of the sinking fund and on the duties of the trustee with respect thereto. The variety of possible duties of the trustee is so great that it is useless to suggest a basis for this fee. Each case must be determined separately. Usually it is a question of striking a bargain with the proposed trustee.

And lastly, another fee is frequently and properly charged upon the maturity of the issue. This fee is figured on a percentage basis, often % per cent; sometimes where the issue is small and the denominations are small, the fee will be at the rate of 14 per cent. Another method of compensation upon the maturity of an issue is to require the corporation to deposit the principal amount of the issue thirty days in advance of the maturity date without interest. In addition to the fees that can be earned by the bank or trust company, it should be remembered that a deposit account will usually be opened with the institution by the corporation for which it is acting as trustee. The business is decidedly lucrative and in view of all the financing that is likely to be done in the near future, it can be truthfully said that the surface has as yet hardly been scratched.

REVIEW QUESTIONS

1. What is it that determines the obligation or responsibility of a trustee? In such an arrangement, what title does the trustee hold? How is the ownership of personal property in the hands of a trustee evidenced?

2. Why are banks and trust companies better qualified to act as trustees than individuals?

3. What is the object of a trust agreement?

4. What is the instrument that creates such an agreement generally

called? How are these classified? What is the function of a bond? What is a first mortgage bond? What is a debenture bond? What is an income bond?

5. What is stock? How does it differ from a bond? What is the

object of a trust agreement?

6. Where a bank or trust company is asked to serve as trustee for a concern, what are the most important questions to be considered before acceptance?

7. What papers are to be filed with the proposed trustee by the corporation that proposes the loan?

8. If the preliminary investigation has been satisfactory, what should the trustee do next? How are the separate bonds or notes compared?

9. What is a sinking fund? When should it be used?

10. What is the usual provision as to foreclosure? What is the purpose of a protective committee?

II. In paying bondholders, what happens if the corporation is solvent on due date of issue, but not at some later date?

12. What are the fees of a trustee?

CHAPTER LXI

THE TRANSFER AGENT AND REGISTRAR

§ 526. Definition of Transfer Agent

A transfer agent is one who records the transfer of stock ownership. Stock, as has been stated, is the evidence of ownership in the assets of a corporation. Stock is not usually redeemable as bonds are, but if at any time the corporation should dissolve, then the stockholders would share in the net assets of the corporation in proportion to their holdings. In a sense they are partners in a business, but under a certain statutory form which limits the liability, and with certain other exceptions to the usual partnership agreement. The various states have different statutes setting forth the requisites for a corporation, but in all cases the ownership of the corporation is evidenced by stock certificates which are in the hands of individuals.

One of the advantages of the corporation organization is the fact that although you may buy stock today, you may sell it at any future time to someone else who wishes to be a stockholder of the corporation. You can accomplish this by selling your stock and transferring the certificate to the purchaser. It is the duty of the transfer agent to cancel the old certificate and issue a new certificate in the name of the new owner and to keep an accurate account of all transfers so made. The procedure of making the transfer can best be explained by examining the following individual case :

A is the holder of a certificate of stock made out in his name for 100 shares of the common stock of the Hollis Iron Company. He desires to sell 50 shares to B. In order that

B's ownership may be recorded on the books of the company, A or B must present the certificate of stock to the transfer agent, with the transfer of 50 shares to B duly endorsed on the back thereof, and with an authorization to transfer 50 shares of stock to B on the books of the company. The transfer agent will then take the original certificate for 100 shares, cancel it, and issue two certificates each for 50 shares, one in the name of A and one in the name of B. Thus 50 shares of A's holdings have been transferred to B and when the proper transfer entries are made it will appear on the books of the company that instead of owning 100 shares of stock, A owns only 50 shares and B owns 50 shares. The law of most states prescribes that each company incorporated in the state shall maintain a transfer record and stock ledger. In New York, certain specified requirements must be included in the make-up of these books. For the information of the company and the ascertainment of the rights of its stockholders, it is imperative that these records be accurately kept.

§ 527. Who May Act as Transfer Agent

A corporation may act as its own transfer agent, and in the great majority of the smaller corporations, the corporation does act for itself in this capacity. The work must be accurate; it requires a set of books consisting of a transfer record and ledger to be kept. The consequence of any carelessness in the maintenance and operation of these books is likely to be serious. In other words, the handling of the stock transfers and the entering of them on the transfer books is entirely different from any of the ordinary work in which the corporate employees are regularly engaged.

When the company is of any substantial size, it is considered more satisfactory and better business practice to have a bank or other corporation act as transfer agent. However, some of the largest corporations, such as the United States

Steel Corporation, the New York Central Railroad Company, and others, maintain their own offices for this purpose.

Banks and trust companies may legally act as transfer agents and there are companies specially organized, whose entire business is to act as transfer agents and registrars for other corporations. Any corporation which is listed on the New York Stock Exchange is required to have a bank or trust company act as its registrar. It may act as its own transfer agent but cannot act as both its own transfer agent and registrar. It is also true that one person or corporation cannot act in the joint capacities of transfer agent and registrar for corporations whose stock is listed on the New York Stock Exchange. This rule does not apply to corporations whose stock is not listed.

§ 528. The Advantages of an Outside Corporation as Transfer Agent

The duties of a transfer agent are technical and require the skill and supervision of trained officials to perform them correctly. Among the many duties of the transfer agent are some which require a knowledge of statutory provisions relating to stock transfers. All of the work is detailed and requires accuracy, as will be seen further on in this chapter. The work is of an entirely different nature from the ordinary routine business of the corporation. It is therefore advantageous to have an outside corporation perform these duties.

§ 529. Acceptance of Agency

Before a bank or trust company should accept either a transfer agency or a registrarship, careful investigation should be made as to the personnel of the corporation making the application, the credit standing of the individuals composing the personnel, their previous history, and the previous history of the corporation itself. The examination would include also