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Mr. HARRIS. Or they may be at the request of some standing committee, in order to bring up some important matter.

Mr. PECORA. Can you give us an approximate idea of the number of meetings the governing committee held during the calendar year 1933?

Mr. HARRIS. No, sir; I cannot.

The CHAIRMAN. How many members are there of the governing committee? Forty-one ?

Mr. HARRIS. Yes; I think the number is 41 or 40.
Mr. PECORA. Plus two ex-officio members ?
Mr. HARRIS. Yes, sir; 40, I believe.

Mr. PECORA. Are the members of the governing committee chosen every year, or is only a portion of them chosen every year?

Mr. 'HARRIS. Do you want the exact language? I can give it to you. There are one quarter of the membership chosen every year.

Mr. PECORA. Ten of the forty are chosen every year?
Mr. HARRIS. Yes, sir.

Mr. PECORA. And for what period of time are they elected annually?

Mr. HARRIS. They are elected to serve for 4 years.

Mr. PECORA. How are nominations for officers and members of those committees made?

Mr. HARRIS. There is a nominating committee appointed.
Mr. PECORA. Appointed by whom?

Mr. HARRIS. Just one minute. I have it here in the book and will find it for you.

The CHAIRMAN. I think you said all committees were appointed by the president of the exchange.

Mr. HARRIS. Yes, sir.
Mr. PECORA. No; not the governors.

Mr. HARRIS. The nominating committee is elected by the membership of the exchange, which committee consists of five members.

Mr. PECORA. That is, the nominating committee consists of five members?

Mr. Harris. Yes, sir; and they are elected by the membership,

Mr. PECORA. That is, the nominating committee is elected by the membership of the New York Stock Exchange.

Mr. HARRIS. Yes, sir.

Mr. PECORA. And are the members of the nominating committee named a year in advance of their functioning?

Mr. HARRIS. Well, not as to the exact time, but they are named some time in advance.

Mr. PECORA. And they are named about a year in advance!
Mr. HARRIS. I think that is correct.

Mr. PECORA. In other words, when is the annual election of officers of the New York Stock Exchange held !

Mr. HARRIS. On the second Monday of May.
Mr. PECORA. Of each year?
Mr. HARRIS. Of each year; yes, sir.

Mr. PECORA. And when is the “slate ", so-called, of the nominating committee to be voted upon at the annual election, put out by the nominating committee!

Mr. HARRIS. On the second Monday in April of each year.

Mr. PECORA. And in that slate is there included the nominating committee for the enusing year? In other words, will there be included in the slate put out for the annual election to be held next May, by the present nominating committee, the names of the members of the nominating committee who will make the slate for the annual election of 1935?

Mr. HARRIS. Yes; I believe that is true.

Mr. PECORA. Now, what are the duties and the powers of the socalled “ governing committee”?

Mr. HARRIS. They are as follows: The governing committee shall be vested with all powers necessary for the gorernment of the exchange, the regulation of the business conduct of its members, and the promotion of its welfare, objects, and purposes.

In the exercise of its powers, it may adopt such rules, issue such orders and directions, and make such decisions as it may deem appropriate.

Mr. Pecora. What provision of the constitution of the exchange are you reading from?

Mr. Harris. I am reading from page 2, article III, section 2.

Mr. PECORA. Now, under section 3, the governing committee has the power to appoint and dissolve all standing and other committees except the nominating committee, hasn't it?

Mr. HARRIS. Yes, sir.

Mr. PECORA. It also has the power to define, alter, and regulate their jurisdiction, hasn't it?

Mr. HARRIS. Yes, sir.

Mr. PECORA. It has the power of discipline oror the members of the exchange?

Mr. HARRIS. That is right.

Mr. PECORA. And the power of discipline extends to that of expulsion ?

Mr. HARRIS. Yes, sir.

The CHAIRMAN. Would you say from that that the governing committee is the real authority in control of the New York Stock Exchange?

Mr. HARRIS. Yes, sir.

Mr. PECORA. Now, Mr. Harris, is there another committee known as the “ law committee "?

Mr. HARRIS. There is.

Mr. PECORA. And what are the powers and duties of the law committee of the New York Stock Exchange?

Mr. HARRIS. It provides : A law committee, to consist of five members, which shall deal with matters of law affecting the interests of the Exchange.

It shall act in an advisory capacity to the president when requested by him and shall, in association with the president, represent the exchange in all matters affecting its general interests, and is authorized and empowered, in its discretion, to examine into the dealings of any member of the exchange.

Mr. PECORA. The members of the law committee are appointed by the president, are they not?

Mr. HARRIS. Yes, sir.

Mr. PECORA. Now, has this law committee virtually superseded the governing committee with regard to the representation of the exchange in matters affecting its general interests!

Mr. HARRIS. I am sorry, Mr. Pecora, but I did not catch the first part of your question.

Mr. PECORA. The committee reporter will read it to you. [Which was done.]

Mr. HARRIS. No, sir; I would not say that.

Mr. PECORA. Well, then, let me refer you to the eighth paragraph of article 10 of the constitution, providing for the creation of a law committee, and defining its duties and powers, which paragraph says, in part, regarding the law committee:

It shall act in an advisory capacity to the president, when requested by him, and shall, in association with the president, represent the exchange in all matters affecting its general interests.

Doesn't that give the committee very, very broad powers, a very broad grant of power, to function for the exchange in all matters that might be deemed to affect the interests of the exchange?

Mr. HARRIS. Yes. But I believe that paragraph starts by saying it shall act in an advisory capacity.

Mr. PECORA. It starts out that way and then it says: and shall, in association with the President, represent the exchange in all matters affecting its general interests.

Mr. HARRIS. Well, that is true.

Mr. PECORA. Now, under that grant of authority, hasn't the law committee virtually assumed the functions covered by the grant of power to the governing committee?

Mr. HARRIS. I do not think so, because in section 3 of the constitution, at page 3, it says:

The governing committee shall determine the manner and form by which its proceedings shall be conducted; it shall appoint and may dissolve all standing and other committees except the nominating committee, define, alter, and regulate their jurisdiction as stated in this instrument, and have original and supervisory jurisdiction over any and all subjects and matters referred to said committees, and may direct and control their actions or proceedings at any stage thereof.

Mr. PECORA. Aren't the members of the law committee referred to, as a matter of fact, as being virtually the governing power of the exchange in association with the president, and thus more so than the governing committee?

Mr. HARRIS. I would not say that. Some of the older men, men who have been on the governing board for a long time, are on the law committee. But the exchange is governed by the governing committee, as a whole.

Mr. PECORA. Has the matter of the action to be taken by the exchange with respect to the bill now pending in Congress to regulate securities exchanges throughout the country been taken before the governing committee of the exchange?

Mr. HARRIS. No, sir; it has not.
Mr. PECORA. You say it has not?
Mr. HARRIS. No, sir.

Mr. PECORA. Has it been taken before the law committee of the exchange?

Mr. Harris. I don't know. I am not a member of the law committee.

Mr. PECORA. You haven't heard one way or other as to whether it bas? Mr. HARRIS. I imagine it would be discussed there. Mr. PECORA. The governing committee has not been called upon to consider the position or attitude of the New York Stock Exchange, that is, the position or attitude it should take with respect to the so-called Fletcher-Rayburn bill that is now awaiting action by Congress?

Mr. HARRIS. Yes, sir. There was a meeting of the governing committee called, in which the matter was brought up, and the president was to make an address and suggestions, and he asked for the approval of the governing committee.

Mr. PECORA. Mr. Committee Reporter, will you read back there and give me the answer that Mr. Harris first made in that respect?

Mr. Harris. There was one place there where I realize the question Tas incorrect

Mr. Pecora (interposing). You mean that your answer to one of my questions was incorrect? Vr. Harris. Yes, sir; the answer given by me was incorrect.

Mr. PECORA. Well, let me hear the committee reporter read what the incorrect answer was that

you

made. (Thereupon the committee reporter read, as follows:) Mr. PECORA. Has the matter of the action to be taken by the exchange with respect to the bill now pending in Congress to regulate securities exchanges throughout the country, been taken before the governing committee of the exchange? Mr. HARRIS. No, sir; it has not. Mr. PECORA. You say it has not? Mr. HARRIS. No, sir. Mr. HARRIS. I should like to correct that answer. Mr. PECORA. What is your answer to that question now? Mr. Harris. That it has, and I forgot this special meeting. Mr. PECORA. You forgot the special meetings of the governing committee at which that subject was brought up? Mr. HARRIS. Yes, sir. Mr. PECORA. Was not the business transacted at those special meetings of outstanding importance?

Mr. Harris. There are a good many meetings, Mr. Pecora. I did forget that particular meeting. I remember distinctly now.

Mr. Pecora. What took place at that meeting, at which that subject was considered ?

Mr. Harris. The president asked for the approval of the governing committee of the stand he was going to take. Approval was granted. Mr. PECORA. What did he say was the stand he was going to take? Mr. Harris. Well, I cannot remember the details of it. Mr. PECORA. What was the substance of it? Mr. HARRIS. It was his suggestion—the suggestion, rather, that he made before the House committee here within 3 or 4 days—with regard to having an authority in charge of exchange matters, the authority to consist of two members appointed by the President, and so forth, as was described at that meeting.

Mr. PECORA. Is that all you can tell us about the substance of what took place at that meeting with respect to that subject?

Mr. HARRIS. The president outlined his plan-
Mr. PECORA. What was the plan that he outlined ?

Mr. Harris. He outlined that in lieu of suggestions made, that a committee be appointed, 2 members to be appointed by the President of the United States, 1 member to be appointed by the Federal Reserve, 2 members of the Cabinet, 1 member to be appointed by the New York Stock Exchange, and 1 by the other exchanges throughout the country, they to be an authority to have control of the stock exchanges.

Mr. PECORA. You are stating now the substance of the suggestion that Mr. Whitney made to the governing committee with regard to the kind of legislation that should be asked of the Congress on this subject of regulation of securities exchanges.

Mr. Harris. True.

Mr. PECORA. What I am asking you to tell us is what attitude was suggested to the governing committee at that special meeting by Mr. Whitney should be the attitude taken by the stock exchange on the so-called “ Fletcher-Rayburn bill.”

Mr. HARRIS. This attitude we have just been over.
Mr. PECORA. Is that all that was discussed at that meeting?

Mr. HARRIS. Yes. He asked for the approval of that matter, and it was granted.

Mr. PECORA. Did he report to the governing committee, so far as you know, his own views with regard to the Fletcher-Rayburn bill!

Mr. Harris. He reported to the entire membership.
Mr. PECORA. I am talking about this meeting of the governing

. committee, this special meeting, at which the subject of the attitude, to be taken by the stock exchange on this bill was discussed.

Mr. HARRIS. No; not at that time.

Mr. Pecora. Did he at any other time, at any other meeting of the governing committee, enter into any such discussion?

Mr. HARRIS. No; he did not take that up, and I imagine due to the fact that he had already sent a letter to all members.

Mr. PECORA. What was the letter he sent to all the members, to which you refer? Have you a copy of it?

Mr. HARRIS. Yes; I have. Mr. PECORA. Will you produce it, please? (Mr. Harris produced a paper and handed the same to Mr. Pecora.)

The CHAIRMAN. Did Mr. Whitney take the position, before the governing committee, that there was need for some regulation of the stock exchange by some authority, when he recommended this commission that you mentioned?

Mr. Harris. He did not say that he thought there was any need of it, but he thought that if regulatory powers were going to be granted to some authority, the suggestion that he made would be a wise one.

Mr. PECORA. I offer for the record the copy of the letter produced by the witness. The CHAIRMAN. Let it be admitted.

(Copy of letter, Feb. 14, 1934, Whitney to stock exchange members, was received in evidence and marked “Committee's Exhibit No. 110”, Feb. 26, 1934, and the same will be found at the conclusion of today's proceedings.)

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