CALIFORNIA PART I THE EXCHANGE AND ITS CONSTITUTION HE New York Stock Exchange is governed by a THE constitution of thirty-eight articles, which has been amended from time to time to meet exigencies as they arose, and which has, for its members, the force of laws. In this Constitution and the rules accompanying it the interests of the public dealing with members of the Exchange are carefully safeguarded, even to the minutest detail, and the effort is made so to regulate the conduct of the members among themselves as to hold them up to the very highest standards of honesty and fair dealing. Of necessity the rules are strictly enforced. Sales and purchases are made and contracts undertaken involving thousands of dollars, without any written memoranda, a nod of the head or a wave of the hand being all that is used to bind the bargain. The infractions of the rules are very few, so few in fact that it may fairly be said that no more honorable body of men exists anywhere in the world. The purposes of the Exchange are denoted in the words of its first article: "Its object shall be to furnish exchange rooms and other facilities for the convenient transaction of their STOCK EXCHANGE LAWS business by its members, as brokers; to maintain high standards of commercial honor and integrity among its members; and to promote and inculcate just and equitable principles of trade and business." The solicitude of the Exchange to maintain the high standard set by this article is manifest from, among others, the disciplinary provisions of the Constitution which follow, as well as from those creating safeguards against members deemed insolvent.1 'The rules of a Stock Exchange or Board of Trade, as between the members, have the force and effect of existing laws. Contracts are governed by the rules in force at the time the contracts are made. Hess Malting Co., v. Warren, 15 Ill. App. 507. Thorne v. Prentiss, 83 Ill. 99. Paton v. Newman, 51 La. Ann. 1428. Pacaud v. Waite, 218 Ill. 138. Nat. League of Comn. Merchts. v. Hornung, 148 App. Div. 355. By becoming members, the members impliedly agree to be bound by the rules. People v. Board of Trade, 45 Ill. 112. Board of Trade v. Nelson, 162 Ill. 431. The constitution and by-laws constitute a law which the members have established for themselves. "The very existence of this body depends upon the faithful observance of its organic law by all its members." White v. Brownell, 2 Daly, 329, 338. Weston v. Ives, 97 N. Y. 222. To the same effect: Thompson v. Adams, 93 Pa. St. 55 (Philadelphia Board of The contracts may be made with specific reference to the rules. Bassett v. Irons, 8 Mo. App. 127. In a suit between members of the New York Stock Exchange it was held that the parties were bound by the constitution and by-laws of the association, and that by-laws prescribing the mode of performing contracts of the kind in question became part of the contract. Peabody v. Speyers, 56 N. Y. 230. And parties outside of the board of the Gold Exchange may agree to be governed, in regard to their contract, by rules which, by their terms, are expressly confined to contracts made at the board. Mills v. Gould, 42 N. Y. Super. Ct. 119. But, while the association may adopt rules obligatory on its own The Governing Committee. The government of the Exchange is vested in a Governing Committee, composed of the President and Treamembers, by which their rights may be summarily determined between themselves, such determination has no force to injure or impair the rights of outside persons not voluntarily subject to the jurisdiction of the tribunal. Morris v. Grant, 34 Hun. 377. See also Waugh v. Seaboard Bank, 54 N. Y. Super. Ct. 283 (Petroleum Exchange). Stock exchanges have power to enact such rules and regulations as are necessary to carry out their purposes, if not contrary to the law of the land. Cohen v. Budd, 52 Misc. 217. By-laws should be strictly construed and should not be extended by implication so as to effect a forfeiture of membership. Albers v. Merchants' Exchange, 140 Mo. App. 446. The Open Board of Stockbrokers, organized in 1864 and consolidated with the N. Y. Stock Exchange in 1869, was described in White v. Brownell, 2 Daly, 329, 355, as "an association of persons engaged in the same kind of business, who have organized together for the purpose of establishing certain rules, by which each agrees to be governed in the conduct and management of his separate transactions or business." A member admitted in subordination to existing rules is estopped from denying their reasonableness. Bostedo v. Board of Trade, 130 Ill. App. 560. The courts will construe such rules. In re Fisk & Robinson, 185 Fed. 974. But they will not interfere to control the enforcement of reasonable by-laws, which infringe no rule of law or public policy. Green v. Board of Trade, 174 Ill. 585. Board of Trade v. Nelson, 162 Ill. 431 Board of Trade v. Weare, 105 Ill. App. 289. A by-law is not invalid merely because it is different from the common law rule, if it is not against the policy of the law. Goddard v. Merchants' Exchange, 9 Mo. App. 290. A by-law providing for the suspension of a member for dishonorable conduct has been held valid. Board of Trade v. Nelson, 162 Ill. 431. A by-law of an Exchange that if a member fails to comply with a business contract made with another member he shall be expelled is valid. People v. Board of Trade, 45 Ill. 112. Board of Trade v. Nelson, 162 Ill. 431. A by-law prohibiting the representation of parties by professional counsel in investigations before committees has been held reasonable and enforceable. Green v. Board of Trade, 174 Ill. 585. 2 surer of the Exchange, and of forty members.1 This committee is divided into four classes of ten members each, each class holding office for four years, but the expiration of the term of each class is so arranged that one class goes out of office each year. It has power to determine the manner and form of its own proceedings; to appoint and dissolve all committees; define, alter and regulate their jurisdiction; direct and control their proceedings; try and punish members; control finances; compensate officers; and all other powers necessary or incidental to the proper regulation of business, but no member may participate in the adjudication of any case in which he is personally interested.* 3 This committee may also choose an acting President in the absence of the President and Vice-President; and it may choose counsel each year. Officers of the Exchange, Their Powers and Duties. The President may call special meetings of the Exchange and the Governing Committee, and must call such special meetings on the written request of one hundred members and of the Governing Committee on the written request of ten committee members." He may appoint committees ad interim.6 The Vice-President, who is chosen by the Govern 1Art. II. 'Art. III, Sec. 1. 'Art. III, Sec. 2. 'Art. III, Sec. 4. 'Art IV, Sec. 2. 'Art. IV, Sec. 3. ing Committee each year, assumes the powers and duties of the President in his absence.1 The Treasurer acts under the Finance Committee, which may appoint one of its members to act, with either the President or Vice-President, as Treasurer pro tem.2 The Secretary is appointed by majority vote of the Governing Committee.3 The Chairman is appointed by the Governing Committee. His duty is to preside over the Exchange during business hours, maintain order, enforce the rules, impose fines, etc., under the direction of the Committee of Arrangements. He is not allowed personally to buy or sell securities upon the floor of the Exchange.5 The Assistant Chairman is appointed by and acts under the direction of the Committee of Arrangements." The Governing Committee may for any good cause remove officers by two-thirds vote of its members. Committees. There are twelve standing Committees: First: A Committee of Arrangements, consisting of seven members, to which is entrusted the general care and supervision of the Exchange, the enforcement 'Art. V. 'Art. VI. 'Art. VII. 'Art. VIII, Sec. 1. 'Art. VIII, Sec. 2. 'Art. VIII, Sec. 3. 'Art. X, Sec. 3. |