PART III THE BROKER AND HIS CUSTOMER HE relation between the broker and his customer THE has been the subject of numerous decisions by the Courts in this country and in England. The cases that have arisen deal largely with either the effort on the part of the broker to recover the balance of his account for stock-brokerage as against his customer, or with the effort on the part of the customer either to recover from the broker securities purchased or deposited for margin, or to obtain their value, upon the theory that the broker dealt with them without complying with the law in regard to notice and time and place of sale. In reading these decisions, it is apparent, that while a considerable measure of natural justice entered largely in determining the issues that arose, the laws seemed to lean altogether in the direction of protecting the This is accomplished by holding the broker to the strictest performance of his duties to his customer and visiting upon him a full measure of responsibility for any dereliction. customer. Most of the cases arrange themselves under the head of pledgor and pledgee, in which is included those decisions dealing with the right to hypothecation and what amounts to conversion. They are presented here as nearly as possible in the sequence in which the ideas arise when the relation of stockbroker and customer is thought of, and the whole is preceded by definitions of those terms most likely to be encountered in a reading of the reported cases. Definitions. Some judicial definitions of terms commonly used by those who deal on the Stock Exchange follow. 66 'MARGIN" DEFINED. "Margin" is security nothing more.1 "SHORT SALE" DEFINED. A "short sale" is a sale of stock which the seller does not possess, but which he hopes to buy in at a lower price than that for which he sells." 2 “BULL" DEFINED. A "bull" is one who buys stock with the expectation of making a profit through a rise of price; he is then said to be "long of stock."3 An "option" in one sense denotes a future contract, 1Hopkins v. O'Kane, 167 Pa. St. 478. 2 Baldwin v. Flagg, 36 N. J. Eq. 57. 35 Am. & Eng. Enc. Law 2nd Ed. 18. in which one side has a right to insist upon compliance with the contract at any time within a given period. In another sense it means where one side has a right to insist upon such compliance as to cancel the contract at his election, such as a "put" or a "call."1 "PUT" DEFINED. A "put" is judicially defined as the "privilege of delivering or not delivering" the thing sold.2 'CALL" DEFINED. A "call" is defined as the "privilege of calling for or not calling for" the stock bought, or an option to claim stock at a fixed price on a certain day.3 A fly-power" is a written assignment in the form generally used on the reverse of stock certificates, which when signed and attached to such certificate, is sufficient to transfer the same in like manner as an endorsement thereon.1 Good Faith and Care. The stockbroker is bound to exercise good faith in Jackson v. Foote, 12 Fed. 37. Bigelow v. Benedict, 70 N. Y. 202 "Bigelow v. Benedict, 70 N. Y. 202. Asgood v. Bander, 75 Iowa, 550. 'Pixley v. Boynton, 79 Ill. 353. Muller v. Bensley, 20 Ill. App. 530. "Carlisle v. Norris, 142 N. Y. Supp. 393, 396. |