their 
 personal property had been used to bolster up the firm's credit. 
 
 Get a Receipt for Protection 
 
 If the broker or bank should ship security to the customer the sender 
 is responsible for its safe arrival and is continuously responsible until the 
 owner signs a receipt, registered mail, express, or personal, for the goods. 
 If security has been sent to a customer and it is apparently lost, the best 
 thing for the customer to do is to "sit tight" and make the broker trace it. 
 In like manner, if the customer sends security to the broker, the broker 
 is in no way responsible until he signs for possession. 
 
 Suppose the security is lost and it is the part of the customer to trace 
 it and find it. Assuredly, quick action is necessary, but usually much time 
 
 35 
 
is lost because of lack of knowledge. The Fire Commissioner prints a 
 warning to theatre goers to be prepared. "Look around for the exits as 
 soon as seated, and in case of fire, do not run amuck, but go quickly and 
 calmly to the nearest exit." Very few stockholders are prepared. 
 
 An Authority's Opinion 
 
 To quote from Smith's Financial Dictionary, "A coupon bond payable to 
 bearer or a stock certificate assigned in blank is good in the hands of an inno- 
 cent and bona fide holder who acquires it by honest purchase at a fair market 
 price without knowledge that it was fraudulently obtained by any previous 
 holder even though it may have been lost by or stolen from its owner. 
 
 "The recovery of a lost or stolen bond or stock certificate can rarely be 
 accomplished unless it is found in the hands of the finder or of the thief or his 
 accomplice or some person who has obtained possession of it by fraud or under 
 circumstances which will convict him of knowledge or suspicion of fraud on 
 the part of the one from whom he received it. 
 
 "The fact that a lost or stolen bond or stock certificate has been advertised 
 by its number does not invalidate the title of an innocent holder, as it cannot 
 foe held that the purchaser of a bond or a stock certificate is bound to have 
 knowledge of the advertisement. 
 
 "A registered bond is without coupons (in most cases) and is filled in with 
 the name of the registered owner and is payable to him or his assigns. It is not 
 available to any other person until properly assigned or transferred by the regis- 
 tered owner. If a registered bond (as to principal and interest) or a stock cer- 
 tificate, not assigned in blank, is lost or stolen the owner can secure a new 
 bond or certificate by furnishing a bond of indemnity." 
 
 LOST! 
 
 New York,' May 24, 1917. 
 
 100 SHARES OrSTEEL, Common, 
 Henry I. Lee No. 593306. 
 
 10 INTERNATIONAL NICKEL VOT'G TRUST CTFS. 
 
 Morgan&reist No. 7537. 
 40 INTERNATIONAL NICKEL VOT'G TRUST CTFS. 
 
 i, Shiran & Polk No. 1749. 
 
 If found, kindly notify 
 
 JONES & SMITH 
 
 290 Wall St, New York Crty. 
 
 Transfer has been stopped, and all parties are 
 cautioned against negotiating the same. 
 
 Smith's resume of the situation would seem to infer that there was 
 little chance for the owner of a lost certificate properly assigned to recover, 
 but this is not the case in every event, for if transfer is stopped and 
 proper procedure taken, the innocent holder of the lost certificate can 
 be reimbursed and the real owner get a new certificate. 
 
 36 
 
How to Ship in War Time 
 
 War time has suggested many ways of insurance for certificates and 
 bonds coming from abroad. Until the United States went to war, all bonds 
 coming from Germany traveled long, roundabout routes and the coupons 
 were sent separate from the bonds and by a different route from the bond. 
 Stock certificates were sent unassigned and separate powers of attorney 
 were shipped by another route. There are thousands of dollars worth of 
 American bonds in this country, sent from Germany in the early days, 
 which have never met with the original coupons. The latter were lost or 
 confiscated. Sometimes the coupons arrived but not the bonds. 
 
 What Corporations Require 
 
 Each corporation has its own special requirements to act upon the loss 
 of a security when the owner desires a new certificate issued in its place. 
 In case of loss, the very first thing to do is to write to the company and ask 
 for their own requirements. State the case fully and hide no minor feature. 
 The following steps are the customary ones to secure a duplicate for a lost 
 certificate : 
 
 The owner, if the stock is in his name, must send a formal notice of the 
 loss, stating the circumstances, to the Treasurer of the Corporation, and a 
 duplicate to the corporation's transfer office, asking the officials to stop 
 transfer. 
 
 If the stock is not in the owner's name, the owner must get the co- 
 operation of the registered owner the name in which the lost certificate 
 stands and have such registered owner make affidavit of the circumstances, 
 at the same time waiving all rights of ownership to the real owner. This 
 affidavit, with a second sworn affidavit of all the circumstances surrounding 
 the loss, must be sent to the officials and transfer office at once. 
 
 The notice of the loss and the notice of transfer having been stopped, 
 must be sent to the secretary of every exchange or known market where 
 trading in the security occurs. 
 
 Advertisements of the loss must be inserted in three or more issues of 
 the most prominent financial daily newspapers in each of the cities where 
 the exchanges are located, or markets, on which the security is listed or dealt 
 in. The copies of the newspaper containing such advertisements are to be 
 filed with the company. 
 
 Upon all requirements as above having been fulfilled, and after a wait 
 of six months or so, the company will advise about the next step. 
 
 A surety bond, perpetual in character, amounting to twice the par value 
 of the lost certificate, the form to be approved by the attorneys of the com- 
 pany, must be given by the owner. The premium, which is large, must be 
 paid by the loser. In case the stock has no par value, the amount lies 
 within the discretion of the company's advisors. 
 
 When all these requirements have been fulfilled, a new certificate may 
 be issued by the company after a second period of about six months. 
 
 The Loss of Bonds 
 
 There is not much hope for the loser of a bearer, coupon bond where 
 the ownership is not definitely shown. Such bonds are almost as negotiable 
 as a twenty-dollar gold certificate. The advertising of the number with 
 
 37 
 
the hope that it may turn up in some broker's office is about the best that 
 can be looked for. 
 
 Many bonds are registered as to principal only and carry bearer coupons. 
 This is a very convenient method of protection and the bonds are easily 
 turned back to regular coupon bearer bonds by having the company register 
 them to "bearer" just before sale. 
 
 Some Famous Thefts 
 
 Some forty years ago the now almost forgotten Austin Bidwell and 
 his clever associates built up a remarkable system whereby about $5,000,000 
 was stolen from the Bank of England. Instead of using actual cash, the 
 forgers purchased U. S. Government bonds from well-known brokerage 
 firms in England. These purchases were made as fast as the forged drafts 
 and bills were put through at the Bank of England and the bonds were 
 shipped in trunks to confederates in the United States. Even if the 
 bonds could not be marketed, they could be used for collateral with which 
 to borrow money, and, in the case of these bonds, the borrowing margin 
 was almost at the bid price. Thus, a stolen bond might not appear on the 
 market for years, and, in the meantime, the culprit could take his time 
 about getting away with the proceeds. 
 
 A few years ago, a clerk in a well-known trust company in New York 
 City got access to the stock certificate book of one of our largest corpora- 
 tions and made out certificates to his own and friends' names. The only 
 forgery necessary was the names of the officers of the company, the trans- 
 fer officer and the officer of registration. The mistake this thief made, and 
 they all make some mistake, was to market the stock by actual sale, thus 
 giving an opportunity for the return of the bogus certificate to the transfer 
 
 abov, ....ic to use the 
 
 of ?30,108.25. - . .n.lersigncd reserves tnt> 
 right, to reject any or all tenders. 
 THE NEW YOBK TRUST COMPANY. Trustee. 
 By H. \V. iiOilSE.. Secretary. 
 
 New York. May 1st. 1917. 
 
 Certificate No. 1823. for three-fourths 
 shares of the capital stock of Lehigh Valley 
 Coal Sales Co.. in- name of Abe Blum, hav- 
 Insr been lost or mislaid, notice is hereby 
 given that application has been made for, a 
 renewal ol the same. 
 
 Mo. 
 Mold. 
 N. Y. 
 Norf. 
 
 >:. y. 
 Pentv 
 St. L* 
 Seabot 
 South* 
 
 Newspaper Notification of Reissuance of a Lost Certificate 
 
 office to be transferred to the name of a bona fide purchaser. Had the 
 thief negotiated a long-time loan on these certificates with some bank, keep- 
 ing the shares in his name but assigned, the theft would have been covered 
 up for possibly years. The realization, however, would have been on only 
 about 75 per cent, of the market price of the security. 
 
 Every precaution must be taken by the owner of stock certificates and 
 bonds to safeguard. The legal complications and red tape are of such a 
 serious nature that too much care is impossible. Registered mail or express, 
 fully insured, are the safest methods of sending securities and, in the case 
 of registered bonds and unassigned stock certificates, the security may go 
 in one mail to be followed by the detached and separate assignment in 
 another mail. 
 
 If you own securities keep a safe deposit vault and a real record of 
 what is in it. 
 
 38 
 
What Happens When Your Broker Gets Your Order? 
 
 Machinery of Purchase and Sale 
 
 What You Should Know 
 
 YOU give your order to your broker, and the only thought which comes 
 to your mind in connection with it is, "At what price will it be 
 reported?" If it is a market order, there may be a few hundred operations 
 in connection with it, and just as many possibilities for errors. If it is a 
 limited order, to buy or sell at a certain price, the number of possible opera- 
 tions are multiplied, and therefore the chance for error is increased. In 
 the first example, we will follow the course of a "market order" on the New 
 York Stock Exchange. Only the important steps will be taken into consid- 
 eration. 
 
 What Happens to a Market Order? 
 
 You decide, after careful deliberation, to purchase 100 shares of U. S. 
 Steel common at the best obtainable price. The first step is your verbal 
 or written order to the man in charge of the customers. He again writes 
 out on a little slip of paper with the word "Buy" printed on it, "100 Steel." 
 The paper is passed to the Order Clerk, who notes the account for whom 
 the purchase is to be made, and at once passes it to the telephone clerk of 
 the order department. This telephone clerk sends the message over the 
 private wire without the slightest delay to the telephone clerk in a small 
 booth situated at the west end of the floor of the Stock Exchange. The 
 exchange telephone clerk notes that the order is at the market. He writes 
 it down on a "Buy" slip and does one of two things. If the firm's Exchange 
 member is not busy, he presses a button at the side of the booth. This but- 
 ton conveys a message to the broker, somewhere on the floor, by causing 
 a number to appear on a black background on each side of the Exchange. 
 No matter what the broker is doing, or where he may be, his eye is trained 
 to see that number flash at the moment it shows against the black back- 
 ground. That number belongs to him, and he knows it as well as the old 
 time galley slave knew his. It may be that he is occupied with another order 
 at the time. If so, he calls a small uniformed messenger boy and sends 
 him to get the order. These boys are as plentiful as brokers, and one is 
 always at hand. 
 
 Either the boy goes for and brings the order, or else the broker goes 
 himself. No one is allowed to run or rush on the floor of the Exchange. 
 A fast walk is all that is permitted. The broker receives the order, folded, 
 so that it cannot be seen by any one else. He glances carefully at it, learns 
 its import and seeks the brokers who are buying and selling U. S. Steel 
 com. Every stock has a separate section for its individual business. Every 
 broker instinctively knows where that locality is. 
 
 The Actual Purchase 
 
 U. S. Steel com. is a very active stock. There are always plenty of 
 brokers buying and selling and the market is a good one. In untech- 
 nical terms, the difference between the bid price and offered price is 
 usually the minimum difference of y$>. The first duty is to learn the 
 
 39 
 
real market. Usually the sellers are shouting "100 (or 500) at an 
 eighth." If the offer is for 100, the minimum trading unit, the call is "At 
 an eighth." This means that the seller is offering his shares at 135 y%. An 
 indicator at the post nearby has the last sale marked on it, and the new- 
 comer can tell the round figures, so that the seller does not need to 
 shout or call "500 at 135^." The fraction preceded by the word "At" 
 is sufficient. The broker, at the same time hears buyers call, "Five for 
 a hundred," or "Five for 500," as the case may be. 
 
 If there are more than 100 shares offered at y&, the broker has one 
 of two options. He may "stop" his proposed purchase at Y%. That is 
 to say, he will arrange with a proposed seller to sell 100 Steel at 135^ 
 if 100 or more shares sell at that price. Having done this, he may join 
 the other would-be purchasers by bidding 135 for the stock. The first 
 broker to bid a price has "the floor." He is entitled to the first 100 
 shares sold at that price. As soon as a sale is made, bids and offers are 
 reopened. If two* or more brokers bid the same price at the same time, 
 and 100 shares is offered at this bid price, it is customary to match coins 
 to see who is entitled to the sale. If our broker is able to purchase his 
 100 Steel com. at 135, the "stop" at 135^ is automatically cancelled. 
 But it is not cancelled until our broker actually buys his stock at a lower 
 price or the stock is purchased at the "stopped" price. The other alter- 
 native for the broker is for him to buy the stock at once at the offered 
 price. He must use his judgment in such matters. 
 
 How It Is Reported 
 
 As soon as the order clerk in the broker's office handed the order 
 to his telephone clerk, the former made an entry in his order book. This 
 entry remains there until the report of the purchase reaches him. He 
 is waiting for it, and if there is a delay, he must telephone to learn the 
 cause. After our broker has purchased the stock, he writes on a report 
 slip, which he carries in his hand, the following, "Bot. 100 Steel com. 
 135^8 Bogert." The last is the name of the broker from whom the pu- 
 chase was made. He either sends the report by messenger or takes it 
 himself to the telephone clerk at the Exchange telephone booth, which 
 his firm rents, and this report is sent back over the private wire to the 
 telephone clerk at the office, who gives a written report to the chief 
 order clerk. The latter notifies the customer's man, who in turn notifies 
 the customer. 
 
 A copy of this "filled" order is sent to the clerical department. It 
 must at once go to the margin clerk, next to the Purchase and Sales De- 
 partment, and again to the stenographer. The order must be stamped 
 with the date, the time of day it was sent and filled, and a copy of the 
 report made out for the customer. The clerks enter it on their books 
 and make a comparison of the transaction with the office of the seller, 
 either direct or through the Clearing House. The bookkeeping record 
 features are part of another story. 
 
 The Limited Order 
 
 Limited orders may be for "the day," "for the week" or "good until 
 cancelled (countermanded)." Each form tells the nature of the time 
 limit by its title. Suppose the order was to purchase 100 Steel com. at 
 
 40 
 
126. At the time the order reaches the Stock Exchange floor, U. S. Steel 
 com. is selling at 135. 
 
 The telephone clerk can use his judgment in doing: one of two 
 things. He may call his floor member by number, if he knows such 
 member is not busy at the moment, or he may give the order to a mes- 
 senger to take to the "specialist." The floor member, upon receipt of 
 the order may not desire to carry this order about with him waiting 
 until Steel com. sells down to the price, and he may give the order to 
 the "specialist." 
 
 What is the specialist? There are always one or more brokers who 
 do no business except in the stocks located at one "post" or locality. 
 There are from ten to twenty stocks dealt in at each post, and at other 
 sections of the Stock Exchange. These specialists never leave this one 
 part of the floor. They have large, but convenient order books, usually 
 silica slates, on which to enter these orders, "away from the market," 
 and to erase them when completed. The regular charge for buying or 
 selling 100 shares for another broker is $2 for nearly all stocks. The 
 very low priced shares have a smaller charge in accordance with the rate 
 charged the customer by his broker. The "specialist," in turn, becomes 
 the broker for a broker. 
 
 The specialist may have many hundreds of shares to buy at the 
 same price for many different firms representing still a larger number 
 of customers. He shows no favorites, and should not. The first order 
 at a price for Jones is filled before the second order at the same price for 
 Smith. The specialist is the usual holder of "stop-orders" away from 
 the immediate market price and his order book can tell the trading posi- 
 tion of a stock better than any other kind of information. 
 
 The Odd Lot Order 1 " 
 
 The basis of trading of the New York Stock Exchange is 100 
 shares. Anything below 100 shares is an odd lot. As a rule, brokerage 
 firms dealing for individual customers, do not buy or sell odd lots with 
 each other. There are four or five firms which make a specialty of this 
 business. They do not have the outside public, individual customers. 
 Their customers are all the other brokerage firms. The Stock Ex- 
 change member for a customer's firm seldom if ever sees an odd lot 
 order. These Odd Lot firms usually retain a large number of mem- 
 bers. The members are scattered about the different parts of the trad- 
 ing room, and each one attends to the business covering a series of 
 stocks most convenient to him. 
 
 The telephone clerk receiving an odd lot order, knows with which 
 odd lot firm his employer deals. A messenger is sent with the order 
 direct from the telephone booth to the odd lot broker specializing in the 
 stock for which the order calls. The odd lot broker receives the order. 
 If it is a market order, he makes out a report at Y% or % above the last 
 sale if a purchase, and below the last sale if the stock is to be sold. 
 Sometimes he waits until a transaction occurs basing the price on "the 
 next transaction." If the bid and asked prices are far apart, and the 
 trading in the stock is very inactive, he sends a quotation to the firm 
 sending the order, asking the customer if he desires to wait until the 
 next sale, or if he wishes the price to be based on a previous sale, or pos- 
 sibly on the bid and offered prices. To the layman, it is a wonderful mys- 
 
 41 
 
tery how the odd lot firms ever keep track of their trades. An ex- 
 planation is difficult, but the principle involved is that, when the odd 
 lot dealer buys enough odd lots of stock to aggregate 100 shares, he 
 sells that 100 shares in the open market. He pays J^ to l /4 less than the 
 prevailing price, and sells at l /% to% of a point over the prevailing price. 
 He must watch the market in 100 shares closely so as to be able to get 
 his profit at once. Some firms maintain a speculative position, while 
 others try to even up as rapidly as possible. The small ^ or % of a 
 point is not too much to charge for the risk involved. On a very active 
 day, these odd lot firms are filling orders from their offices many hours 
 after the Exchange is closed. The risk is easily apparent, as they must 
 take every order offered them. 
 
 The Bond Orders 
 
 One section of the New York Stock Exchange is set apart for deal- 
 ing in the listed bonds. A glance over the official bond quotation sheet 
 of the Exchange gives the novice heart failure to even imagine how it 
 is possible to deal in so many issues. The average member of the Ex- 
 change is content to permit the specialists in bonds to do their own 
 work. He knows that the specialist can obtain a better market than he 
 can. In almost every case all orders are given out at once to these men 
 who make bond deals their special business. Except when the order is 
 for a large amount in a bond actively dealt in and at the market very- 
 few brokers have the temerity to attempt to fill the order themselves. 
 
 As a rule, therefore, the order in bonds goes straight to the bond 
 dealer without the firm's floor member seeing it. The report is sent 
 by the bond broker when the order is filled, by messenger. It takes 
 years of experience to be a specialist in this department and the busi- 
 ness is most intricate. 
 
 Orders in Curb Stocks 
 
 The outside market, known as the Curb Market, follows the plan 
 of the big exchanges. There is a special locality where each stock is 
 traded in. The machinery is not so complete and there is no indicator 
 for the broker to glance at to note the last sale. There is no ticker such 
 as one might watch to follow prices and the report of transactions is not 
 nearly so accurate. 
 
 Nearly all firms maintain representatives on the Curb. The rep- 
 resentatives may not be associated with the firms except in so far as 
 they may have desk room. Each curb man usually has a telephone lo- 
 cated in a building near the curb market and a clerk to receive orders. 
 The transmission of orders to the broker is either by signals or mes- 
 senger. The casual sightseer would note young boys making all kinds 
 of curious motions with fingers, eyes, body or by printed signs, from win- 
 dows overlooking the Broad Street Curb. Messengers are running back 
 and forth in much the same manner as on the floor of the Stock Ex- 
 change. The same system as to entering the order in a book, stamping 
 it to show the time received, day, hour and minute, is used as for orders 
 on the New York Stock Exchange. The Curb Market has no clearing 
 house and each transaction must be compared between the clerks of 
 buyer and seller. The machinery is more cumbersome. Odd lots may 
 be bought and sold between brokers the same as 100 shares, but on the 
 Curb there are specialists in each stock the same as on the exchanges. 
 
 42 
 
Unlisted and Over the Counter Stocks 
 
 There are hundreds and even thousands of different securities which 
 do not have a regular market. This class is also usually high grade and 
 the business is growing more rapidly each day. Many firms and hun- 
 dreds of individuals make a specialty of certain classes of stocks. Some 
 firms deal in oil stocks, others in steel stocks, some in bank and trust 
 company stocks, and there are also specialists in insurance and muni- 
 tion stocks. Other firms deal entirely in bond issues which are not 
 listed on any exchange or Curb Market. 
 
 The various firms handling the accounts of customers know these 
 "outside" specialists. When orders are received from customers in such 
 securities, the transactions are made direct over the telephone. If there 
 are two or more firms specializing in the same class of security as called 
 for in the order, each one is called and the bid and asked quotations are 
 listed. The best bid gets the sale and the best offer brings about the 
 purchase. In this case the telephone does all the work. 
 
 The Enormity of Detail 
 
 Each order is individual. The many details in connection with the 
 fulfilling of the order and the following of it to the completion of its 
 course involves the entire history and study of brokerage business, in- 
 cluding the accounting feature. The outline given in the preceding para- 
 graphs may be of use to the customer in at least making him understand 
 the complexity of detail and the possibility of delay and error. Even the 
 smallest order passes through so many operations and in such a short 
 time that the insurance of accurate completion demands a large pre- 
 mium. The premium for this accuracy is only the commission. It is 
 possible for a small brokerage firm to earn five thousand dollars in com- 
 missions in one month and lose it all in ten minutes through an error 
 of either clerk or broker. 
 
 A Few Things for the Customer to Remember 
 
 The order departments in this country, with reference to brokerage, 
 far surpasses the English or Continental service. The time taken to fill 
 an order is the shortest of any other business known. 
 
 Do not expect to purchase 100 shares of U. S. Steel com. at 135 when 
 500 other people want Steel at that price and only one small transaction 
 occurs at 135. 
 
 Do not complain about an Odd Lot order, if you send in to buy 10 
 Nat. Biscuit at the market, the last and lowest sale being 105, and your 
 report reads 104^4. You should have either asked for a quotation or 
 specified that your purchase was to be based on "the next sale." 
 
 Do not tell your broker to use his judgment. Take your own re- 
 sponsibility and tell him what to do, or what you wish to do. Be care- 
 ful to mark your order either "Buy" or "Sell" and state how long it is 
 to be effective before you desire its cancellation. 
 
 Be certain to give one order at a time. Also be careful to cancel 
 an order if you supplement it with any change. 
 
 Try not to make one order contingent on another. Avoid all pos- 
 sible ambiguity. Ambiguity means loss to you and the broker. 
 
 Be certain to have a complete understanding about the price of an 
 order when the stock in question sells ex-dividend or ex-rights. 
 
 Write your orders and see that they are confirmed. 
 
 43 
 
Transfer Taxes 
 
 Conditions of Double Taxation Affecting Buyers or Sellers of Stock 
 
 IT very often happens that the customers of a brokerage firm are charged 
 with an extra tax to transfer stock. In almost all cases where this 
 charge appears, the client feels that he has been unjustly charged. He 
 knows that the seller has paid one tax and he can conceive of no con- 
 dition where it might be necessary for him to supplement this with a 
 second. In like manner there are instances where the seller is charged 
 with a double tax on his sale. This is also an enigma to the customer, 
 who has visions that his broker is either careless or is extracting a little 
 profit from him. It is the purpose in this article to describe certain situ- 
 ations where this double charge is necessary. 
 
 A Transfer is a Sale 
 
 The broker's client must first of all realize certain facts. In the first 
 place the State laws assume that every transfer of stock constitutes a 
 sale. This may not be the actual case, but no affidavit can make the 
 government change its mind. In the second place, there exists no 
 broker who desires to pay his double tax and go into detailed informa- 
 tion to his customer. In the third place, the laws of the various stock 
 exchanges prohibit the broker from assuming this extra charge unless 
 the said broker is actually at fault. The above facts therefore are suffi- 
 cient evidence in themselves that the broker has every reason to evade 
 this extra charge if it is possible. 
 
 There are three systems of taxation which affect the buyer or seller 
 of stocks. Each system is based on the same scale and, in each case, a 
 revenue stamp is used on the sales ticket. There are: the New York 
 State tax ; the Massachusetts State tax ; and the Pennsylvania State tax. 
 This tax is based on the par value of the stock and is determined at the 
 rate of two cents a share, or fraction of a share, of the par value of $100. 
 Tf the stock is of no par value all the State taxes class No Par as though 
 it were $100. It may be that a stock demands three sets of stamps. Un- 
 til a definite ruling can be made Baldwin Locomotive, when transferred, 
 requires New York State and Pennsylvania State stamps. Stocks of the 
 Pennsylvania Railroad do not require Pennsylvania stamps. Every cor- 
 poration interprets the laws after its own fashion, as is the case with 
 respect to legal documents. The seller always pays the tax. 
 
 Examples of Double Tax 
 
 The following hypothetical situations are instances when the cus- 
 tomer should be charged with the double tax for purchase, sale or trans- 
 fer. In the cases to follow, the broker would be transgressing the laws 
 of his exchange if he assumed the tax, charging it to any of his firm's 
 accounts : 
 
 1 Delay In Giving the Broker a Name for Transfer 
 
 The customer must realize that, technically, the law demands that 
 the same set of stamps used to effect the sale of a security must be ap- 
 plied to the particular stock involved. However, this rule is impossible 
 
 44 
 
and the best the broker and transfer companies can do is to match the 
 stamps and security as closely as possible. For example, if a security 
 is released from the transfer office on May 26, it is manifestly impossible 
 to use stamps to transfer it again dated May 8. Brown puts in an order 
 to buy 20 shares of U. S. Rubber common at the market on May 7, 1916. 
 The stock is purchased from the Odd Lot broker the same day and is 
 deliverable by the Odd Lot broker the following day, May 8, 1916. The 
 Odd Lot broker cancels his stamps as of May 8, 1916, but he insists that 
 Brown's broker accept the stocks by transfer. Under the present sys- 
 tem of doing business the Odd Lot brokers practically force the commis- 
 sion house to accept, not the actual certificate, but a new certificate di- 
 rect from the transfer office. If Brown intends to pay for the stock and 
 pays for it on May 7, 1916, telling his broker that he wishes to have the 
 certificate transferred to his name, the broker gives Brown's name to 
 the Odd Lot Firm and there is an end to the transaction. If Brown neg- 
 lects to tell his broker of the disposition of the stock on May 7, or pay 
 for it, until late on May 8, 1916, or a later date, the broker gives the Odd 
 Lot firm his, the broker's name, and the original sales stamps are used 
 to transfer the stock. 
 
 On May 9, 1916, Brown decides to have the stock transferred to 
 his own name, paying for it. The stock is now in his broker's name and 
 the sales revenue stamps are used. To effect the transfer to Brown's 
 name, a new set of stamps must be attached to the stock, and it is 
 Brown's fault that such a course is necessary. Therefore, Brown is 
 charged with the cost of the stamps necessary to make the transfer to 
 his name. The State classes a transfer on the books of the company as 
 a sale, whether such transfer is in reality a sale or in fact is not a sale. 
 
 2 The Sale of Securities Which Are Not a Good Delivery 
 
 All exchanges, including the "curb" have rules regarding the "nego- 
 tiability" or delivery of securities. These rules are on file in any broker's 
 office and depend upon many conditions. For the purpose of our exam- 
 ple, a well-known rule will be used. A certificate of stock accompanied 
 by a detached power-of-attorney is not acceptable to the buyer. Brown 
 presents his 20 shares of U. S. Rubber common with such a detached 
 power. In other words the stock certificate is not released by Brown 
 on the back of the certificate, but Brown has signed a separate piece of 
 paper embodying such a power. Sales stamps are charged to Brown for 
 the actual sale, but before the certificate can be delivered it must be 
 transferred to a name which can be endorsed to the blank power on the 
 back of the certificate. It is a possible chance that the buyer will give 
 his own name, as in the case mentioned previous, but the buyer from the 
 broker is not compelled to give his name, so that the broker may have to 
 first transfer the certificate to his own name. Brown is again respon- 
 sible and the charge, if necessary, must accrue to him. 
 
 3 Delayed Delivery by Seller on Stock Sold Regular Way 
 
 Brown sells 100 U. S. Rubber common through his broker, regular 
 way. 
 
 "Regular way" means that the actual certificate of stock must be 
 delivered before 2:15 p. m. to the seller the following day. Brown is in 
 St. Louis and the certificate of stock is in his safe deposit vault in New 
 
 45 
 
York City. It is manifestly impossible for the broker to get his certifi- 
 cate in time for delivery, so he borrows 100 shares from the margin ac- 
 count of one of his other customers and makes the delivery. Later, the 
 customer from whom he borrowed the stock desires to pay for it, having 
 it transferred to his name. The broker must use Brown's certificate, but 
 he finds that the date of transfer release on Brown's certificate is a later 
 date than that on the sales ticket which accompanied the other custom- 
 er's purchase. It is without doubt proper for Brown to pay the tax for 
 the other customer's transfer. 
 
 There are many variations of this phase of transfer charge. There 
 may be no charge if the broker must borrow the stock from another 
 broker, the lender not demanding the stamps on its return, and it may 
 be that Brown's certificate will match up, as to date, with the original 
 stamps on the other customer's purchase. This is simply a matter of 
 chance. Again, no buyer is compelled to accept a certificate larger than 
 100 shares. If Brown sold 7,000 shares and presented one certificate, it 
 would have to be split into one hundred share lots by the transfer office 
 there would be no charge if it was returned in Brown's name from the 
 transfer office but the original stamps were used to deliver other stock 
 on Brown's sale, if he delayed presenting the stock until the day of de- 
 livery, and Brown must be responsible for future stamps necessary on 
 the new 70 certificates returned. 
 
 It is the duty of the broker to protect his customer on all dividends 
 accruing on stock held for said customer. The various companies recognize 
 ownership as only those whose names are on the books as owners of the 
 stock. If the holder of stock does not have it in his name the day the stock 
 sells ex-dividend, he will have to collect the dividend from the man or firm 
 in whose name the stock stands on the books of the company. Unless such 
 registered holder is accessible and willing to part with the dividend, there 
 is a possibility of never collecting by the rightful owner. Even when col- 
 lected, the registered owner usually charges at least one per cent, for his 
 trouble. 
 
 Brown holds 100 shares of U. S. Steel Pfd. in a margin account. To 
 protect him, on April 29, the day the stock sells ex-dividend, his broker 
 transfers the 100 shares to his, the broker's name. This insures the divi- 
 dend coming to the broker to be placed to Brown's credit. On May 14 
 Brown decides to pay for the stock and have it transferred to his own name. 
 The original sale stamps have been used to protect the dividend for Brown 
 so that Brown must be charged with another set of stamps to get the stock 
 in his own name. 
 
 5 Reorganizations and Protective Committees 
 
 It is certainly often difficult for the broker to explain to Brown just 
 why he is charged a double tax on reorganizations and for depositing stock 
 with protective committees. But this charge is very necessary and a very 
 legitimate one. Brown owned 100 shares of the stock of the International 
 Mercantile Marine Pfd. If the stock was not in his name and he desired 
 to place it under the protection of the Wallace Committee, he had to pay 
 double tax, or four dollars. The reason for this is that the original stock 
 had to be transferred to the Committee. This was one tax. Then, a certifi- 
 cate of the committee was issued to Brown. This was a second tax. If the 
 broker had held Brown's stock and had the original sales ticket to present 
 
 46 
 
for the first transfer, Brown would then have been charged with only one 
 tax. 
 
 Broker and Client 
 
 The relation between the broker and client with reference to these tax 
 matters is always more or less strained. The broker is appointed an agent by 
 the State Governments and he has no other alternative than to obey the laws. 
 Inspectors examine his books at various undeterminate periods and the 
 broker must be more than careful. The imposition of these various taxes 
 has doubled his clerical force and clogged the machinery of clerical work. 
 On the other side, the various exchanges have stringent laws relating to 
 commissions. The assuming of any legitimate tax by the broker, is classed 
 as splitting commissions, for which act the broker is liable to suspension or 
 expulsion. The only time a broker is permitted to pay a tax is when he can 
 prove that such a tax is on account of an error on his part, or on the part 
 of his clerks. 
 
 The Customer's Duty 
 
 On the other hand, it is the customer's duty to find out why charge is 
 made against him. The broker can always give the reason, and where the 
 reason is one of the foregoing or an indirect result of one of the foregoing, 
 the customer must be charged with the tax. 
 
 47 
 
General Regulations Covering the Transfer of 
 Stocks and Bonds 
 
 I. Registration 
 
 1. In transferring stock or bonds to the name of an Individual or Firm, 
 the full name should be given as it is usually signed, without prefix, suffix, 
 or title. 
 
 2. When a transfer is made to the name of a Woman, the prefix Miss 
 or Mrs. should be given, and the security registered in her individual name, 
 Thus, Mrs. Jane Doe and not Mrs. John Doe. 
 
 3. The titles of Corporations or Associations should be stated in full, 
 including the prefix The when applicable. 
 
 4. The name of a Trustee or Trustees should be followed by a brief 
 description of the trust. 
 
 5. The name of an Executor or Administrator should be followed by 
 a brief description of the will or estate. 
 
 6. Transfers to the Estate of John Doe are usually impossible. Richard 
 Roe, Executor (or Administrator) of the Estate of John Doe, is preferable. 
 
 7. Usually Executors, Administrators or Trustees can not transfer to 
 themselves as individuals. If necessarily done, the reason and justification 
 therefor should be shown by a court order or otherwise. The best way is 
 to transfer to a third party and retransfer to name desired. 
 
 8. In all cases the addresses of transferees should be stated with par- 
 ticularity. 
 
 9. Persons or associations having securities transferred to themselves 
 from time to time are requested to state the name uniformly, in order to 
 avoid the opening of unnecessary accounts and the confusion and incon- 
 venience consequent thereon. 
 
 If John Doe be a registered holder, the name should not be given as 
 Jno. Doe or /. Doe at the time of subsequent transfers ; and the name 
 Richard Roe & Co., should not afterwards be stated as Richard Roe & 
 Company or R. Roe & Co. 
 
 II. Assignment 
 
 1. The assignment on the reverse side of a certificate or bond, must 
 be signed, witnessed and dated. The name of the person constituted as 
 attorney to make the transfer upon the books of the Company, should be 
 omitted. 
 
 2. Signatures to such assignments must be technically correct; that is, 
 they must correspond in every particular with the name in which the 
 security is issued, without abbreviation, enlargement or change. 
 
 (a) The assignment of a certificate or bond registered in the name of 
 John Henry Smith, must not be executed in the name of John 
 H. Smith, J. Henry Smith, or J. H. Smith. If, however, a 
 certificate in the name of John Henry Smith has been signed 
 "J. H. Smith," the incorrect signature should not be erased, 
 but the proper signature "J onn Henry Smith" should be signed 
 
 48 
 
either directly above or below the incorrect signature and each 
 should be witnessed. 
 
 (b) Titles, if any must be prefixed or suffixed to signatures, exactly 
 
 as they appear on the face of the security. If the prefix Miss, 
 Mrs., Rev., Dr., Capt., Baron, etc., constitutes a part of the 
 name of the holder as registered, the signature must include 
 such prefix. 
 
 (c) Brothers or Bros, must be written as it appears in the security. 
 
 3. When a security has been issued in a name incorrectly stated or 
 wrongly spelled, the assignment must be executed both in the name as 
 registered and in the correct name. 
 
 4. The assignment of a security registered in the name of John Doe 
 and Richard Roe must be executed by both. 
 
 5. The assignment of a security registered in the name of a woman 
 subsequently changed by marriage, must be executed Jane Doe, now Jane 
 Roe. Evidence of the marriage and of the holder's identity, may be re- 
 quired. 
 
 6. A detached assignment must contain provision for the appointment 
 irrevocable of a person (the name being left blank) as attorney to make the 
 necessary transfer upon the books of the Company, and a full description 
 of the security ; that is, name of the Company, Issue, Certificate or Bond 
 Number, and the face amount. 
 
 (a) A separate assignment should accompany each certificate or bond. 
 
 7. Any alteration in the wording of an assignment or appointment of 
 an attorney should, whenever practicable, be attested by the signature of 
 every person joining in the execution of the assignment as the assignor or 
 as one of the assignors ; and must in any event be attested by that of a 
 person or persons thereunto authorized. 
 
 III. Assignments by Corporations or Associations 
 
 1. When a transfer is to be made from the name of a Corporation or 
 Association, the certificate or bond must (subject to paragraph 2 below) be 
 accompanied by a copy of a resolution of the board of directors or trustees, 
 authorizing its transfer and naming the officer delegated to execute the 
 assignment. 
 
 (a) This copy must be certified by the secretary of the Corporation 
 as a true copy from the minutes. 
 
 (b) If such a resolution is of a continuing effect, the secretary of the 
 Corporation must certify that the resolution is in effect at the time of the 
 intended transfer. 
 
 2. If a transfer is to be made on the authority of a by-law, the security 
 must be accompanied by a copy of the by-law, certified by the secretary of 
 the Corporation as being in effect at the time of such intended transfer. 
 
 3. The corporate seal (if the Corporation or Association have one) 
 must be impressed upon the assignment, whether on the security itself or 
 detached, and likewise upon all attestations. 
 
 (a) If a Corporation or Association have no seal, attestations must 
 be acknowledged before a Notary Public. 
 
 49 
 
IV. Assignments by Trustees 
 
 1. When a certificate or bond is to be transferred from the name of a 
 Trustee or Trustees, a certified copy of the instrument creating the trust 
 must be submitted. 
 
 2. Evidence is required of the appointment of a Trustee or Trustees, 
 (if other than as stated in the creating instrument) ; of his or their ac- 
 ceptance of the trust, and retention of it at the time of the intended transfer. 
 
 3. Assignments by trustees require the signature of all living Trustees. 
 The signature of one alone is not sufficient to justify a transfer of stock or 
 bonds. (See Section V, paragraph 4.) 
 
 (a) The decease of a former co-trustee should be proved by a certifi- 
 cate of death when obtainable, or otherwise by credible affidavit, as a con- 
 dition precedent to transfer. 
 
 V. Assignments by Executors and Administrators 
 
 1. A certificate or bond offered for transfer from the estate of de- 
 cedent intestate, must be accompanied by a certificate of the granting of 
 Letters of Administration, and evidence of the retention of the trust by the 
 Administrator or Administrators at the time of the intended transfer. 
 
 2. A security offered for transfer from the estate of a decedent testate, 
 must be accompanied by the following : 
 
 (a) A certified copy of the Last Will and Testament of the deceased 
 
 (b) A certificate of the appointment of an Executor or Executors, and 
 evidence of his or their retention of the trust at the time of the intended 
 transfer. 
 
 3. Presumptively, it is within the power of executors, or either of 
 several executors alone, to sell and transfer the assets of a decedent. A 
 will may, however, require joint action of all the executors. 
 
 4. If an assignment is proposed by executors more than eighteen months 
 after the decedent's decease, a presumption arises that the executors have 
 become Trustees and must be so treated. 
 
 5. Evidence must be furnished of the payment of any inheritance or 
 succession tax imposed by the laws of the States interested, or in lieu 
 thereof, a waiver of notice issued by the Comptroller, Auditor, or other 
 proper officer of such States. 
 
 (a) If the decedent was not a resident of the State of New York, and 
 died subsequently to July 21, 1911, a waiver by the Comptroller of that 
 State will issue of right, upon application therefor with a proper present- 
 ment of the facts. 
 
 VI. Charges for Registration and Transfer 
 
 1. When a certificate of stock is surrendered and a greater number of 
 certificates is issued in the same name, or in any one name, for a like aggre- 
 gate number of shares, a charge of 25 cents each is usually made for the 
 additional certificates. There is usually no other charge for the transfer 
 of stock. 
 
 2. No charge is made for the registration of bonds, nor for the transfer 
 of registered bonds. A charge of $1.00 per bond is generally made to 
 cover the actual cost of restoring registered bonds to coupon form, when 
 such restoration is provided for by the mortgage securing such bonds. 
 
 50 
 
VII. Taxes on Registration and Transfer 
 
 1. The State transfer tax on stock of any Company transferred within 
 the States of New York, Massachusetts and Pennsylvania amounts to 2 
 cents per $100 of par value or fraction thereof. The duty to require pay- 
 ment in advance of making a transfer, is imposed upon the Companies by 
 law. 
 
 2. There is now no tax on the registration or transfer of bonds. (See 
 Section V, paragraph 5, as to inheritance taxes on decedents' estates.) 
 
 VIII. Transfers In Error 
 
 1. In case a name has been filled in for transfer in error, some com- 
 panies will allow the name to be erased if the erasure is guaranteed by a 
 Stock Exchange member of firm, and will correct if guaranteed against 
 loss by a Stock Exchange member or firm. Other companies furnish forms 
 of their own to be filled out, while the Penna. R. R. Co. and a few others 
 require a detached power of attorney, signed by the original stock holder 
 before making correction. 
 
 Lost Certificates 
 
 Although the requirements of different companies show great varia- 
 tions, yet the following are the general requirements to secure a duplicate 
 for a lost or destroyed certificate: 
 
 (1) A formal notice of the loss, with request to stop transfer. 
 
 (2) An affidavit, signed by the registered stockholder, stating as fully 
 as possible, particulars of the loss. 
 
 (3) Notice of loss must be sent to the Secretary of every Exchange 
 upon which the security is traded. 
 
 (4) An advertisement of the loss must be inserted in three or more 
 issues of a prominent daily newspaper, in each city where such Exchanges 
 are located. Copies of such newspapers, advertisements included, must be 
 filed with the company. 
 
 (5) A surety bond in twice the par value of the lost certificate, the 
 form of which is to be approved by the company, must be given by the 
 owner of the lost certificate. 
 
 (6) Where all above requirements have been fulfilled and consent 
 has been received by the company from the Exchanges interested, a dupli- 
 cate certificate will usually be issued after a period of about six months 
 from the date of the loss. 
 
 New Jersey Regulations 
 
 The State of New Jersey, Department of the Comptroller of the Treasury, 
 Trenton, N. J., issues the following circular regarding requirements Respecting 
 the Transfer of Shares of New Jersey Corporations owned by Estates of Non- 
 Resident Decedents: 
 
 A strict compliance with these requirements will materially assist in facil- 
 itating transfers. 
 
 When the entire estate goes to exempt heirs to wit: father, mother, hus- 
 band, wife, child or children or lineal descendant, born in lawful wedlock, 
 brother or sister, wife or widow of a son or husband of a daughter, churches, 
 
 51 
 
hospitals and orphan asylums, public libraries, Bible and tract societies, re- 
 ligious, benevolent and charitable institutions and organizations (within this 
 State by location or incorporation), waiver will be issued. This fact must be 
 established by filing with this Department 
 
 If the estate is disposed of by will by a copy of the will, certified by the 
 proper legal authority, including the certificate of the executor's appointment, 
 and an affidavit made by executor, certifying names of beneficiaries mentioned 
 in the will who survived the testator, and how they were related to testator. 
 If the estate is not disposed of by will, by the affidavit of the administrator, 
 giving date of death of decedent, place of residence at that time, names of bene- 
 ficiaries, how they were related to decedent, and what portion of estate each 
 will receive, and the certificate of administrator's appointment. 
 
 When any portion of the estate goes to other than exempt heirs, as above 
 recited. Upon the payment of the tax due this State, a receipt therefor and a 
 certificate thereof will be issued. 
 
 The deposit with the transferring corporation of the waiver or certificate 
 above provided will constitute sufficient authority for the transfer of the shares 
 stated therein, as contemplated by the law. 
 
 To determine the amount of tax due this State, it is necessary to file with 
 this Department a copy of the will of the deceased and a copy of the inventory 
 of the estate (including real and personal property), certified by the proper legal 
 authority, and an affidavit of the executor, reciting the date of death, the resi- 
 dence of deceased at time of death, the names of all beneficiaries named in the 
 will who survived the testator, and their respective relationship to decedent; 
 also, when possible, statement of debts, administration and other expenses. 
 
 It is necessary to be informed of the total value of the estate, both as to 
 real and personal property. 
 
 Intestate estates can supply like information by affidavit of administrator. 
 
 In case of life interest, vested or contingent remainders, etc., forming part 
 of an estate, affidavits should include the age at time of death of decedent, of 
 life tenants, beneficiaries, etc., and such other information as may assist in de- 
 termining the value thereof. 
 
 Statements, unless sworn to, are unacceptable. Documents forwarded are 
 for filing purposes, hence must remain here, constituting the action taken. 
 
 Form of Corporation Requirement 
 
 The Pennsylvania Railroad Company, Philadelphia, Pa., issues the following 
 circular relating to transfers of its stock and also stock of other companies in- 
 corporated in Pennsylvania: 
 
 Executors, administrators, guardians and other representatives of the es- 
 tates of decedents and minors acting under letters testamentary, or of ad- 
 ministration or other authority granted by or under the laws of any State or 
 Territory of the United States other than Pennsylvania, or of any kingdom, 
 state, sovereignty, or country, will, before being permitted to transfer stock 
 of this Company standing in the names of decedents or minors, be required to 
 comply with the provisions of the Act of Assembly of this State, of which the 
 following is a copy: 
 
 "AN ACT RELATING TO FOREIGN EXECUTORS, ADMINISTRATORS, 
 GUARDIANS, AND REPRESENTATIVES OF DECEDENTS AND 
 WARDS." Approved April 8th, 1872. 
 
 "Section 1. That is shall and may be lawful for any executor, administrator, 
 or other person representing the estate of any decedent, or for any guardian or 
 other legal representative of the estate of a minor, acting under letters test- 
 amentary or of administration, or other authority, granted by or under the 
 laws of any other State or Territory of the United States, or of any kingdom, 
 
 52 
 
state, sovereignty, or country, to transfer any or all shares of stock and regis- 
 tered loan, or either, of any incorporated company of this Commonwealth, 
 standing in the name of any decedent, minor, or cestui que trust, and to re- 
 ceive the dividends and interest, or either thereof, whenever a duly authenticated 
 copy of the will, or other grant of authority under which such transfer or re- 
 ceipt is proposed to be made, shall have been filed in the office of the register 
 of wills for the county in which such incorporated company has its transfer 
 office or principal place of business; and all transfers of stock or loans, or re- 
 ceipts for dividends or interest, heretofore made by foreign executor, adminis- 
 trator, guardian, and others acting as aforesaid, are hereby validated." 
 
 The principal place of business and transfer office of this Company are 
 situated in the county of Philadelphia, and therefore the duly authenticated copy 
 of the will or other grant of authority referred to in the Act of Assembly should 
 be filed in the office of the Register of Wills for this county, whose address is 
 City Hall, Philadephia, Pa. The Register of Wills requires: Authenticated copy 
 of Will and Letters testamentary, under Section 906 of the Revised Federal 
 Statutes, that is Certificates of the Official Custodian of the Document, Pre- 
 siding Judge and Clerk of Court. Upon compliance with these requisites, he 
 will furnish a certificate, which shall be left with this Company as evidence 
 of the authority of the representative to act. His fee for this service is $1.50 
 for filing papers and $.50 for issuing certificate. 
 
 Executors, administrators, guardians, committees over lunatics and trustees 
 will not be permitted to transfer to themselves individually without an order of 
 court. This rule applies also where several of them seek to transfer to one of 
 their number individually, or to one individually, and a stranger. A simultaneous 
 transfer through an intermediary will not be permitted. 
 
 New York Stock Exchange Rules for 
 Delivery 
 
 1. Securities admitted to dealings upon the New York Stock Ex- 
 change, Registered and Transferable in the Borough of Manhattan, City 
 of New York, in conformity with the requirements of Section 1, Article 
 XXXIII of the Constitution, are a delivery: 
 
 (a) Certificates of Stock for 100 shares or odd lots aggregating 100 
 
 shares, with irrevocable Assignment for each Certificate, and 
 in the name of a member or a member's firm, registered and 
 doing business in the Borough of Manhattan. Certificates for 
 the exact amount or aggregating the amount of an odd lot. 
 
 (b) Or with irrevocable Assignment witnessed by a member; or cor- 
 
 rectness of signature guaranteed by a member or a member's 
 firm. 
 
 (c) Or with irrevocable Assignment and each Power of Substitution 
 
 witnessed by a member ; or correctness of signature guaranteed 
 by a member or a member's firm. 
 
 (d) Coupon bonds payable to Bearer, in denominations of $500 or 
 
 $1,000 each, with proper coupons of the bond's number securely 
 attached. Small bonds, under $500, only in special transactions. 
 The money value of a missing coupon may be substituted only 
 with the consent of the Committee on Securities for each 
 delivery. 
 
 53 
 
Coupon Bonds exchangeable into Registered Bonds and Con- 
 vertible Bonds must carry all unpaid and unmatured Coupons. 
 
 (e) Registered Coupon Bonds in denominations of $500 or $1,000 
 
 registered to Bearer, or when transfer books are closed with 
 an Assignment to Bearer for each bond by a member or his 
 firm or witnessed by a member, or the correctness of the sig- 
 nature guaranteed by a member or his firm, registered and doing 
 business in the Borough of Manhattan. 
 
 (f ) Registered Bonds in denominations not exceeding $10,000 properly 
 
 assigned. 
 
 2. Securities contracted for in amounts exceeding 100 shares of Stock 
 or $10,000 in Bonds may be tendered in lots of 100 shares of Stock or $10,000 
 in Bonds, or any multiple of either, and must be accepted and paid for as 
 delivered. 
 
 3. Securities with Assignment, or Power of Substitution, signed by an 
 Insolvent, are not a delivery. During the close of transfer books, such se- 
 curities held by others, than the insolvent, are a delivery if accompanied 
 by an affidavit for each certificate or bond, that said securities were held on 
 a date prior to the insolvency. 
 
 Securities with Assignment or with Power of Substitution, guaranteed 
 by a member or his firm, suspended for Insolvency, are not a delivery and 
 must be reguaranteed by a solvent member or his firm. 
 
 4. Securities with an Assignment or a Power of Substitution executed 
 by a firm that has ceased to exist are not a delivery, except during the 
 closing of the transfer books. The Assignment must be proved or ac- 
 knowledged before a Notary Public. (Form No. 3, and for witness No. 9.) 
 
 Securities with either the Assignment or any Power of Substitution 
 witnessed by a deceased person are not a delivery. 
 
 5. Securities assigned, or a Power of Substitution by a firm that has 
 dissolved and is succeeded by one of the same name, are a delivery, when 
 the new firm shall have signed the statement "Execution guaranteed," under 
 a date subsequent to the formation of the new firm. 
 
 6. Securities in the name of a corporation or an institution, or in a 
 name with official designation, are a delivery only when the statement, 
 "Proper papers for transfer filed by assignor" is placed on each assignment 
 and signed by the Transfer Agent. 
 
 7. Securities with an Assignment or a Power of Substitution signed by 
 a deceased person, Trustees, Guardians, Infants, Executors, Administrators, 
 Assignees and Receivers in Bankruptcy, Agents or Attorneys are not a 
 delivery. 
 
 8. Securities assigned by a Married Woman are not a delivery. A 
 joint assignment and acknowledgment by husband and wife before a 
 Notary Public, will make such security a delivery only while the transfer 
 books are closed. (Form No. 4.) 
 
 9. Securities in the name of an Unmarried Woman, with the prefix 
 "Miss," are a delivery without notarial acknowledgment, when signed 
 "Miss." 
 
 10. Securities in the name of an Unmarried Woman (without the 
 prefix "Miss"), or a Widow are a delivery only when the Assignment is 
 acknowledged before a Notary Public. (Form No. 5.) 
 
 54 
 
11. Securities of a Company whose transfer books are closed in- 
 definitely for any reason, legal or otherwise, the Assignment and each Power 
 of Substitution must be acknowledged before a Notary Public. (Form 
 Nos. 2, 3 ; for witness, 8 and 9.) 
 
 12. Securities in the name of Foreign Residents are not a delivery on 
 the day the transfer books are closed for payment of a Dividend of Registered 
 interest, and reclamation can only be made on that day. 
 
 13. Securities in the name of Foreign Residents must be accompanied 
 by an acknowledgment before a United States Consul or Morgan, Grenfell 
 & Co., London, when required by transfer agents. 
 
 Several Companies having transfer offices at Grand Central Station, 
 New York, make this requirement. 
 
 14. Certificates of stock on which the name of a transferee has been 
 filled in error, may be made a delivery during the closing of the transfer 
 books by ruling of the Committee on Securities. Necessary form of re- 
 lease, cancellation and reassignment will be furnished on application to the 
 Committee on Securities. 
 
 15. An endorsement by a member or his firm registered and doing 
 business in the Borough of Manhattan, or the signature as a witness by 
 such a member, of a signature to an Assignment or a Power of Substitu- 
 tion, is a guarantee of its correctness. Each Power of Substitution, as well 
 as the Assignment, must be so guaranteed, or witnessed. 
 
 16. "Coupon Bonds issued to Bearer, having an endorsement upon them 
 not properly pertaining to them as a security, must be sold specifically as 
 'Endorsed Bonds,' and are not a delivery, except as 'Endorsed Bonds! " 
 
 Extract from Resolutions of Governing Committee, adopted May 23, 
 1883. 
 
 A definite name of a person, firm, corporation, an association, etc., 
 such as "John Smith," "Brown, Jones & Co./' "Consolidated Bank," ap- 
 pearing upon a Coupon Bond, and not placed there for any purpose of the 
 Company by any of its officers, implies ownership, and is an "Endorsed 
 Bond" under the above resolution. 
 
 17. Any endorsement on a Coupon Bond stating that it has been de- 
 posited with a State for bank circulation or insurance requirement, may be 
 released and release acknowledged before a Notary Public; it will then be 
 a delivery as a "Released Endorsed Bond." 
 
 "Rights" to Subscribe 
 
 18. Assignments of "Rights," with the signature of the assignor wit- 
 nessed and guaranteed in the same manner as other Assignments, as pro- 
 vided in these rules, are a delivery : 
 
 (a) An Assignment of the "Rights" accruing on each 100 shares; or, 
 
 Assignments of "Rights" on odd lots aggregating the "Rights" 
 on 100 shares. 
 
 (b) An Assignment for the exact amount, or Assignments aggregat- 
 
 ing the amount, on a sale of the "Rights" accruing on an odd lot 
 of stock. 
 
 55 
 
19. Assignments of "Rights" in the name of a Married Woman, 
 Widow or an Unmarried Woman are a delivery without notarial ac- 
 knowledgment. 
 
 20. Assignments of "Rights" made by a deceased person or a firm 
 that has ceased to exist are not a delivery and must be taken back by the 
 party delivering them. 
 
 21. Assignments of "Rights" signed by Trustees etc., or for corpora- 
 tions, etc., are not a delivery, until passed by the Committee on Securities. 
 
 Forms for Notarial Acknowledgments and 
 
 Depositions Prescribed by the Committee 
 
 on Securities 
 
 Form No. 2. 
 
 Acknowledgment by an Individual, by Whom an Assignment or a 
 Power of Substitution is Executed. 
 
 State of 1 
 
 |ss. 
 County of j 
 
 On this day of 19 .... before me, 
 
 a Notary Public for the County of personally 
 
 appeared to me known, and known to me to be 
 
 the individual named in the within Certificate, and described in and who 
 executed the foregoing Instrument, and acknowledged to me that he ex- 
 ecuted the same. 
 
 :SEAL: 
 
 If used for a Power of Substitution, substitute for the word Instru- 
 ment, "Power of Substitution, dated 19 ," the date 
 
 referred to filled in. 
 
 56 
 
Form No. 3. 
 
 Acknowledgment for Firm. 
 
 State of ] 
 
 Us. 
 County of J 
 
 On this day of 19 before me, 
 
 a Notary Public for the County of personally 
 
 appeared to me known, and known to me to be 
 
 one of the firm of named in the within Cer- 
 tificate, and described in and who executed the foregoing Instrument, and 
 acknowledged to me that he executed the same as the act and deed of said 
 firm. 
 
 :SEAL : 
 
 If used for a firm that has dissolved, omit the word "be" in fourth line 
 and substitute the words "have been on 19 . ..." 
 
 If used for a Power of Substitution, executed by a firm that has dis- 
 solved, substitute for the word Instrument, "Power of Substitution, dated 
 , .19 "the dates referred to filled in. 
 
 Form No. 4. 
 
 Joint Acknowledgment of Execution of an Assignment Made by Hus- 
 band and Wife. 
 
 State of ] 
 
 Us. 
 County of J 
 
 On this day of 19 before me 
 
 came and her husband, both of them 
 
 known to me, and they severally acknowledged that they executed the fore- 
 going (or within) Assignment and Power of Attorney, for the purpose 
 therein mentioned. 
 
 :SEAL : 
 
 57 
 
Form No. 8. 
 
 Deposition by a Witness of the Execution of an Assignment or a 
 Power of Substitution by an Individual. 
 
 State of ) 
 
 [ss. 
 County of ) 
 
 On this day of 19 .... before me, 
 
 a Notary Public for the County of personally 
 
 appeared to me known, who being by me first duly 
 
 sworn did depose and say that he resides at that he knew 
 
 named and described in the instrument, 
 
 which was signed in witness' presence. 
 
 :SEAL: 
 
 If used for a Power of Substitution, executed by an individual, see 
 instructions in Form No. 2. 
 
 Form No. 9. 
 
 Deposition by a Witness of the Execution of an Assignment or a 
 Power of Substitution by a Firm. 
 
 State of ) 
 
 [ss. 
 County of ) 
 
 On this day of 19 before me, 
 
 a Notary Public for the County of personally 
 
 appeared to me known who, being by me first duly 
 
 sworn, did depose and say that he resides at that he 
 
 knew and kn'ew him to be one of the firm of 
 
 named and described in the instrument, 
 
 which was signed in witness' presence. 
 
 :SEAL: 
 
 If used for a firm that has dissolved, or for a Power of Substitution 
 executed by a firm that has dissolved, see instructions in Form No. 3. 
 
 58 
 
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