is usually made by brokers for custody of securities, but a commission is sometimes charged for the trouble of collecting dividends. In the case of a deposit of securities with a bank this charge of commission is enough to constitute the bank a bailee for reward of the securities themselves, so as to render them liable for their loss by means of forgery by the manager of the bank. This was decided in Johnston's claim in the winding-up of the United Service Company, who had been the claimant's bankers. He had deposited with them some stock certificates of railway companies and other documents, some with coupons, some without. The company, in consideration of a very small commission, undertook his banking account, and were authorized to receive the dividends on those shares and to collect the coupons as and when they became due. The manager of the certificates, sold the bank abstracted some of the stock, and forged the transfers. The possession of the abstracted certificates was not essential to the collection of the money which the bank was authorized to collect, yet it appeared to the Court that they came into the custody of the company in the ordinary course of their business as bankers, and that they were deposited with the bank by a customer of the bank under such circumstances as would have entitled the bank to a lien upon them for their general banking account. These considerations were held sufficient to fix the bank with liability; and upon similar considerations must depend the question of a broker's liability for negligence in the custody of securities. It must not, however, be assumed that where no charge is made the bailment is necessarily gratuitous. It might be argued that the securities 1 L. R., 6 Ch. 212. remain in the custody of the broker under the original employment to purchase them, and in so far connected with that employment as to be covered by the original commission charged; or again, that the mere collection of coupons is a sufficient advantage to the broker to constitute him a bailee for reward, even although the charge made be inadequate to remunerate him for trouble of collection, apart altogether from any indirect compensation for custody. We have hitherto treated the relationship existing between principal and broker from a legal point of view. But a person, though not a member of the Stock Exchange, may, if he so desires, refer to the Committee any complaint against a member; and if it is one which is fitting for their adjudication, it will be decided summarily by them in the same manner as if both parties were members, and in accordance, therefore, with the principles described in the following chapter. On referring a complaint to the Committee, a non-member will be required to sign the form of reference to the Committee set out in the Appendix under Rule 54. Reference of complaint to CHAPTER III. Contract between broker and jobber. Legal proceedings by members. BROKER AND JOBBER. WE now pass to the consideration of the contract between the broker and the jobber. The Stock Exchange does not recognize in its dealings any parties other than its own members; therefore, whatever be the instructions given to the broker by his principal, this bargain made with the jobber must be fulfilled according to the rules, regulations and usages of the Stock Exchange; if any special arrangement has been made between the broker and his principal, or any additional liability incurred by the broker, the responsibility rests with him, since he cannot call upon the jobber to deal otherwise than according to those rules. Nor would the question arise between broker and jobber as to whether any rule or usage was reasonable or not; for these usages are founded on the general convenience of all persons engaged in business on the Stock Exchange, and could not, therefore, as regards those persons, be said to be unreasonable.1 Moreover, it is a rule of the Exchange that no member may attempt to enforce by law any claim arising out of Stock Exchange transactions against a member or defaulter, or against the principal of a member or defaulter, without the consent of such member, of the creditors of the defaulter, or of the Committee. A member can of course have resort to the law if he chooses, in defiance of this rule; but 1 Grissell v. Bristowe, L. R., 4 C. P. 36. as this would render him liable to expulsion from the House, it very rarely, if ever, happens; nor is it likely that the Committee would, unless for the sake of testing the law, or, perhaps, under altogether exceptional circumstances, consent to refer to the decision of the Courts any dispute arising out of transactions with which they are themselves so peculiarly competent to deal. We must, therefore, in considering the relationship which arises between broker and jobber, be guided solely by the rules and regulations adopted by the Committee for General Purposes of the Stock Exchange. of disputes. Dealings for future ac The parties are of course bound from the moment Settlement the contract is made, and, as we have seen, the bargain is checked on the following day. Any disagreement would then be discovered, and would, if necessary, have to be referred to arbitration; if arbitrators cannot be found, or are unable to agree, the matter would then be finally referred to the Committee for their decision. The Committee do not entertain any application which has for its object to annul any bargain in the Stock Exchange, unless upon a specific allegation of fraud or wilful misrepresentation. There are also certain dealings which they refuse to recognize, such as dealings in letters of allotment, either of loans or shares in new companies; or dealings which have been effected for a period more than a month in advance. This rule would apply, in ordinary securities, to all bargains made for a period beyond the ensuing two accounts; and, in English and India stocks, to all dealings for a future account effected more than eight days previously to the account then pending. It must not be assumed, however, that a member, relying upon this fact, can repudiate any such bargain with impunity, for it is within the discretion count." Dealings in prospective dividends. Remedies for delay. "Buying in" and "selling out." of the Committee to take into consideration any dishonourable conduct on the part of members. Dealings in prospective dividends on shares or stock of railway or other companies are prohibited by the rules, and are, à fortiori, not recognized by the Committee; although, if contracts of this nature should be made, there is nothing in the Gaming Act before alluded to, or in the principles of common law, to render them voidable.1 All contracts on the Stock Exchange are made subject to an implied reservation of the right of rescission, if the contractee fails to complete; that is to say, the party who is ready and willing to complete may in such cases treat the original contract as rescinded, effect elsewhere a similar bargain at the market price, and claim against his original contractee for any loss incurred. This is in accordance with the ordinary rule of law, so far at least as it relates to the remedy of the buyer; but on the Stock Exchange there are certain regulations as to the period at which a member may be treated as having failed to complete his bargain, and as to the method of ascertaining and claiming the amount of loss incurred, which must be strictly followed where it is sought to enforce the remedy. If loss has been incurred, it will be in every case the difference between the contract price and the price at which the security is bought in or sold out, as the case may be, against the member who has failed to complete his contract. 1 Marten v. Gibbon, 33 L. T., N. S. 561. Since this case was decided the wording of the Stock Exchange rule has been altered; in the report the old rule is set out. 2 See Pott v. Flather, 16 L. The member wish J., Q. B. 366, where the amount recoverable at law was held to be the difference between the contract price and the market value of the security at the time the contract was broken. |