'Il':~i~i~EirulL~_lta~ case Na. l~i
Registry No. 1707--04
NATIONAL RECOVERY ADMINISTRATION
CODE OF FAIR COMPETITION
AS APPROVED ON NOVEMBER 27, 1938
1. Executive Order
2. Letter of Transmittal
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Approved Code No. 141
CODE OF FAIR COMPETITION
As Approved on November 271, 1933
An application having been duly made, pursuant to and in full
compliance with the provisions of title I of the National Industrial
Recovery Act, approved June 16, 1933, for my approval of a Code
of Fair Competition for Investment Bankers, and hearings having
been held thereon and the Administrator having rendered Ihis report
containing an analysis of the said code of fair competition, together
with his recommendations and findings with respect thereto, and the
Administrator having found t~ha.t the said code of fair competition
complies in all respects with the pertinent provisions of title I of
the said act and that the requirements of clauses (1) and (2) ofE
subsection (a) of section 3 of the said Act have been met:
NOW, THEREFORE, I, Franklin D. Roosevelt, President of the
United States, pursuant to the authority vcested in me by title I of
the Nation~al Indust~rial Recovery Act, approved June 16, 1933, and
otherwise, do adopt and approve the report, recommendations, and
findings of the Administ~rator and do order that the said code of
fair competition be and is hereby approved.
FRANKLIN D. ROOSEVELT.
Approval recommended :
Hvoo S. rJOHNSON,
THE 77HITE HOUSE,
Novlemlber 27, 1933.
NOVEMB~En 20, 1933.
The Wh'ite H~ouse.
Smn: I hiave thle honor to trainsmit herewith the report of the
Heal~rin on the Clode of Falir Comlpetition for Investment Bank-
ers condiuctedl in accordance withl the requirements of the National
Recovery Admlinistration, in the A~udlitorium, United States Chamber
of Commeirce B~uildingp, on November 6, 1933. The sponsor of this
Code is thle Investment Bankercs Associationn of America. Although
its present membershiip consists of only 302 out of some 6376 security
dealers, these members comprise the leading investment houses of the
UTnited States aind Canadla. For the yecar 1932 thie business of mem-
bers of the Association approximatedd 90 percent of the total volume
according to reliable r~ecords.
It is important to note that thle uinderriliting business of invest-
mient bankilingr has dleclinied to a negligible amiount at thiis time. This
may b~e attributable to various causes and particularly to the excess
flotation of new securities during the years culminating with 1929.
In tha~t p'eriodt undterwriting houses kieenly competed in combing the
fieldl for new issues and abnormanlly large sales or~ganizations were
created by the dealers to dispose of the securities. Trade practices
developed which resulted in the enactment of the Securities Act of
1933. The investment bankers definitely r~ealize the need for fair
pract ice provisions to govern their business and at their recent annual
convention decided that aldeqluate prov-isions be made a part of the
Code. They have voluntarily agreed to submit Fair Practice pro-
visions in a supplemnentary codle within ninety days of your approval
of this Code.
To this end a National Commnittee, comiposed' of twenty-two out-
standiing investment bankers under w~homi are seventeen regional
Group C'hirmien, is working ini conjunction with the officers and the
Bo0ardl of Governors of the Investment Bankers Association of
America. In addition invitations have been issued to a number of
Stalte Secur~ityr Comlmissioners andl others to collabora~te with the
National Committee. Trade Practices which will be filed will assure
the operations of thle Codle and will place the investment banking
business on a far coundter andl fairer basis thlan it has been in the
If in your judgmrent the Fair Tradle Pr~actice Provisions when sub-
mlittedl either eliminate enitirecly or correct thle abuises that affect the
pu"blic interest. thle f-low oif investmecnt capiital into business and
mnduitryv, which is nol essential elemlent. in thle Ircovery program, will
have been expedited.
Supplementary data submitted by the Association in regard to
employment and watges revealed a startling contrast to the prevadl-
ing inactivity in the investment field. A wide and thorough canvas
of members as of November 1, 1933, who were in business on Novem-
ber 1, 1929, showed that there were 15,070 employees in these houses
on November 1 this year as compared to 24,406 employees on the
corresponding. date in 1929, or a reduction in numbers of 38%~.
The canvas further showed a wide divergence for a. number of
groups in the average reduction in wages of employees receiving,
$150.00 per month or less on November 1, 1929, compared with the
amounts they received on November 1, 1933. One group reported
average increases of from 1,/2%0 to 45%, while the lowest group rec-
ported decreases over 30%0. On the basis of the complete survey it
seems reasonably clear that the average net reduction in wages of
all employees receiving $150.00 per month or less on November 1,
1929, will not exceed 15%7.
The Labor provisions of this Code coincide with those of the
Code for Stock Exchange Firms because of the inseparable rela-
tionship of the two businesses. Here again the provision for over-
time payment is, in fact, of minor importance compared to the
known generosity of employers to employees during prosperous
The only available record as to the volumne of the investment
banking: business is in the compilation of capital issues publicly
offered. Using figures taken from the table submitted, the 1929 vol-
ume of such financing exceeded $;11,500,000,000 as against a possible
$1,000,000,000 for 1933. The severity of this shrinkage in business
may be better understood when it is realized that t.he estimated
$1,000,000,000 of publicly offered issues is only 25%0 of the volume
done in 1920, the low point of the previous depression, and only
about 10%o of the average volume of t~he years 1927, 1928 and 1929.
In no year since 1919, except 1932 and 1933 has the volume been
less than $4,000,000,000, hence it is reasonable to assume that the
normal annual capital requirement of the country is somewhat in
excess of that figure.
From a summary of the foregoing, it will be seen that although
the volume of recorded business decreased over 90%0 in the past four
yers he number o~f emprloyPee deP~cnrea butlr 38~, and the wages
of employees mentioned decreased on an average only 15%. Prob-
ably no other business in the country finds itself in a comparable
position. The members do not hesitate to say that the average
investment banker is today maintaining an organization far in
excess of his present needs, due partly to the need for technically
trained employees, even though their retention has not been justified
during the past two years.
No objectors from the business or from the public appeared at
the Hearing, nor have any objections since been filed.
The Code has been accepted by the Investment Bankers Associa-
tion of America and has received the approval of the several Ad-
visory Boards of the National Recovery Administration with the
exception of a qualification by the Consumers' Advisory Board,
included in this report.
I find that the Code complies with the pertinent provisions of
clauses (1) and (2), subsection (a) of Section 3 of the National
Industrial Recovery Act. I r~ecomlmend, therefore, that you approve
the Clode of Fair C~ompetition for Investment Bankers as submitted
Hnaa S. JoHNson,
CODE OF FiAIR COMPETITION
To effectuate the policy of Title I: of the National Industrial Re-
covery Act, the following provisions rare established as a Code of
Fair Clompetition for Investment Ba~nkers.
ARTICLE i- DEFINITIONS
(1) The term investment banking business as used herein shall
mean the business of underwriting or distributing issues of bonds,
stocks, or other securities, or of purchasing such securities and offer-
ing the same for sale as a dealer therein, or of purchasing and selling
such securities upon the order and for the account of others; pro-
vided, however, that the term "L investment banking business shall
Snot include transactions on regulal organized exchlanges but such:
term shall include all business reatn to such transactions to the
extent that such business is not conducted by a member of such'
exchange or by any person or organization having the privilege of
any such exchange for itself or any of its partners or executive
(2) The termn employer as used herein shall include every
natural person, co-partnership, corporation, association, or other
entity that is engaged in doing any investment bankingg business.
If the major part of the business of a~ny employer consists of any
business other than investment banking business which other busi-
ness is governed by any other code or codes, such employer shall not
be bound as to his investment banking business by the wage and
hour provisions of this Code, but shall be governed as to his invest-
ment banking business by the wage and hour provisions of such
other code or codes; but all other provisions of this Code shall apply
to such employer as to his investment banking business.
(3) The term emplZoyee as used herein shall mean anyone
employed by any employer, regardless of the nature or method of
payment of his compensation.
~(4) The term "Administrator as used herein shall mean the
Adnunistrator appointed by the President of the United States under
the National Industrial Recovery Act.
(5) Population for the purposes of this Code shall be determined
by reference to the 1930 Federal Census.
ARTICLE II--LABOR PROVISIONS
(1) ~(a) Employees shall have the right to organize and bargain
collectively through representatives of their own choosing, and shaHl
be free from the interference, restraint, or coercion of employers of
labor, or their agents, in the designation of such representatives or
in self-organization or in other concerted activities orthe purpose
of collective bargaining or other mutual aid or protection.
(b) No employee and no one seeking employment shall be required
as a condition of emlploymlent to join any company union or to re-
frain from joining, organizing, or assisting a labor organization of
his own choosing. I
(c) Employers shall comply with the maximum hours of labor,
minimum rates of pay, and other conditions of employment, ap-
proved, or prescribed by the President of the United States.
(2) No person under sixteen years of age shall be employed by
any employer; provided, however, where a state law requires higher
m1inmum age, no person below the age so specified shall be employed
within that state.
(3) (a) No employer shall employ any person for more than 40
hours in any one weekr, provided, however, that in order to meet
contingencies which cannot be anticipated and over which t~he em-
ployers have no control, the said hours of employment may be in-
creased, to meet such contingencies, but in no event shall such em-
ployees work more than a total of 44 hours per week averaged over
a period of four (4) months without the payment of overtime.
(b) The maximum hours fixed in the foregoing paragraph (a)
shall not apply (1) to guards and watchmen employed at night to
safeguard securities or assets (provided such guards and watchmen
do not wvork more than six (6) days each week), or (2) to partners
in any copartnership, or (3) to outside salesmen, or (4) to employees
in a managerial or executive capacity or 2n any other capacity of
distinction or sole responsibility who receive more than $35 per wmeek.
(c) No employee, except outside salesmen working solely on a
commission basis, shall be paid (1) less than $16 per week in any
city of over 2,000,000 population; (2) less than $15 per week in any
city between 500,000 and 2,000,000 population; (3) less than $14.50
per week in any city between 250,000' and 500,000 population; (4) less
than $14 per week in any city between 2,500 and 250,000 population;
and (5) in any town of less than 2,500 population all wages of em-
ployees shall be increased by not less than 20%0 provided that this
shall not require the payment of wages in excess of $19 per week;
provided, however, that where a State law provides a higher mini-
mum wage than is provided in this Code, no person employed within
that State shall be paid a wage below that required by such State
(d) All employees, except employees mentioned in paragraph (b)
above, if employed for more than a total of 44 hours per week aver-
aged over a period of four (4) months, shall be paid for all such
excess time of employment at the rate of 1331/3ro of tlhe regular
hourly rate at which such persons shall then be employed; but re-
gardless of the calculation of such overtime averaged over a four
months' period, all such employees if employed for more than 48
hours mn any one week shall be paid for such timle in excess of 48
hours at t~he rate of 1331m% of the said regular rate. The amount
paid for overtime for any weekly period shall be credited on the
amount of overtime paid at the end of any four months' period, and
in computing the amount of overtime to be paid as herein provided
the regular hourIy rate at which anly person shall be employed shall
bea determiried by? dividing the amount per week wluich he shall regu-
larlyv be paid by 40o. .
(e) The 'wages of employ~ees exceptt employees mentioned mn the
foregoing subdivisions (2), (3), and (4) of paragraph (b)) being
psid on September 1, 1933, in excess of the established mmlmum
shall not be decreased, notwithstanding that the hours worked mn such
employment may be hereby reduced.
(1) To cooperate withl the Administration in the administration
of this Code there is hereby constituted an Investment Bankers Code
Committee. Such Commnittee shnUl consist of three members ap-
pointed by the President of the Investment Bankers Association of
Amnerica; two members chosen by a fair method approved by the
ALdministrator to represent employers not members of the Invest-
ment Bankers A~ssociation of America; and a representative or repre-
sentatives without vote appointed byv the President of the United
States. The five voting members of said Comumittee shall be ap-
pointed or.chosen from assenting~ employers.
(2) The Investment Bankters Code Committee herein provided for
shall be the representative, body from the employers subject to this
Code, to act on their behalf in t~he administration and enforcement
of this Code, and shall hafve, in addition to the specific powers herein
provided for, all general powers necessary for such administration
rand enforcement; such general and specific powers shall be at all
times subject to the right of the Aldministrator to veto or modify any:
action taken by such Clommittee.
(3) The Invest~ment Bankers Code Committee may from time to
timle appoint such committee or committees as it mlay deem necessary
or proper to carry out its p~owers andi duties under the Cod n
may delegate to any such committee such of its powFers and duties
as it mlay deemn necessaryl and prouper to effectuate such purposes.
The representative or representatives appointed by the President of
the United States shall be given notice of all meetings of any com-
mitee r cmmites apoitedbythe Investment Bankers Code
Committee and shall have the righ opriiae ihu oei
the activities of such committtee or committees.
(4) The Investment Banklers Code Conulnittee may from time to
time present to the Administrator recommendations which will tend
to effectuate the administration of the provisions of this Code and
the policies of theNational Industrial Recovery Act.
(5) In order to keep the Pr~esident of the Ujnited States and the
Administrator informed as to the observance or nonobservance of this
Code, each employer shall prepare and file with the Investment
Bankers Code Conuinittee, at such time and in such mn~nr~lc as said
Committee may prescribe, statistics covering the numil~. ofi persons
employed, wage rates, hours of woorkring, and such1 other dat3Por
information as the Investment Bankers Code Committee mlay required
provided such other data or information shall also be required by the
Administrator. All information so furnished shall be treatedl as
confidential and used only for thle sole purpose hierein set forth.
(6) The expenses of administering this Code shall from time to
time be equitably assessed and collected by the Investment Bankers
Code Committee from employers assenting to this Code in accord-
ance with a. plan to be approved by thle Ad~ministrator; but no such
employer shall be liable for any payment in excess of said assessment.
(7) Any employer may voluntarily assent to this Code by signing
and filing his assent with the Investment Bankers Code Committee,
No. 33 South Clark Street, Chicago, Il'linois.
AnnICLE IV-FAIR TRADE PRACTICEs
WVithin 90 days after the approval of this Code, the Investment
Bankers Code Committee shall submit, in accordance with the pro-
cedure set forth in paragra h (1) of Article V, supplementary
provisions relating to fair tra e practices.
AnnIcLE V--AMENDMENTS AND TERMINATION
(1) Any employer assenting to this Code that may hereafter desire
to have the Code amended or any supplementary provisions added
shall take the following procedure: Propose the amendmlent to the
Investment Bankers Code Clommittee which shall, if a majority of
the Committee shall approve the proposed amendment, submit; it to
a meet~ingr of the eployerC~PPs anssntingr to this Code especially called
for that purpose upon due notice; and if at any such meeting a
majority of such employers shall be present or represented and if
a majority of such employers as are present or represented at said
meeting shall vrote in favor of the adoption of such proposed amend-
ment, such amendment shall be submitted by the Investment Bankers
Code Committee to the President of the Unitedl States for approval,
and such proposed amendment. shall take effect as a part of this Code
upon such approval thereof by the President of the United States.
Employers voting on such amendments as above provided may vote
in person, by proy in wEriting, or may vote in writing without being
(2) This Code shall continue in effect as long as the National
Industrial Recovery Act shall be in effect, but in no event after
June 16, 1935, and shall in all respects be subject to the provisions
and conditions of the National Industrial Recovery Act.
(3) This Code and all the provisions thereof are expressly made
subject to the right of the President of thle UInitedl Stat~es, in accord-
ance with the provisions of subsection (b) orf section 10 of the Na-
tional Industrial Recovery Act, from time to time to cancel or
modify any order, approval, license, rule, or regulation issued under
Title I: of the National Industrial Recovery Act, and specifically,
but without limitation, to the right of the President of the United
States to cancel or modify his approval of this Code or any condi-
tions imposed by him upon his approval thereof.
ARTICLE VI-EFFECTIVE DATE
This Code shall become effective on the second Mondlay after its
approval by the President o~f the United States.
Approvedl Code No. 141.
Registry No. 1707-04.
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