ADMINISTRATION OF THE STOCK EXCHANGE 461
very largely responsible for the steady elimination of bucket-
shops throughout the nation.
Semi-Annual and Other Financial Statements.—In 1922
the Stock Exchange inaugurated its policy of regularly inquir-
ing into the financial condition of its member brokerage firms.
In this connection the Constitution states :2°
Members who carry margin accounts for customers shall furnish
to the Committee on Business Conduct, upon its request, which request
shall be made not less than twice in each year, a statement of his
financial condition or that of his firm in such form as shall be pre-
scribed by said Committee.
Subsequently, there was added to this demand (referred to
in Wall Street as the Stock Exchange “questionnaire” %'), the
further requirement that the same firms should cause to be
made a complete audit of their accounts and assets, including
securities held for safekeeping. Exchange firms or members
not carrying margin accounts for customers were also called
upon annually and on demand, to report to the same Com-
mittee as to their holdings of securities for safekeeping.??
The adoption of this policy has undoubtedly proved one
of the greatest forward steps taken by the Exchange in recent
times. Insolvencies of Exchange members (see accompany-
ing Figure 59) have been reduced to very low percentage
proportions, during years when the similar percentage insol-
vencies among American national banks, among all American
banking institutions, and among American commercial firms,
have. been unusually high®®* Frequently, the operation
of the plan has prevented insolvencies on the Exchange, by
forcing its firms in sufficient season either to increase their
capital or reduce their commitments.
In 1926 the further policy was undertaken of calling upon
Exchange members to furnish to the Exchange their total net
% Constitution (Rules, Chapter XV, Sec. 1).
81 The full text of the questionnaire form will be found in Appendix XVIg
2 See Appendix XVIh.
83 See Appendix XVIi.
