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mutuality of name, ownership, and general policy. I think that no harm and some advantage has come to the customers of each department through the dual functions of the firm. No brokerage department customers' man is allowed to sell our own participations or underwritings to his customers. The reason is practical as well as ethical. If we sell our own underwritings to brokerage department customers who often carry securities on margin, the securities are not permanently placed and we have not fulfilled our obligation to the company whose securities we have been paid to sell. If we sell our underwritings to marginal customers, we are using our own capital for the purchase of our own securities. In the event of adverse developments we would be frozen with these loans. In addition brokerage department customers have reason to resent biased advice and the recommendation of our own issues would destroy our brokerage business.

I do not believe that it is practical to provide by statute that the two businesses should be as completely segregated as ours as small dealers cannot afford the segregation of capital and premises. The main purpose of segregation is served by making it clear whether the dealer is a broker or a principal. This should be indicated in verbal statements and in written bills and confirmations.

The dealer and underwriter business has recently been largely confined to the purchase and sale of municipal bonds. These bonds are rarely, if ever, listed and under the provisions of section 7 (c) a dealer can neither use his capital to carry such securities nor could he borrow money against them.

In passing I think I should point out that it is impossible for a brokerage firm to refrain entirely from acting as a principal, as in the case of errors which must be cleared, and that no dealer, whether member of an exchange or not, can refrain from acting as a broker unless it refuses to handle customers' orders to buy securities not owned by the firm. A strict interpretation of this portion of the act would destroy the investment banking business and, consequently, the capital market which I think is admitted to be prerequisite to normal recovery.

Section 6 of the proposed bill forbids lending on unlisted securities which would enforce a great hardship upon the market for unlisted securities and particularly upon the smaller firms. Section 14 regulating “over the counter” markets enforces a particular hardship, on outlying territories as there are a multitude of unlisted bonds and preferred stocks traded in which are in most cases obligations of companies so small that their size would preclude compliance with any expensive listing requirements.

The Dickinson report to the Secretary of Commerce recommended control by a “Federal stock-exchange authority" and through a flexible mechanism to further study the means of regulating the stock exchanges and advised against placing stock exchanges in a strait-jacket. It urged that the law be limited to minimum requirements and that broad discretionary power be given the authority. Regarding the segregation of brokerage and dealer business it said "Any such proposed segregation should not be accomplished before we are in a position to calculate its cost and to foresee its repercussions.'

I think that the authority designated to exercise control of stock-exchange firms should be authorized to extend the segregation of the two businesses as far as its further study indicated it to be necessary in the interests of the public.

(Telegrams]

SAN FRANCISCO, Calif., February 27, 1934--11:21 p.m. DEAN WITTER,

Washington, D.C.: At a joint meeting of Security Dealers Association of San Francisco local I.B.A. members and nonmembers totaling 53 firms, a resolution was unanimously adopted authorizing you to represent them before the Senate Banking Committee and the Interstate and Foreign Commerce Committee of the House and to express for them their disapproval of the Fletcher-Rayburn bill as now written. Group wishes specific opposition registered to sections 6, 10, and 14. Dealers object to section 6 which in present form precludes extension by banks of credit on unlisted securities in regular course of business which would stifle public market for majority of Pacific Coast issue and cause deflationary liquidation, thereby impeding further national recovery.

Dealers feel Pacific coast market requires security dealer to act both as investment banker and broker in order to properly handle and diversify clients investment account which must be given first consideration. Dealers therefore oppose

section 10 because it encourages exclusive broker to favor and sponsor only securi. ties on his particular exchange for commission consideration and likewise causes exclusive underwriter or dealer to recommend only those securities in which they personally are interested. In view of the excellent self-regulatory measures embodied within the fair-practice provisions of investment bankers' code approved by this group today, section 14 of bill is not only burdensome but unnecessary. Furthermore, believe section 14 destructive to unlisted market here because majority of western issues are not listed on any exchange and their marketability would be narrowed to detriment of both corporation and security owner. Partial list houses present follows: Anglo California National Bank, American Trust Co., Bank of America, N. H. Bennett & Co., Bennett, Richards & Co., Brush Slocumb & Co., Blyth & Co., Cavalier & Co., City Co., Conrad, Bruce & Co., Davis Skaggs & Co., Denault & Co., Elworthy & Co., Eyre Palmer & Co., Heller Bruce & Co., Hellman Wade & Co., Henderson & Co., Heron & Co., Martin Judge, Jr., & Co., Leppo & Co., Mitchum Tully & Co., R. H. Moulton & Co., R. N. Miller & Co., Rollins & Sons, Inc., Schwabacher & Co., Shaw Hooker & Co., Weeden & Co, Dean Witter & Co., Wulff Hansen & Co.

SECURITY DEALERS ASSOCIATION OF SAN FRANCISCO.

Los ANGELES, Calif., February 27, 1934–1:52 a.m. DEAN WITTER,

Washington, District of Columbia: Security Dealers Association of southern California, a voluntary association composed of 71 investment dealers all operating in Southern California, 20 members having seats on some exchange operating both as broker and dealer, and 51 members having no stock-exchange seats but acting both as broker and dealer, had a meeting today unanimously authorizing you to represent their association before Senate Banking Committee and Interstate and Foreign Commerce Committee in connection with Fletcher-Rayburn bill.

Our group here particularly concerned with section 6A which we feel in present form would preclude extension of credit by banks on unlisted securities in regular course of business and feel should be definitely clarified. Section 10 we feel affects particularly legitimate small investment dealers whose relationship with client makes it necessary for them to act both as agent and principal in giving rounded investment service. Dealer who is intrusted with client's investment account should surely be allowed to act as agent for that client if he feels it necessary. Section 14 presents a particular problem in this territory as there are more than 1,000 issues, unlisted bonds and preferred stocks, traded in which are in most cases obligations of companies so small that their size would preclude compliance with any rigid rules that may be set up by Federal Trade Commission. We are wiring directly to committee as an association and some of our members also wiring members of the committee. Please advise in what way we may be of further assistance.

SECURITY DEALERS AssociaTION OF SOUTHERN CALIFORNIA. By Edw. McWILLIAMS, Secretary.

PORTLAND, OREG., February 28, 1934—12:24 a.m. DEAN WITTER,

Washington, D.C.: The board of governors of the Investment Bond Club of Portland, having 33 dealers as members, would like you to represent the organization before Senate and House committees in regard to Fletcher-Rayburn bill. Our organization is disturbed by provisions in the bill which seriously hamper investment houses which are primarily dealers, these same provisions failing in our opinion to afford investing public any protection.

Sections 10 and 14 are particularly offensive in this connection. Section 6A would seriously injure holders of high grade unlisted bonds. In general we see no occasion for provisions of act which hamper investment dealers who occasionally act as brokers for convenience of customers. After all we have the Securities Act of 1933 and our code besides State regulations.

INVESTMENT Bond CLUB OF PORTLAND.
R. H. MARTIN, President.

WINTHROP, MITCHELL & Co. Dean WITTER:

Following resolution passed today: Resolved that Dean Witter is authorized to represent the following investment-banking firms in hearings before the Senate Banking Committee and the House Interstate and Foreign-Committee in connection with the Fletcher-Rayburn bill and to oppose sections adversely affecting the investment-banking business. This resolution signed by E. A. Strout, Inc., Dumheller Ehrlichman & White, Wm. P. Harper & Son and Co., Bramhall & Stein, C. H. Eberting & Co., Ferris & Hardgrove, The Crawford Goodwin Co., Grande Stolle & Co., Hartley Rogers & Co., Harold H. Houston & Co., John A. Kutz & Co., Lanser Agnew & Co., Arthur G. Latimer, Sharples & Lewis, George E. Maine & Co., J. D. Matthews & Co., Prescott Oakes, Riker and Woolsey, Inc., The Quinn Smith Co., John C. Blackford, F. K. Easter & Co., Greening & Co., All Seattle, and Hewitt Reeder & Co., Evans, McLane & Co. of Tacoma and Murphey, Favre & Co., Ferris and Hardgrove, Richards & Blum Inc., Spokane Eastern Co., All Spokane. This list includes practically every investment dealer in Seattle, Tacoma, and Spokane.

STANLEY MINOR.

DEAN WITTER & Co.

San Francisco, December 28, 1933. Form no. 1-Specimen only.-Sale of owned securities in which firm has profit. Mr. John SMITH,

San Francisco. DEAR MR. Smith: At the request of Mr. John Doe, we are pleased to confirm sale to you of $1,000 par value Pacific Gas & Electric Co. first and refunding 442percent bond due June 1, 1950; price 8742 plus accrued interest.

In this transaction we act as principals, confirming at a net price which includes a profit to us.

We understand you wish to complete this transaction tomorrow, December 29.
Thanking you for this business, we are
Yours very truly,

DEAN WITTER & Co.

DEAN WITTER & Co.,

San Francisco, December 28, 1933. Form no. 2Specimen only.-Sale of owned securities in which we have a loss to another dealer. Blyth & Co.,

San Francisco. As a matter of record we are pleased to confirm sale to you of $1,000 par value Pacific Gas & Electric Co., first refunding 42 percent gold bond, due June 1, 1960; price 8772 plus accrued interest.

In this transaction we act as principals, confirming at a net price. Delivery regular. Thanking you for this business, we are Yours very truly,

DEAN WITTER & Co.

DEAN WITTER & Co.,

San Francisco, December 28, 1933. Form no. 3Specimen only.-- Brokerage transactions, showing purchase for a/c of customer with commission shown on attached bill. Note bill specifies “Bond department.” Mr. JOHN SMITH,

San Francisco. DEAR MR. Smith: At the request of Mr. John Doe we are pleased to confirm purchase for your account of $1,000 par value Pacific Gas & Electric Co. first and refunding 412-percent gold bond, due June 1, 1960; price 8772, plus accrued interest plus commission.

We understand you wish to complete this transaction tomorrow, December 29, 1933. Thanking you for this business, we are, Yours very truly,

DEAN WITTER & Co. NOTE.-On this form we will include the legend: “In this transaction we act as brokers."

DEAN WITTER & Co.,

San Francisco, February 20, 1934. Specimen no. 3—Bond department. Mr. John Smith, city:

Purchased for your account: 1,000 Pacific Gas & Electric Co 412s, 8772-

$875. 00 Due June 1, 1960.-

2. 50

877. 50

3. 50

July and December 1 accrued interest, 28 days.

Due Dean Witter & Co.----
Please add additional interest per day if not paid on

881. 00

DEAN WITTER & Co.,

San Francisco, December 28, 1933. Form no. 4-Specimen only. - Brokerage transaction showing sale for ale customer indicating commission charge. Bill to accompany and to be marked “Bond department." Mr. John Smith,

San Francisco. DEAR MR. SMITH: At the request of Mr. John Doe, we are pleased to confirm sale for your account of $1,000 par value Pacific Gas & Electric Co. first and refunding 4/4-percent gold bond due June 1, 1960; price 8742, plus accrued interest less commission.

We understand you wish to complete this transaction tomorrow, December 29, 1933. Thanking you for this business, we are, Yours very truly,

DEAN WITTER & Co. NOTE.—On this form we will include the legend, “In this transaction we act as brokers."

DEAN WITTER & Co.,

San Francisco, December 28, 1933. Form no. 5Specimen only.--Sale to customer from inventory in which we have profit. See attached bill marked “Bond department.” Mr. John Smith,

San Francisco. DEAR MR. SMITH: At the request of Mr. John Doe, we are pleased to confirm sale to you, $1,000 par value Pacific Gas & Electric Co., first and refunding 4/4-percent gold bond due June 1, 1960; price 8772, plus accrued interest.

In this transaction we act as principals, confirming at a net price which includes a profit to us.

Our detailed statement is attached hereto. We understand you wish to complete this transaction tomorrow, December 29, 1933. Thanking you for this business, we are, Yours very truly,

DEAN WITTER & Co.

Specimen No. 5.—Bond Department.

DEAN WITTER & Co.,

San Francisco, February 20, 1934. Sold to: Mr. John SMITH, San Francisco. 1,000 Pacific Gas & Electric Co. 414's, due June 1, 1960, 8742

$875. 00 July and December 1 accrued interest, 28 days.-

3. 50

Due Dean Witter & Co.--

878. 50 In this transaction we act as principals, confirming at a net price which includes a profit to us.

Please add additional interest per day if not paid on

Form No. 6.-Specimen only.--Sale from inventory for own account if we have a loss in securities sold.

DEAN WITTER & Co.,

San Francisco, December 28, 1928. Mr. John Smith, San Francisco.

DEAR MR. Smith: At the request of Mr. John Doe, we are pleased to confirm sale to you of $1,000 par value Pacific Gas & Electric Co. first and refunding 472 percent bonds due June 1, 1960; price 87+2, plus accrued interest.

In this transaction we act as principals, confirming at a net price. We understand you wish to complete this transaction tomorrow, December 29, 1933. Thanking you for this business, we are Yours very truly,

DEAN WITTER & Co.

Porm No. 7-Specimen only.-Sale to another dealer of securities in which we have a profit.

DEAN WITTER & Co.,

San Francisco, December 28, 1933. BLYTH & Co., San Francisco:

As a matter of record we are pleased to confirm sale to you of $1,000 par value Pacific Gas & Electric Co. first and refunding 442 percent gold bonds, due June 1, 1960; price 8792, plus accrued interest.

In this transaction we act as principals, confirming at a net price which includes a profit to us. Delivery: Regular. Thanking you for this business, we are Yours very truly,

DEAN WITTER & Co. No.

SAN FRANCISCO,

193— Received from Dean Witter & Co. the following securities:

$1,000 Pacific Gas & Electric Co. 414's due 6-1-60 No.

6-1-34 et seq. coupons attached. In this transaction we act as principals, confirming at a net price, which includes profit to us. At 87.

$875. 00 0-28

3. 50

878. 50

Name BLYTH & Co., INC.,
Address S. F.
Remarks JJQ.

Federal Tax Stamps.

(Signature)

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