the holders of the interim certificates or interim receipts can assert any right, title, or interest therein.

(b) In all cases where securities and/or cash are not received by an investment banker and held as provided in paragraph (a), such securities and/or cash shall be deposited with a corporate trustee which shall issue its trust certificates, executed as its obligation to carry out the trust, and hold such securities and/or cash for the benefit of the holders of such trust certificates pending delivery of securities in permanent form.

(c) Any prepayment in advance of delivery of temporary securities, interim certificates, interim receipts, or definitive securities shall be evidenced by the investment banker's receipted invoice or memorandum of sale.

(d) All forms of interims specified in the foregoing paragraphs shall by their text clearly indicate their precise nature; the rights of the holders thereof; the security and the amount thereof called for; the limitation of time for delivery of securities called for, if appropriate; the redemption or repayment provisions, if appropriate; provision for payment of interest, if any; negotiability, transferability, or registration provisions, if any; assignment form, if appropriate; and the name of the issuer of such interim.

SEC. 4. Titles of new issues.—An investment banker shall not be the originator of any new issue of securities (except public securities) for distribution to investors, or participate in the distribution of any such new issue, which issue has a title which is misleading as to the lien, terms, or priority of such issue. If any new issue of public securities shall have a title which is misleading as to the lien, terms, or priority of such issue, the facts with regard thereto shall be stated in the prospectus, if any, or, if there is no prospectus, in some other manner disclosed to each purchaser of such security.

As used in this section, the term "public securities" shall mean any securities issued by the United States or by any instrumentality thereof, or by any territory or insular possession thereof, or by the District of Columbia, or by any State of the United States, or by any subdivision of any such State.

SEC. 5. Interrelated directorates and managements. Any investment banker who is the originator of a new issue of securities, shall, if such investment banker or any partner or principal officer thereof shall be an officer or director of the issuer company, disclose such fact in the prospectus.

ARTICLE V. RULES PERTAINING PRIMARILY TO SELLING SYNDICATES AND SELLING GROUPS IN CONNECTION WITH NEW ISSUES OF SECURITIES

SECTION 1. Statement of issue price. The prospectus shall state the price received by the issuer for any new issue of securities offered for sale to the public, or if there is no prospectus such price shall be disclosed in some other manner to each person purchasing such new security from any member of the selling syndicate or selling group.

SEC. 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 political subdivision 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 times that, in the usual course of delivery, such prospectus or description will be received by all such investment bankers on approximately the same day and at least 3 days (excluding Sundays and holidays but including the day of delivery) before the date on which it shall be proposed to make the public offering of such securities. SEC. 3. Membership in selling syndicates and selling groups. No investment banker proposing to organize a selling syndicate or a selling group shall invite or permit any person to be a participant in such selling syndicate or a member in such selling group unless such person is an investment banker actually engaged in the investment banking business.

SEC. 4. Price.-Each selling syndicate agreement and selling group agreement shall set forth the price at which the new securities are to be sold to the public or the formula by which such price can be ascertained.

No participant in a selling syndicate or member of a selling group shall, during the life of such selling syndicate or selling group, offer the new securities being distributed by such syndicate or group at any price below such public offering price. It shall be deemed a reduction of such offering price for a participant in a selling syndicate or a member of a selling group to allow any deduction, abatement, concession, or commission whatsoever, either directly or indirectly; provided that any

investment banker may allow to another investment banker a commission or concession if and to the extent that provision is made therefor in the agreement creating the selling syndicate or the selling group. No such commission or concession shall be allowed, however, to another investment banker who is not subject to these supplementary provisions unless he effectively agrees with the investment banker allowing him such commission or concession that he will be bound by the provisions of the following paragraph.

Any investment banker receiving such commission or concession in respect of any new security shall not resell such security to a person during the life of the selling syndicate or selling group at a price less than the price at which such security could be sold at the same time to the same person by a participant in such selling syndicate or by a member of such selling group.

SEC. 5. Presyndicate sales.-No investment banker shall organize, manage, or participate in a selling syndicate or selling group to offer a new issue of securities to the public if, within 30 days prior to the formation of such syndicate or group, he shall, at a price lower than the offering price to the public, have sold or given a right to purchase, or shall have assisted the issuer in selling or giving a right to purchase, any part of such new issue to any person other than an investment banker otherwise than as an essential step in the plan for the sale to the public of such new issue of securities.

SEC. 6. Trades in connection with new issues.-No investment banker who is a participant in any selling syndicate or a member of any selling group shall enter into any agreement or arrangement with any purchaser of the new securities being distributed by such syndicate or group whereby, either directly or indirectly, as a condition of the purchase, such investment banker will accept any other securities (except securities which are being refunded or redeemed in connection with or by means of such new issue of securities) in trade in payment of all or any part of the purchase price of such new securities. The foregoing provision shall not, however, prevent such investment banker from accepting such other securities as agent for sale, in which case the investment banker shall make the usual charge for such services and such investment banker may allow the purchaser of the new securities to apply towards the purchase price thereof any net proceeds realized from the sale of such other securities.

SEC. 7. Requirement of down payment.-(a) Except as hereinafter provided in paragraph (c) of this section, whenever a participant in a selling syndicate, or a member of a selling group, accepts a subscription subject to allotment for the purchase of a new security to be distributed by such selling syndicate or selling group, he shall require the person making the subscription to deposit with him a down payment of not less than 5 percent of the public offering price on the securities subscribed for.

(b) Except as hereinafter provided in paragraph (c) of this section, whenever new securities are subscribed for subject to allotment from the manager by a participant in a selling syndicate or a member of a selling group he shall at the time of such subscription make a down payment of not less than 5 percent of the public offering price. Such down payments shall be deposited by the manager in a special account with one or more incorporated banks, trust companies or persons permitted to receive deposits, provided, however, that they shall in all cases be deposited with a bank, trust company or person other than the manager.

(c) No down payment as required by paragraph (a) of this section shall be required from any purchaser who may be prevented by law from making such payment in advance of the delivery of the security purchased; and the participant or member who accepted the subscription of such purchaser shall furnish the manager of the selling syndicate or selling group evidence of such fact satisfactory to the manager, and in such case such participant or member shall not be required to make the down payment as required by paragraph (b) of this section; and the fact that such down payment is not required in any such case shall not be considered as a concession under section 4 of this article. The requirements of paragraph (b) shall not be compulsory in the case of a selling syndicate where all the participants were parties to the purchase from the issuer of the new security to be distributed.

SEC. 8. Requirements as to confirmations of sales.-No participant in a selling syndicate and no member of a selling group shall confirm a sale or a subscription from any purchaser unless

(a) Such participant or member has reasonable grounds to believe that such purchaser is bona fide and responsible;

(b) A copy of the prospectus, if any, has been delivered to such purchaser or accompanies the confirmation;

(c) Such sale does not violate or evade any provision of the selling syndicate or selling group agreement or of the rules; and

(d) A partner, duly accredited executive or branch office manager has approved such sale as complying with paragraphs (a), (b), and (c) of this section.

Failure of a participant in a selling syndicate or a member of a selling group to comply with the provisions of the foregoing paragraphs (a), (b), (c), or (d) of this section, shall not be deemed a violation of this section if not willful and if such participant or member gives notice, as soon as such failure is discovered, to the manager of the selling syndicate or selling group, stating the circumstances attending such failure.

SEC. 9. Certificates to be furnished manager.—Each participant in a selling syndicate and each member of a selling group shall, upon request of the manager, furnish to the manager a certificate signed by a principal officer or partner of such participant or member that he has examined the records of sales made by such participant or member, and that the provisions of sections 7 and 8 of this article were complied with in respect of such sales.

SEC. 10. Extension of the original period of the selling syndicate.-If provision is made in any selling syndicate agreement for the extension of the original period of the selling syndicate, such extension shall only become effective upon the consent of participants in the selling syndicate representing 75 percent in interest of the selling syndicate.

SEC. 11. Prohibition of participation with bank officers.-No investment banker to his knowledge shall participate in any selling syndicate in which any officer of any bank or trust company has a participation as an individual.

SEC. 12. Disclosure of interest of directors and officers of issuer.-No investment banker to his knowledge shall participate in any selling syndicate in which any director or any officer of the issuer of the new securities with relation to which such selling syndicate was formed has a participation, as an individual unless he discloses such participation in the prospectus, if any, or if there is no prospectus then in some other manner, to any person purchasing the security from such investment banker.

SEC. 13. Distribution of syndicate funds; expenses.-The manager of any syndicate shall distribute the amount due to syndicate participants promptly after the close of the syndicate. Upon request of any participant, the manager shall render to him a statement of expenses, which statement shall show the aggregate amounts of: (1) payments to manager, if any; (2) legal expenses; (3) advertising expenses; (4) expenses for printing, engraving, mailing, telegrams, and cables; and (5) other expenses.

SEC. 14. Disclosure of manager's right to purchase securities. If the manager of any selling syndicate is given the right under the selling syndicate agreement to buy securities in the open market for account of the selling syndicate, such fact shall be disclosed in the prospectus, if any, or, if there is no prospectus, in some other manner, by each participant in the selling syndicate to any person purchasing the securities from such participant.

If to the knowledge of the manager of any selling group any agreement for the organization of any syndicate formed in connection with the distribution of any new issue of securities to be distributed by such selling group has given the manager of such syndicate the right to buy in the open market any securities of such issue for the account of such syndicate, then the manager of such selling group shall disclose such fact in the prospectus, if any, or, if there is not prospectus, in some other manner to each member of the selling group, and such fact shall be disclosed in like manner by each member of the selling group to each person purchasing such securities from such member.

SEC. 15. Purchases of securities in open market in anticipation of public offering of new issue. If either (1) the manager of any selling syndicate or the manager of a selling group, or (2) to the knowledge of any such manager, the issuer or originator or any other syndicate formed in connection with the distribution of any new issue of securities to be distributed by or through such selling syndicate or selling group, purchases any of the outstanding securities of the issuer in the open market within 10 days prior to the date on which such securities are first offered to the public, such facts shall be disclosed by the manager to all participants in the selling syndicate or members of the selling group, and shall also be disclosed, either in the prospectus or in some other manner, by each participant in the selling syndicate or member of the selling group to any person purchasing the securities from such participant or member; provided, however, that no disclosure shall be required under this section 15 of any purchases of outstanding securities of the issuer made for the purposes of a sinking fund.

SEC. 16. Disclosure of interest in distribution.-Any participant in a selling syndicate, and any member of a selling group, who has any direct interest in the distribution of a new security other than as a member of a selling group, shall disclose such fact, either in the prospectus or in some other manner, to any person purchasing the securities from such participant or member.

SEC. 17. Copies of selling syndicate agreements and selling group agreements to be filed. Every manager of a selling syndicate or selling group shall, promptly after such selling syndicate or selling group is formed, file a copy of the selling syndicate agreement or the selling group agreement with the investment bankers code committee by mailing such copy, postage prepaid, to said committee addressed to its executive office. Copies of selling syndicate agreements and selling group agreements so filed need not contain the names of any of the parties thereto, except the manager.

ARTICLE VI. RULES PERTAINING PRIMARILY TO RETAIL SALES AND PURCHASES

SECTION 1. "Over the counter" transactions.-In "over the counter" transactions, whether in "listed" or "unlisted" securities, if the investment banker buys for his own account and risk from his customer, or sells for his own account and risk to his customer, he shall buy or sell at a price which is fair, taking into consideration market conditions in respect of such security at the time of the transaction, the expense of executing the order, and the fact that he is entitled to a profit; and if he acts as agent for his customer in any such transaction, he shall not charge his customer more than a fair commission or service charge, taking into consideration market conditions in respect of such security at the time of the transaction and the value of any service he may have rendered by reason of his experience in and knowledge of the market for such security.

SEC. 2. Information to be furnished upon confirming of customers' orders.-Upon confirming any customer's order for the purchase or sale of any security if the investment banker (1) is to act as principal in the transaction; or (2) is controlled, by, or controls, or is under common control with the issuer, the investment banker shall inform the customer of such fact upon the written memorandum of such confirmation.

SEC. 3. Information to be given upon delivery of memorandum of transactions.— Any investment banker who has a transaction with a customer involving the purchase or sale of any security shall, at or before the completion of the transaction, deliver to the customer a written memorandum of such transaction containing the following information: (a) whether such investment banker acted as principal or as agent for the customer; (b) if the investment banker acted as agent for the customer, the amount of the commission or service charge charged to the customer by such investment banker, and if another broker has been used, and any part of the commission has been paid to such other broker, the amount so paid shall be stated as a separate item; (c) if such investment banker acted as agent for the customer, the name of the person from whom the security was purchased or to whom the security was sold and the day and the hours between which the transaction took place, or that the information referred to in this paragraph (c) will be furnished upon written request of the customer for whom the investment banker acted as agent; and (d) if no written confirmation of the customer's order shall have been given, the information as required by clause (2) of section 2 of this article.

SEC. 4. Brokerage transactions. If in any transaction involving the purchase or sale of any security the investment banker purports to act as an agent to buy or sell on behalf of a customer, such investment banker shall not act as a principal in such transaction, nor, without the consent of his customer, represent any other principal in such transaction.

SEC. 5. Guarantee.-No investment banker shall, in any transaction involving the purchase of any security for the account of the customer or involving the sale of any security to a customer, agree with the customer, either directly or indirectly, to guarantee that the market value of the security as it was at the time the security was bought for or by the customer will be maintained, or that the business of the issuer of such security will be successful in earning profits, or that the issuer will meet its promises and obligations; provided that the restrictions of this section shall not apply in respect of transactions in any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

SEC. 6. Repurchase agreements.-No investment banker shall, in any transaction involving the purchase of any security for the account of a customer or

involving the sale of a security to a customer, agree with the customer, either directly or indirectly, to repurchase the security from the customer; provided that the restrictions of this section shall not apply in respect of transactions in obligations of the United States or any security guaranteed as to principal or interest by the United States, or of transactions in any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited, or to any repurchase agreement with any person whenever such repurchase agreement is limited to 60 days and is used as a substitute for borrowing.

SEC. 7. Retail partial-payment transactions.—-No investment banker shall take or carry any account or make a transaction for any customer under any arrangement which contemplates or provides for the purchase of any security for the account of the customer or for the sale of any security to the customer, where payment for the security is to be made to the investment banker by the customer over a period of time in installments or by a series of partial payments unless(a) In the event such investment banker acts as an agent or broker in such transaction he shall, immeidately, in the regular course of business, make an actual purchase of the security for the account of the customer, and shall immediately, in the regular course of business, take possession or control of such security and shall maintain possession or control thereof so long as he remains under obligation to deliver the security to the customer.

(b) In the event such investment banker acts as a principal in such transaction, he shall, at the time of such transaction, own such security and shall maintain possession and control thereof so long as he remains under obligation to deliver the security to the customer.

No investment banker, whether acting as principal or agent, shall in connection with any transaction referred to in this section make any agreement with his customer under which the investment banker shall be allowed to pledge or hypothecate any security for any amount in excess of the indebtedness of the customer to such investment banker.

SEC. 8. Information received in other capacities.-An investment banker who receives information as to the ownership of securities in the capacity of paying agent, transfer agent, trustee or in other similar capacity, shall under no circumstances make use of such information for the purpose of soliciting sales or exchanges except at the request and on behalf of the issuer.

ARTICLE VII. RULES PERTAINING PRIMARILY TO SALESMEN

SECTION 1. Supervision. Any investment banker who employs any salesman shall supervise the sales methods of such salesman and his correspondence in relation to offers of securities for sale to investors; and any sale made by any such salesman to any investor, other than another investment banker, shall be approved by a partner, duly accredited executive, or branch office manager of such investment banker. Such approval shall be evidenced by a written endorsement made upon a copy of the memorandum of sale mentioned in section 3 of article VI, and each memorandum so approved shall be made a part of the permanent records of such investment banker and retained in his files for at least 3 years.

SEC. 2. Experience. (a) Except as hereinafter provided in paragraphs (a) and (b) of this section, no investment banker shall employ any person to act as a salesman unless such person shall have had at least 2 years experience in the investment banking business or in a business a major part of which consisted in investing in securities.

(b) Except as hereinafter provided in paragraph (c) of this section, any person who has not had 2 years experience in the investment banking business or in a business the major part of which consisted in investing in securities but who has had such experience for a period of at least 6 months, may be employed as a salesman by any investment banker if the compensation of the person so employed to act as salesman shall be a straight salary and shall not include in whole or in part commissions upon securities sold.

(c) Nothing contained in either paragraph (a) or (b) of this section shall be construed to prevent any investment banker from continuing to employ as a salesman any person who is so employed by such investment banker at the effective date of the rules.

SEC. 3. Solicitation at residences.-No salesman shall call in person upon, or telephone to, any customer or prospective customer at his home or residence for the purpose of selling to, or offering to sell to, or soliciting an offer to buy from

45381-34-39