ApprvedCodeNo.141-menmentNo.4 Reisty No 177-0
NATIONAL RECOVERY ADMINISTRATION
CODE OF FAIR COMPETITION
AS APPROVED ON FEBRUARY 27, 1935
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Approved Code No. 141-Amendment No. 4
Registry No. 1707-04
This publication is for sale by the Superintendent of Documents, Government
Printing Office, Washington, D. C., and by district offices of the Bureau of
Foreign and Domestic Commerce.
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Approved Code No. 141-Amendment No. 4
AMENDMENT TO CODE OF FAIR COMPETITION
As Approved on February 27, 1935
APPROVING AMENDMENT OF CODE OF FAIR COMPETITION FOR
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 approval of an amend-
ment to Section 4 of Article V of Amendment No. 2 of the Code of
Fair Competition for Investment Bankers, which is attached hereto
and hereby made a part hereof, and Notice of Opportunity to be
Heard having been afforded to all interested parties, and any objec-
tions filed having been duly considered and the annexed report on
said amendment, containing findings with respect thereto, having
been made and directed to the President:
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 adopt and incorporate, by reference, said annexed report
and does concur in and adopt the findings of fact made therein,
and does find that said amendment 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 amendment, which is attached hereto
and made a part hereof, be and it is 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 entirety
NATIONAL INDUSTRIAL RECOVERY BOARD,
By L. C. MARSHALL, Executive Secretary.
L. H. PEEBLES,
WASHINGTON, D. C.,
February 27, 1935.
11822---1603-27-35 t I
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
The addition of a new Sub-Section (e) to Section 4 of Article
V to require that in order to receive a concession on each purchase of
securities the investment banker (other than a member of the selling
syndicate or selling group organized in connection with the dis-
tribution of the issue of securities in question) must sign a certificate
which will indicate that said investment banker is performing a
service for which he is entitled to the concession.
The Code of Fair Competition for Investment Bankers was ap-
proved on November 27, 1933. Amendment No. 2 of this Code con-
tains all of the Fair Trade Practice provisions and was approved
on March 23, 1934.
The Code provides that where new securities are being distributed
through a selling syndicate or selling group there can be only one
price at which the new securities can be offered to the public during
the life of the selling syndicate or selling group, the intent being
to avoid any preference or discrimination in sales to investors.
However, the Code provides that another investment banker may
have the concession from such public offering price if and to the
extent that the selling syndicate or selling group agreement author-
izes such concession. Since certain purchasers, notably banks in
the normal course of their business, purchase new issues of securities,
either for redistribution or for their own investment account or
both, they are as a class in the dual capacity of distributors and
investors. Therefore, such purchasers, under the Code as now writ-
ten, when purchasing solely for their own investment account, are
in a position of receiving preference as compared with other in-
The proposed amendment would require that before a concession
could be given to an investment banker (other than a member of the
selling syndicate or selling group organized in connection with the
distribution of the issue of securities in question) he must certify that
he is purchasing the securities either (1) solely for the account of
clients, or (2) for his own account but with the intention of redis-
tributing the securities to his clients in the ordinary course of his
business. No certificate is required of participants in the selling
syndicate or members of the selling group, because the necessary
control is included in the syndicate or group agreements.
The effect of the amendment would be to'consistently maintain
the principle of no discrimination between investors by putting all
investment bankers on a level with private investors when they pur-
chase securities solely for investment and not for distribution. It
proceeds on the theory that an investment banker is entitled to a lower
price than that available to the public only when that investment
banker actively participates in the distribution to others of the securi-
ties in question.
The Deputy Administrator in his report to the National Industrial
Recovery Board on said amendment 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:
The National Industrial Recovery Board finds that:
(a) The amendment 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 maintain-
ing united action of labor and management under adequate govern-
mental sanction and supervision, by promoting the fullest possible
utilization of the present productive capacity of industries, by avoid-
ing undue restriction of production (except as may be temporarily
required), by increasing the consumption of industrial and agricul-
tural products through increasing purchasing power, by reducing and
relieving unemployment, by improving standards of labor, and by
otherwise rehabilitating industry.
(b) The effect of the amendment will be to consistently maintain
the principle of no discrimination between investors by putting all
investment bankers on a level with private investors when they
purchase securities solely for investment and not for distribution.
(c) The amendment will eliminate unfair competitive practices
by prohibiting the granting of a concession by a selling investment
banker to any purchaser where such concession is merely an induce-
ment for the purchaser to purchase securities from said investment
banker rather than the recognition that the purchaser will perform
a service in the distribution of the securities which entitles him to
(d) 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.
(e) The Code empowers the Code Committee to present the afore-
said amendment on behalf of the Industry as a whole.
(f) The amendment and the Code as amended are not designed
to and will not permit monopolies or monopolistic practices.
(g) The amendment 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.
(h) 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, this amendment has been approved.
For the National Industrial Recovery Board:
L. C. MARSHALL,
FEBRUARY 27, 1935.
AMENDMENT TO CODE OF FAIR COMPETITION FOR
Amend Article V, Section 4, of Amendment. No. 2 of the Code of
Fair Compettiton for Investment Bankers: Add the following new
Sub-section to be known as Sub-section (e):
(e) No investment banker (other than a member of the selling
syndicate or selling group organized in connection with the distri-
bution of the issue of securities in question) shall be allowed a com-
mission or concession by such selling syndicate or selling group,
nor shall any investment banker, (other than as aforesaid), be
allowed a commission or concession by a participant in such selling
syndicate or by a member of such selling group as provided in para-
graph (b) of this section, unless the investment banker receiving
such commission or concession shall furnish to the manager of the
selling syndicate or selling group or to such participant in the sell-
ing syndicate or such member in the selling group at the time of
the confirmation of the purchase or the entering of a subscription
in connection with which such commission or concession is or is to
be received, or prior to the date of confirmation of sale or of allot-
ment, a certificate in a form to be approved by the Code Commit-
tee and signed by such investment banker stating he claims a com-
mission or concession upon the purchase of the security in question
and that such security is being acquired either (1) solely for the
account of clients, or (2) for such investment banker's own account
but with the intention of redistributing such security to clients in
the ordinary course of his business.
Approved Code No. 141-Amendment No. 4.
Registry No. 1707-04.
UNIVERSITY OF FLORIDA
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