(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

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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

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such customer or prospective customer, unless such customer or prospective customer shall have previously given written permission therefor to the investment banker employing such salesman. As used in this section the term "salesman" shall include any investment banker, or any partner, officer or employee thereof who does any act or thing in this section described.

SEC. 4. Orders taken by salesmen.-Any investment banker who employs any salesman shall require that all orders taken by such salesman for the purchase of or subscription to any security shall be subject to acceptance and confirmation by such investment banker.

ARTICLE VIII. RULES PERTAINING PRIMARILY TO INVESTMENT COMPANIES

SECTION 1. If any investment banker has agreed to manage, or give investment advice to the management of an investment company (sometimes known as an "investment trust") all or part of the securities of which are held by the public or if any partner or officer or employee of any investment banker is an officer or director of any investment company all or part of the securities of which are held by the public

(a) Such investment banker shall not for his own account sell to or purchase from such investment company any securities unless a majority of the members of the board of directors of such investment company are not such partners, officers, or employees, and unless the transaction is previously approved after full disclosure by a majority of such members of the board of directors of the investment company.

(b) Such investment banker shall use his best efforts to cause the investment company to prepare and distribute to its stockholders quarterly statements and annual financial statements, such annual statements to conform to the standards for such annual statements required by section 1 of article IV hereof.

(c) If such investment banker has received any compensation or commission for acting as agent for the investment company, or if such investment company has purchased from or sold to such investment banker any securities, or if the investment company has engaged in any other transaction in which the investment banker has a financial interest, the investment banker shall use his best efforts to see that full disclosure of such transactions is made by the company to the stockholders at an annual or special meeting. Where the investment banker has acted simply as broker for the execution of orders on a securities exchange it shall be sufficient disclosure if the total amount of securities dealt in and the total amount of commissions received shall be stated.

(d) Such investment banker shall not enter into any management or advisory service contract with such investment company providing for the payment to the investment banker of any fee or for any other compensation for managing or advising the management of the investment company unless the contract therefor has been submitted to and approved by the stockholders of the investment company. (e) Such investment banker shall use his best efforts to cause the investment company not to use the term "trust" as part of the title of such investment company unless the use of the term "trust" is justified as a matter of law.

ARTICLE IX. MISCELLANEOUS RULES

SECTION 1. Investment management.-No investment banker who is receiving a fee for managing the account of any customer or for advising a customer with respect to his investments shall sell to or buy from such customer, for his own account or as agent for any other person, unless he shall have obtained the previous written or telegraphic approval of such customer to each such transaction.

SEC. 2. Discretionary accounts.-No investment banker who is authorized to purchase or sell securities for account of a customer in his discretion shall sell to, or buy from, such customer for his own account or as agent for any other person unless he shall have obtained the previous written or telegraphic approval of such customer to each such transaction.

SEC. 3. Segregation of agency funds.-Any investment banker acting as sinking fund agent, principal or coupon paying agent, dividend paying agent or in any similar capacity, who holds any funds or securities in any such capacity shall hold such funds or securities as trust funds or trust securities unless the terms of such agency agreement expressly otherwise provide.

SEC. 4. Quotations.-No investment banker shall publish or circulate, or cause to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind which purports to quote or to give a quotation of any transaction as a purchase or sale of any security

unless such investment banker believes that such transaction was a bona fide purchase and sale of such security, or which purports to quote the bid price or asked price for any security, unless such investment banker believes that such quotation represents a bona fide bid for, or offer of, such security. If nominal quotations are used or given they shall be clearly stated to be only nominal quotations.

SEC. 5. Offers to buy and sell.-No investment banker shall make any offer to buy or sell any security at a stated price from or to any person unless such investment banker is prepared to purchase or sell, as the case may be, at such price. SEC. 6. Compensation and gratuities.-No investment banker shall, directly or indirectly, give, permit to be given, or offer to give, anything of value

(a) To any employee, agent, or representative of another person for the purpose of influencing or rewarding the act of such employee, agent or representative in relation to the business of the employer of such employee, the principal of such agent, or the represented party, without the knowledge and consent of such employer, principal or represented party; or

(b) To any officer or employee of any bank, trust company or insurance company except for services actually rendered or to be rendered, and in no case without the knowledge and consent of such bank, trust company or insurance company; or

(c) To any person for the purpose of influencing or rewarding the action of such person in connection with the publication or circulation in any newspaper, investment service, or similar publication of any matter which has, or is intended to have, an effect upon the market price of any security, provided that this paragraph (c) shall not be construed to apply to matter which is clearly paid advertising; or

(d) To any director, official, officer or employee, of any issuer, for the purpose of influencing or rewarding the action of any such director, official, officer or employee, in connection with the issue or sale by such issuer or any person controlled by such issuer of any new securities of such issuer or of any such controlled person.

For the purposes of this section the giving of anything of value to a member of the family of any person shall be regarded as the giving of a thing of value to such person.

In order to comply with the requirements of the National Recovery Administration is is expressly stated that nothing in this section 6 shall be construed to apply to the free and general distribution of articles commonly used for advertising.

SEC. 7. Registered investment bankers.-(a) No registered investment banker shall, in any transaction with any investment banker not registered under article X hereof, allow or grant to such nonregistered investment banker any allowance, commission, or discount usually and customarily to be allowed to another dealer; nor shall any registered investment banker join with any investment banker not registered under article X hereof in any syndicate or group contemplating distribution to the public of any issue of securities; nor shall any registered investment banker sell any security to or buy any security from any investment banker not registered under article X hereof, except at the same price at which at the time of such transaction such registered investment banker would buy or sell such security, as the case may be, from or to a person who is a member of the public not engaged in the investment banking business.

(b) The provisions of this section 7 shall not apply to an investment banker in a foreign country who is not eligible for registration under article X hereof, but in any transaction with any such foreign investment banker a registered investment banker shall as a condition to such transaction secure from such foreign investment banker an agreement that, in making any sales to purchasers within the United States of securities acquired as a result of such transaction, he shall conform to the provisions of this section 7 to the same extent as though he were an investment banker registered under article X.

(c) No investment banker who is not a registered investment banker shall represent that he is a registered investment banker and no registered investment banker shall advertise or hold himself out to the public as a registered investment banker except as shall be permitted by regulations from time to time prescribed by the investment bankers code committee.

SEC. 8. District rules. Every investment banker shall, with respect to any transaction in any district, comply with any additional rule established in such district as provided in sections 5, 6, and 7 of article XI hereof.