Approved Code No. 141-Amendment No. 3 Registry No. 1707-04
NATIONAL RECOVERY ADMINISTRATION
CODE OF FAIR COMPETITION
AS APPROVED ON FEBRUARY 18, 1935
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Approved Code No. 141-Amendment No. 3
Registry No. 1707-04
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Approved Code No. 141-Amendment No. 3
AMENDMENT TO CODE OF FAIR COMPETITION
As Approved on February 18, 1935
APPROVING AMENDMENT OF CODE OF FAIR COMPETITION FOR INVEST-
Applications having been duly made pursuant to and in full com-
pliance with the provisions of Title I of the National Industrial
Recovery Act, approved June 16, 1933, for approval of amendments
of Amendment No. 2 of the Code of Fair Competition for Invest-
ment Bankers, which are attached hereto and hereby made a part
hereof, and Notice of Opportunity to be Heard having been afforded
to all interested parties, and any objections filed having been duly
considered and the annexed report on said amendments, containing
findings with respect thereto, having been made and directed to the
NOW, THEREFORE, on behalf of the President of the United
States, the National Industrial Recovery Board, pursuant to author-
ity vested in it by Executive Orders of the President, including
Executive Order No. 6859 dated September 27, 1934, and otherwise;
does hereby incorporate, by reference, said annexed report and does
find that said amendments and the Code as constituted after being
amended comply in all respects with the pertinent provisions and
will promote the policy and purposes of said Title of said Act, and
does hereby order that said amendments, which are attached hereto
and made a part hereof, be and they are hereby approved, and that
the previous approvals of said Code and said Amendment No. 2
are hereby modified to include an approval of said Code in its en-
tirety as amended.
NATIONAL INDUSTRIAL RECOVERY BOARD,
By L. C. MARSIALL, Exccutive Secretaruy.
L. H. PEEBLES,
WASHINGTON, D. C.,
February 18, 1935.
REPORT TO THE PRESIDENT
The White House.
Sm: An application has been duly made pursuant to and in full
compliance with the provisions of the National Industrial Recovery
Act for the amendment of Amendment No. 2 of the Code of Fair
Competition for Investment Bankers for the following purposes:
1. To clarify the definitions "interim certificate" and interim
receipt in paragraph (t) of Article II.
2. To modify subsection (d) of Section 1 of Article IV regard-
ing the acceptance of stock dividends in excess of the amount
charged earnings or earned surplus by a company paying a stock
3. To clarify Section 2 of Article V with respect to three-day
notice of organization of selling syndicate or selling group.
4. The addition of a new Section 14 to Article X to provide for
automatic suspension and cancellation of registration in cases of
nonpayment of code assessments.
5. The addition of a new Section 15 to Article X to provide for
automatic suspension and cancellation of registration for failure
to supply necessary reports on which code assessments are predicated.
6. The addition of a new Section 16 to Article X to provide for
reregistration in cases of cancellation as provided in Sections 14 and
15 of Article X.
The Code of Fair Competition for Investment Bankers was
approved on November 27, 1933. Amendment No. 2 of this Code
contains all of the Fair Trade Practice provisions and was approved
on March 23, 1934.
The proposed amendment clarifying paragraph (t) of Article
I with reference to definition of the terms interim certificate "
and "interim receipt" is advisable in order to avoid the possibility
that a temporary security which gives the holder all the legal rights
might be considered either an interim certificate or interim receipt,
as in that case under Article IV, Section 3 of the Code the required
refund of monies paid for a security would be unjustified since the
purpose of Article IV, Section 3 in requiring refunds of monies
paid is to protect the holders of interim certificates or interim re-
ceipts in the event that the security purchased cannot for any un-
foreseen reason be delivered. In contrast with such temporary se-
curity interim certificates and interim receipts do not give the
holder the legal rights he would possess if the security were in
It is proposed to modify subsection (d) of Section f of Article IV
so as to permit an organization which receives regularly recurring
stock dividends from a company neither controlled by nor affiliated
with it to promptly sell such stock dividends and take up the proceeds
as income regardless of whether or not the proceeds are more or less
than the proportionate amount charged against earnings or earned
surplus by the issuing company. The section as written prohibits
taking up as income stock dividends received at an amount greater
than that charged against earnings or earned surplus by a company
paying such stock dividends and this is in accordance with sound
business practice when applied to corporations in general, such as
operating corporations. This principle is not applicable, however,
with respect to organizations defined in the proposed amendment,
such as investment trusts.
The clarification of Section 2 of Article V is necessary because of
uncertainty among investment bankers as to its exact intentions.
The proposed amendment accomplishes the following two purposes,
which I am advised was the intention of the provision now in the
1. It provides a three-day period during which an investment
banker may come to a decision as to whether or not he wishes to par-
ticipate in the distribution of the issue of securities as well as the
amount of his participation, and
2. It provides a three-day period during which the investor may
come to a decision as to whether or not his order for a portion of the
issue is a firm order since the order cannot become a firm order in
accordance with the Code until written confirmation from the seller,
which confirmation may not be given by the seller within the three-
Under the existing Code the Code Committee has authority to can-
cel the registration of any registered investment banker in cases of
non-payment of code assessments, but may do so only after formal
procedure entailing unnecessary expenses. The proposed amendment
adding Section 14 to Article X provides ample time for the payment
of an assessment by a registered investment banker before any action
occurs since he has thirty days after the notice of indebtedness has
been sent to him to pay such assessment and if the assessment is not
received within that time a second notice is mailed to him with which
second notice it is required that a copy of this amended section be
included. A period of fifteen days after the second notice is pro-
vided, after which time the investment banker is automatically sus-
pended and if payment is not received within another fifteen day
period after suspension, his registration is automatically cancelled.
Provision is made, however, that the Investment Bankers Code Com-
mittee may stay the operation of automatic cancellation in any case
in which it finds that undue or unreasonable hardship will result by
reason of the requirement that the assessment be paid within the
period prescribed. Necessary discretion is thus insured to the Code
Committee in cases which warrant special consideration.
The above remarks with reference to the proposed Section 14 are
likewise applicable to the proposed amendment to add a new Section
15 to Article X involving the submission of reports upon which are
predicated the code assessments, except that there is, of course, no
necessity for discretion with respect to automatic cancellation in this
case since there would appear to be no valid excuse why any invest-
ment banker could not forward a report as to the number of his
employees. The plan of assessment is based on the number of em-
ployees of a registered investment banker, and therefore, Is the con-
trolling factor in assessments for code expenses.
The proposed amendment adding Section 16 to Article X pro-
vides that an investment banker whose registration has been can-
celled in accordance with the new Section 14 may again become
a registered investment banker upon application, provided payment
has been made in full of the amount of the indebtedness for which
the original registration was cancelled. It further provides that if
an investment banker's registration has been cancelled in accordance
with the new Section 15 for failure to send in the reports required
by the Code the investment banker may again become a registered
investment banker upon application if the required reports are sub-
mitted. This section further provides that an investment banker
who has assented to the Code is entitled to new registration only
if he pays in full the amount of any unpaid assessment owing by
him in his capacity as an assentor.
The Deputy Administrator in his report to the National Indus-
trial Recovery Board on said amendments of said Amendment No. 2
of said Code having found as herein set forth and on the basis of
all of the proceedings in this matter:
It finds that:
(a) The amendments of said Code and the Code as amended are
well designed to promote the policies and purposes of Title I of the
National Industrial Recovery Act including the removal of obstruc-
tions to the free flow of interstate and foreign commerce which tend
to diminish the amount thereof, and will provide for the general
welfare by promoting the organization of industry for the purpose
of cooperative action among trade groups, by inducing and main-
taining united action of labor and management under adequate gov-
ernmental sanction and supervision, by eliminating unfair competi-
tive practices, by promoting the fullest possible utilization of the
present productive capacity of industries, by avoiding undue restric-
tion of production (except as may be temporarily required), by in-
creasing the consumption of industrial and agricultural products
through increasing purchasing power, by reducing and relieving un-
employment, by improving standards of labor, and by otherwise
(b) The Code as amended complies in all respects with the perti-
nent provisions of said Title of said Act, including without limita-
tion subsection (a) of Section 3, subsection (a) of Section 7, and
subsection (b) of Section 10 thereof.
(c) The Code empowers the Code Committee to present the afore-
said amendments on behalf of the Industry as a whole.
(d) The amendments and the Code as amended are not designed
to and will not permit monopolies or monopolistic practices.
(e) The amendments and the Code as amended are not designed
to and will not eliminate or oppress small enterprises and will not
operate to discriminate against them.
(f) Those engaged in other steps of the economic process have
not been deprived of the right to be heard prior to approval of said
For these reasons, therefore, these amendments have been
For the National Industrial Recovery Board:
IJ. C. MAR SHIALL,
FEnBRUARY 18, 1935.
AMENDMENT TO CODE OF FAIR COMPETITION FOR
Amend Paragraph (t) of Article II of Amendment No. 2 of the
Code of Fair Competition for Investment Bankers:
Strike out the first period and insert in lieu thereof a semicolon
and the following:
but the term interim certificate or interim receipt shall not in-
clude any security in temporary form which entitles the holder
thereof to the possession of the same legal rights in respect of such
security as would be possessed by the holder of the security in
Amend Article IV, Section 1, Sub-Section (d) of Amendment No.
2 of the Code of Fair Competition for Investment Bankers: Add the
following to the present Sub-Section:
Where a corporation (or a voluntary association) receives regu-
larly recurring stock dividends from a company not directly or indi-
rectly controlled by it or affiliated with it and promptly sells such
stock dividends, such recipient may take up as income the cash
proceeds from the sale of such stock dividends, provided the amount
thereof is segregated from other income in such recipient's published
reports and a statement of the basis upon which the credit is com-
puted is given.
Amend Article V, Section 2 of Amendment No. 2 of the Code of
Fair Competition for Investment Bankers:
Strike out all of the existing Section and in lieu thereof insert the
SECTION 2. Three-day Notice of Organization of Selling Syndicate
or Selling Group.-Any investment banker proposing to organize a
selling syndicate or a selling group to distribute new securities other
than those of the United States Government or any instrumentality
thereof or of any State or subdivision or instrumentality thereof
shall mail or deliver or telegraph a copy of the prospectus or an
adequate description of the security to each investment banker who
is to be offered a participation in such syndicate or a membership in
such selling group at such time that, in the usual course of delivery,
such prospectus or description will be received by all such invest-
ment bankers on approximately the same day and at least three days
(excluding Sundays and holidays but including the day of delivery)
before the date fixed by the manager when participants in such syndi-
cate or members in such group must accept or refuse such participa-
tion or membership and such manager shall, either at the time of
the mailing or delivery or telegraphing of such prospectus or descrip-
tion as aforesaid or at another time, fix a date for the public offering
of such securities which offering date shall be a date not earlier than
the date fixed by such manager when participants in such syndicate
or members in such group must accept or refuse such participation
After the receipt of the prospectus or description any investment
banker who is to be offered a participation in a selling syndicate
or a membership in a selling group may advise prospective purchas-
ers in regard to the security, but no such investment banker shall
confirm an order for such securities before the day fixed by the
manager for the public offering or before he shall have accepted
in whole or in part the participation or membership offered to him.
Amend Article X of Amendment No. 2 of the Code of Fair Com-
petition for Investment Bankers:
Add the following new Section to be numbered Section 14:
SECTION 14. Payment of Assessment.-Any registered investment
banker who shall, upon the date when this amended Section becomes
effective, have failed to pay any assessment levied against him pur-
suant to the provisions of Section 13 of this Article X, within 30
days after notice of his indebtedness shall have been sent him, or
any registered investment banker who shall, at any time after this
amended Section becomes effective, fail to pay any assessment levied
against him pursuant to the provisions of Section 13 of this Article
X, within 30 days after notice of his indebtedness shall have been
sent him, shall immediatley be sent by registered mail a second
notice in writing of his indebtedness, and if said indebtedness be not
liquidated within 15 days after the date of the mailing of such sec-
ond notice, the registration of such delinquent registered invest-
ment banker is thereby automatically suspended; provided that a
copy of this amended Section shall have been sent to such delin-
quent registered investment banker with such second notice. Any
registered investment banker whose registration shall have been
suspended as provided in this amended Section shall be imme-
diately notified in writing of the suspension of his registration, and
his registration may be automatically reinstated after payment of
his indebtedness; provided such payment shall be made within 15
days after such registration has been so suspended. If any delin-
quent registered investment banker shall fail to pay his indebted-
ness after 15 days suspension his registration shall be automatically
canceled; provided, however, that the Investment Bankers Code Com-
mittee may stay the operation of the automatic cancellation provided
for herein, in any case in which it finds that undue or unreasonable
hardship will result to a registered investment banker by reason of
the payment by him of his assessment within the period prescribed.
Amend Article X of Amendment No. 2 of the Code of Fair
Competition for Investment Bankers:
Add the following new Section to be numbered Section 15:
SECTION 15. Filing of Reports for Assessments.-Any registered
investment banker who shall, upon the date when this amended
Section becomes effective, have failed to file with the Investment
Bankers Code Committee any report within 30 days after notice
shall have been sent him that such report is required for the purpose
of any assessment to be levied pursuant to the provisions of Section
13 of this Article X, or any registered investment banker who shall,
at any time after this amended Section becomes effective, fail to file
with the Investment Bankers Code Committee any report within
80 days after notice shall have been sent him that such report is
required for the purpose of any assessment to be levied pursuant to
the provisions of Section 13 of this Article X, shall immediately
be sent by registered mail a second notice in writing to file such re-
port, and if such report be not filed within 15 days after the mailing
of such second notice the registration of such delinquent registered
investment banker is thereby automatically suspended; provided
that a copy of this amended Section shall have been sent to such
delinquent registered investment banker with such second notice.
Any registered investment, banker whose registration shall have
been thus suspended shall be immediately notified in writing of the
suspension of his registration; and his registration may be auto-
matically reinstated after filing such report and after payment of
any assessment levied against him based on such report; provided
such payment shall be made within 15 days after notice of his in-
debtedness shall have been sent to him. If any delinquent registered
investment, banker shall fail to file his report after 15 days suspen-
sion or shall fail to pay his indebtedness within 15 days after notice
of assessment levied based on such report, his registration shall be
Amend Article X of Amnendment No. 2 of the Code of Fair
Competition for Investment Bankers:
Add the following new Section to be numbered Section 16:
SECTION 16. Application. for Renewal of Cancelled Registra-
tions.-Any investment banker whose registration as a registered
investment banker shall have been cancelled as provided in Section
14 or 15 of this Article X, may apply for a new registration as a
registered investment banker by an application therefore made in the
same manner and under the same conditions as are specified in this
Article X with respect to an original application for such registra-
tion; provided, that in the event such cancellation shall have been
made under the provisions of said Section 14, the application for
new registration shall be preceded or accompanied by payment in
full of the amount of the indebtedness for which the original regis-
tration of such applicant shall have been cancelled; and, provided,
further that in the event such cancellation shall have been made
under the provisions of said Section 15, the application for such
new registration shall be preceded or accompanied by the report or
reports as to which the applicant was delinquent, and thereupon
there shall be levied against such applicant the same assessment or
assessments based on said report or reports which would have been
levied if said report or reports had been filed in accordance with
the original notice thereof, and such new registration shall not be
granted until such applicant shall pay in full the amount of said
assessment or assessments. No investment banker who shall have
assented to the Code shall be entitled to a new registration as pro-
vided in this Section unless he shall also first pay in full the amount
of any unpaid assessment owing by him in his capacity as such
Approved Code No. 141-Amendment No. 3.
Registry No. 1707-04.
UNIVERSITY OF FLORIDA
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