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of this bill and the suggestions that you have to make as to regulation.

Now, that would be very helpful to us; but just statements that it will do this or it will not do that, without the reasons, is not giving us very much help.

Mr. PIERCE. Mr. Chairman, I will get to that, and God knows I want to be helpful.

The CHAIRMAN. We would like to have your help.

Mr. PIERCE. I think if you will ask Mr. Pecora he will tell you that for the last 2 months I have done everything I could to be helpful to him.

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section 6 of the bill. I think there can be no doubt in the world that from the standpoint of anybody, whether he be prejudiced against the New York Stock Exchange, stock exchanges in general, commodity exchanges in general, it would be extremely destructive.

I have had an analysis made of the accounts carried by our firm. Of those accounts in which there are unlisted securities, I find that the total value—the total money value-of both listed and unlisted issues is $45,927,000.

The total value of the unlisted securities is $6,173,000, which means that the percentage of unlisted securities is 13.45. That is. not exactly correct, but it is approximately correct. It is sufficiently correct to illustrate the point that I seek to illustrate. For instance, an insurance stock may be listed on the Hartford Stock Exchange.

It is not good collateral in New York. We do not lend on it. It might just as well not be listed at any point. However, giving the other side the benefit of the doubt, we have broken down that unlisted lot, removing from it all those stocks listed on six of the more important exchanges except New York; namely, Boston, Philadelphia, Chicago, Detroit, San Francisco, and Los Angeles. Listed on those exchanges are shares in accounts of a value of $1,111,000. Deducting that lot from the total unlisted, we would still have a percentage of 11.03 of unlisted stocks in our accounts which under this bill would have to be liquidated.

Mark you, $6,100,000 less $1,100,000, and we are only one house.

The further away one gets from New York the greater the percentage of lending by brokers on unlisted stocks. The local house in Dubuque, Iowa, or Salt Lake City, Utah, is quite likely to lend on the stock of a good bank in such city, or of a local insurance com-pany whose position is well known or even of some industrial which is not listed on any stock exchange.

Mr. PETTENGILL. Mr. Chairman-
The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. How many dollars worth of unlisted securities did you say that you had?

Mr. PIERCE. $6,173,000, with a possible modification of some few thousand dollars, perhaps in securities that are listed on other stock exchanges.

In order to get a cross section in respect of this particular feature
Mr. LEA. Mr. Chairman-
The CHAIRMAN. Mr. Lea.

Mr. LEA. Mr. Pierce, do you make that statement on the assumption that outstanding accounts would have to be liquidated, if this bill. went into effect?

Mr. PIERCE. Yes; the bill precludes the possibility of carrying unlisted issues.

Mr. LEA. That is what I want to know, whether you are talking with reference to outstanding accounts, or future accounts after the bill might go into effect.

Mr. PIERCE. These are accounts, actually on our books.
Mr. MERRITT. Mr. Chairman-
The CHAIRMAN. Mr. Merritt.

Mr. MERRITT. I suppose that these accounts that are in existence are not static. Do you average the same proportion of new accounts as you have of old?

Mr. PIERCE. It runs with great uniformity, and always has. The effect, from the standpoint of these outstanding securities,

Mr. PETTENGILL. May I ask one more question? Is it your view that if the bill is passed, many listed stocks will be withdrawn from listing and increase the total unlisted stocks?

Mr. PIERCE. I would think there can be no doubt about it.

Mr. LEA. Is it not a disadvantage to these unlisted stocks to have collateral privileges withdrawn?

Mr. PIERCE. In what sense, please, sir, to the public?
Mr. LEA. From a market sense.
Mr. PIERCE. You mean from the standpoint of the public?
Mr. LEA. Yes; from the standpoint of the buyer.
Mr. PIERCE. Oh, there can be no doubt about that.

Mr. LEA. Then, why would corporations with listed stock want it to become unlisted?

Mr. PIERCE. We may be talking at cross purposes. You are speaking from the standpoint of the public.

Mr. LEA. I am speaking from the standpoint of the man who wants to sell, or the man who wants to own it.

Mr. Marland's or Mr. Pettengill's question was to assume that there are a lot of little stocks going to become unlisted, and that will at the same time-

Mr. PETTINGILL. I was asking his opinion.

Mr. LEA. At the same time, I am speaking about a much more disturbing situation as to the unlisted stocks.

Mr. PIERCE. Yes, sir.

Mr. LEA. So what I want to know is why the listed stock is going to voluntarily become a nonlisted stock in view of the penalization that exists against the unlisted stock.

Mr. PIERCE. Well, from my study of this bill, if I had control of a corporation whose stock was listed, and if I had to live up to the regulations of this bill, my stocks certainly would become unlisted.

Mr. LEA. Your stocks would become what? Mr. PIERCE. Unlisted. Mr. LEA. You want to escape regulation; is that what you want? Mr. PIERCE. No; I would escape a lot of trouble and expense. Mr. LEA. In what way? Would not the depreciation of the value of your stocks by becoming unlisted be greater than any possible losses you would suffer by complying with this bill?

Mr. PIERCE. I think there are many executives of corporations who are not in the least interested in the market value of their stocks. I do not say that that is a fact in the majority of cases, but it is in some cases.

Mr. LEA. But, the public are very much interested in that question.

Mr. PIERCE. Well, on this mundane sphere of ours, the average stockholder does not have a great deal to say.

Mr. LEA. Mr. Pierce, so far as listing of these stocks is concerned, are there any particular difficulties about fixing the value of an unlisted stock for the purpose of sale?

Mr. PIERCE. There is great difficulty.

Mr. LEA. Well, are they, the unlisted stocks, commonly accepted for collateral purposes?

Mr. PIERCE. They are not.

Mr. LEA. Would there be any particular hardship then in denying that privilege by this bill? Mr. PIERCE. There would. Mr. LEA. In what respect? Mr. PIERCE. In this respect: There are in the unlisted department of the New York Curb, for instance, a few stocks which are considered by all banks and brokers as excellent collateral. Such stocks as the stocks of some of the Standard Oil issues, for example. The banks, New York banks, take those issues quite readily, as readily as they will General Motors, or United States Steel.

Mr. LEA. Just for the moment, without pledging myself, I do not see sufficient reason for denying the use of these unlisted stocks for collateral, but I would like to know the reasons for it, and what the effect would be if we come to adopt the provisions of this bill.

Mr. PIERCE. Well, the banks are our hosts, generally speaking, and we are quite willing to lend, freely, on the collateral on which the banks will lend freely to us.

Mr. LEA. But is not the situation of the broker somewhat different from the banks? He does not have the deliberate opportunity to investigate the collateral, does he, that the banks exercise?

Mr. PIERCE. Well, judging from the results, I would say that we have done about as well as the banks in the last 4 years.

Mr. LEA. I am not trying to express a viewpoint. I am trying to get yours.

Mr. PIERCE. That is mine, sir, and I do not mean to be facetious.
Mr. MARLAND. Mr. Chairman-
The CHAIRMAN. Mr. Marland.

Mr. MARLAND. Mr. Pierce, you said that a stockholder does not have much to say about the corporation.

Mr. PIERCE. Yes.
Mr. MARLAND. Why does he not?

Mr. PIERCE. Well, that is rather a broad statement, sir. I might state the incidental stockholder

Mr. MARLAND. Why does he not? What is there in the situation to prohibit the stockholders from having much to say about the corporation?

Mr. PIERCE. Inherently, I suppose, there is not; but as a practical matter I would say he is about in the position of the average voter. If New York City gets a bad form of government, or Philadelphia, or any other city, theoretically it is the fault of the voters.

Mr. MARLAND. In many of our large corporations, is it not a fact, quite a large percentage of the stock is in what you call "street names" broker's names?

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Mr. PIERCE. Yes, sir.

Mr. MARLAND. What percentage would you say of the Steel, for instance, or any other big corporation, is in brokers' names?

Mr. PIERCE. Oh, there is no way of guessing at that. One would have to look into the statistics. It might be 1 percent, or might be 5 percent, might be 15.

Mr. MARLAND. Sufficient to control the election of the corporate officers?

Mr. PIERCE. No, sir; save in few instances.

Mr. MARLAND. What is the practice of brokers in sending proxies at the request of officers of companies; sending proxies for the stock that is held in the street names?

Mr. PIERCE. Under the rules of the Stock Exchange, we may give proxies on the stock in your possession, registered in our name. I think that the practice of different brokers varies. It is our practice, if any contest is involved, to consult those customers of ours, even in respect of the stock standing in our name, carried for them, to ascertain to which side they would like us to give their proxy.

Mr. MARLAND. Have the stock-exchange officials ever given thought to any method of encouraging a greater interest among stockholders in the management of their corporations?

Mr. PIERCE. Not so far as I know, sir.

Mr. MARLAND. Another question 1 would like to ask, not in line with that: What percentage of the trading in stock during a month is for the account of customers and what percentage is for members' accounts?

Mr. PIERCE. I understand that has been given in the Pecora questionnaire. I have no information about it. So far as my particular house is concerned, 100 percent is for customers.

Mr. MARLAND. You mean your house never buys on its own account?

Mr. PIERCE. We do not.
Mr. MARLAND. Or the account of your members?

Mr. PIERCE. We have one or two members who at times buy on their own account, occasionally, very occasionally, and very moderately.

Mr. MARLAND. Probably you can tell us this: Has the stock exchange ever sought by questionnaire or otherwise to determine what proportion of the trading done during the day or month, or any period, is for customers' accounts and what percentage is for the account of the broker himself?

Mr. PIERCE. So far as I know, they have never attempted that until the Pecora questionnaire was prepared.

Mr. MARLAND. That would be establishable, would it not? Mr. PIERCE. We ascertained it for Mr. Pecora. Mr. MARLAND. You could do it any day, could you not? Mr. PIERCE. If we set up the machinery, I should think we could without difficulty.

Mr. MARLAND. It never has been done, to your knowledge?

Mr. PIERCE. So far as I know, not until the Pecora questionnaire was returned.

Mr. MARLAND. Mr. Chairman, I would like to add this: We have had a great deal of discussion by the opponents of the bill of various sections of the bill. I think we have covered them all pretty well.

I think when we have a very capable witness, like this gentleman, it would be well to have his suggestion as to what legislation, if any, he thinks might be advisable and necessary. He has said he believes. in regulation. I think that I would like to see the witnesses confine themselves to suggestions.

The CHAIRMAN. I told the witness in the beginning the committee would be very happy if he would make suggestions as to what regulations he thought were fair and we ought to have.

Mr. PIERCE. Well, if you will pardon me, Mr. Chairman, that is a rather large order.

The CHAIRMAN. The committee has a rather large order, Mr. Pierce, to try to execute. We are sitting here rather as a jury on

this case.

Mr. PIERCE. I happen to be one of a committee

The CHAIRMAN. And we would like for you, even if you do not have the time this morning, and you will have the privilege when your remarks are sent to you for revision, to attach to them the suggestions you think would be proper, and we will be very happy if you will do that.

Mr. PIERCE. I will be very glad to do so, sir.
Mr. WOLVERTON. May I make an observation, Mr. Chairman?
The CHAIRMAN. Yes, Mr. Wolverton.

Mr. WOLVERTON. It seems to me, Mr. Pierce, three thoughts have been presented to this committee as to the form this proposed legislation should take. First, the bill which is before us now, under consideration; second, the suggestions made by Mr. Whitney day before yesterday; and third, the suggestions contained in the Roper or Dickinson report. It would be very helpful to me, and I think to the other members of the committee, if you would express your opinion with respect to the relative value of these three forms of suggested regulation.

Mr. PIERCE. I will be glad to undertake it. Gentlemen, I happen to be one of a committee of five, an unofficial committee, which was appointed by the association last November to sit with the law committee, which is the policy committee of the New York Stock Exchange. While the Dickinson committee was considering its recommendations, our committee, with Mr. Whitney, and Mr. Redmond, came over to Washington for an afternoon's conference. We spent the afternoon discussing five, as I recall it, features that the Dickinson committee considered essential.

I have had my ideas as to stock-exchange regulations for a long time, as far back as when Mr. Whitney and Mr. Pecora were in knickerbockers, and I came over here as full of enthusiasm as a brindle pup, thinking I was going to have a chance to express some of my fine ideas.

Well, we found the committee, as a whole, some members of it, at least, very sympathetic, and while I have no criticism to make of the others, for God knows I believe they were thoroughly honest in their ideas about the thing, we felt that one of them, at least, believed that the stock exchange should be abolished altogether.

The Chairman. What committee are you talking about now?
Mr. PIERCE. The Dickinson committee.
Mr. KENNEY. That is the same thing as the Roper committee?

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