Hearing Before the Committee on Agriculture, House of Representatives, Seventy-fourth Congress, First[-second] Session...

"SEC. 4e. It shall be unlawful for any person to act as floor broker in executing any orders for the purchase or sale of any commodity for future delivery or involving any contracts of sale or contracts to sell any commodity for future delivery, on or subject to the rules of any contract market unless such person shall have been licensed by the Secretary of Agriculture as such floor broker and such license shall not have expired nor been suspended nor revoked.

SEC. 4f. (1) Any person desiring to be licensed as futures commission merchant or as floor broker hereunder shall make application to the Secretary of Agriculture, which application shall be made in form and manner to be prescribed by the Secretary of Agriculture, giving such information and facts as the Secretary of Agriculture may deem necessary concerning the business in which the applicant is or will be engaged, including, in the case of applications of futures commission merchants, the names and addresses of the managers of all branch offices and of all correspondents and agents engaged in soliciting or accepting no behalf of such applicant any orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any board of trade, and including also the names of its officers and partners, if a partnership, and of its officers, directors, and/or stockholders, as the Secretary of Agriculture may direct, if a corporation. Such person, when licensed hereunder, shall likewise continue to report and furnish to the Secretary of Agriculture the above-mentioned information and such other information pertaining to his business as the Secretary of Agriculture may require.

(2) Any person licensed as futures commission merchant hereunder shall post in a conspicuous place in each of the offices maintained by such person in the United States in which orders for the purchase or sale of any commodity for future delivery are solicited or accepted, the original or duplicate copy (issued by the Secretary of Agriculture) of such person's license as such futures commission merchant. All licenses shall expire on the 31st day of December of the year for which issued.

"SEC. 4g. If any person licensed hereunder as futures commission merchant or floor broker shall violate any of the provisions of this act, or any of the rules or regulations of the Secretary of Agriculture hereunder, or shall fail or refuse to make any report required by the Secretary of Agriculture regarding the transactions of such person, or the transactions of the customers thereof, in commodities for future delivery on any board of trade in the United States or elsewhere, or shall fail or refuse to keep the books and records pertaining to such transactions in the form and manner required by the Secretary of Agriculture, or shall fail or refuse to keep such books and records open to inspection by any representative of the United States Department of Agriculture or the United States Department of Justice, the license of such person may be suspended or revoked after notice and hearing in accordance with the procedure described in paragraph (b) of section 6 of this act.

'SEC. 4h. It shall be unlawful for any person

"(1) to conduct any office or place of business anywhere in the United States for the purpose of soliciting or accepting any orders for the purchase or sale of any commodity for future delivery, or for making or offering to make any contracts for the purchase or sale of any commodity for future delivery, or for conducting any dealings in commodities for future delivery that are or may be used for (A) hedging any transactions in interstate commerce in such commodity or the products or byproducts thereof, or (B) determining the price basis of any such transaction in interstate commerce, or (C) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, if such orders, contracts, or dealings are executed or consummated otherwise than by or through a member of a contract market; or

"(2) falsely to represent such person to be a member of a contract market, or the representative or agent of such member, or to be a licensed futures commission merchant, or the agent of such licensed futures commission merchant, in soliciting or handling any order or contract for the purchase or sale of any commodity in interstate commerce or for future delivery, or falsely to represent in connection with the handling of any such order or contract that the same is to be or has been executed on, or by or through any member of, any contract market.

"SEC. 4i. It shall be unlawful for any person to make any contract for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market unless such person shall report or cause to be reported to the properly designated officer in accordance with the rules and regulations of the Secretary of Agriculture (1) whenever such person shall directly or indirectly make such contracts with respect to any commodity, or any future of such commodity, during any one day in an amount equal to or in excess of such amount as shall be fixed from time to time by the Secretary of Agriculture; and (2) whenever such person shall directly or indirectly have or obtain a long or short position in any commodity or in any future of such commodity, equal to or in excess of such amount as shall be fixed from time to time by the Secretary of Agriculture. Such person shall also keep books and records of transactions coming within the provisions of (1) and (2) hereof, which books and records shall show complete details concerning all of such transactions, including the names and addresses of all persons having any interest therein, and shall be open at all times to inspection by any representative of the United States Department of Agriculture or the United States Department of Justice.

“ SEC. 4j. It shall be unlawful for any person to make or enter into, or be a party to as principal or agent, any contract of sale of any commodity for future delivery on or subject to the rules of any contract market, unless

"(1) such contract shall be made prior to a date to be fixed by rule or regulation of the Secretary of Agriculture, which shall not be earlier than the fifteenth day of the delivery month to which such contract relates: Provided, That the Secretary of Agriculture may fix different dates for different commodities, and if as to any commodity no date is fixed, then as to such commodity the provisions of this paragraph shall not apply; and

"(2) such contract shall require, in accordance with the rules or regulations of the Secretary of Agriculture, that the party making delivery thereon of any commodity shall furnish to the party receiving the same, written notice of the date of delivery, which notice shall be given at least three business days prior to the date of delivery: Provided, That the Secretary of Agriculture, by rule or regulation, may require longer notice of delivery as to any commodity or commodities, not exceeding ten business days; and

"(3) such contract provides for the delivery thereon of a commodity of a grade or grades conforming to United States standards, if such standards shall have been officially promulgated."

SEC. 6. Section 5 of the Grain Futures Act (U. S. C., title 7, sec. 7) is amended by

(a) striking out the word "is" after the word "board" in paragraph (a) and inserting in lieu thereof the word are";

(b) striking out the word "purpose." at the end of paragraph (a) and inserting in lieu thereof the following: purpose: Provided, That any board of trade not so located shall be designated as a contract market' if such board of trade provides for the delivery of commodities on such contracts at a delivery point or points and upon terms and conditions approved by the Secretary of Agriculture."; and

SEC. 7. The Grain Futures Act is amended by adding after section 5 (U. S. C., title 7, sec. 7) the following new sections:

"SEC. 5a. Each board of trade which shall have been designated as a contract market' under authority of this act shall

"(1) promptly furnish the Secretary of Agriculture copies of all bylaws, rules, regulations, and resolutions made or issued by it or by the governing board thereof or any committee, and of all changes and proposed changes therein,

"(2) allow inspection at all times by any authorized representative of the United States Department of Agriculture or United States Department of Justice of the books, records, and all minutes and journals of proceedings of such board of trade, its governing board and all committees, and of all subsidiaries and affiliates of such board of trade, which books, records, minutes, and journals of proceedings shall be kept for a period of three years from the date thereof, or for a longer period if the Secretary of Agriculture shall so direct, and "(3) when so directed by the Secretary of Agriculture, require the operators of warehouses in which or out of which any commodity is delivered on any contract for future delivery on such board of trade, to make such reports, keep

such records, and permit such warehouse visitation as the Secretary of Agriculture may prescribe. Such books and records shall be required to be kept for a period of three years from the date thereof, or for a longer period if the Secretary of Agriculture shall so direct, and such books, records, and warehouses shall be opened at all times to inspection by any representative of the United States Department of Agriculture or United States Department of Justice.

'SEC. 5b. The failure or refusal of any board of trade to comply with any of the provisions of this act, or any of the rules and regulations of the Secretary of Agriculture thereunder, shall be cause for suspending for a period not to exceed six months or revoking the designation of such board of trade as a contract market'in accordance with the procedure prescribed in paragraph (a) of section 6 of this act."

SEC. 8. Section 6 of the Grain Futures Act (U. S. C., title 7, secs. 8, 9, 10, and 15) is amended by

(a) striking out the first sentence of paragraph (b) and inserting in lieu thereof the following: "If the Secretary of Agriculture has reason to believe that any person has violated any of the provisions of this act, or any of the rules and regulations made pursuant to its requirements, or has manipulated or is attempting to manipulate the market price of any commodity, in interstate commerce, or for future delivery on or subject to the rules of any board of trade, he may serve upon such person a complaint stating his charges in that respect, to which complaint shall be attached or contained therein a notice of hearing, specifying a day and place not less than three days after the service thereof, requiring such person to show cause why an order should not be made directing that all contract markets until further notice of the Secretary of Agriculture refuse all trading privileges to such persons, and/or to show cause why the license of such person, if licensed as futures commission merchant or as floor broker hereunder, should not be suspended or revoked." ;

(b) striking out the words "said commission" after the words "before the " in the second sentence of paragraph (b) and inserting in lieu thereof "Secretary of Agriculture";

(d) striking out the words "as chairman of the said commission" in the second sentence of paragraph (b) after the words "to the Secretary of Agriculture";

(e) striking out the words and numerals "of section 12" after the word "penalties," in the third sentence of paragraph (b);

(f) inserting, after the word "amended" in the third sentence of paragraph (b) the following: “and supplemented (U. S. C., title 49, secs. 12, 46, 47, and 48)";

(g) striking out the word "or" after the word "commission," in the third sentence of paragraph (b) and inserting in lieu thereof the word “and”;

(h) striking out the fourth sentence of paragraph (b) and inserting in lieu thereof the following: "Upon evidence received, the Secretary of Agriculture may require all contract markets to refuse such person all trading privileges thereon for such period as may be specified in the order, and, if such person has been licensed as futures commission merchant or as floor broker hereunder, may suspend, for a period not to exceed six months, or revoke, the license of such person.";

(i) Striking out the word "commission" wherever it appears in the sixth, seventh, and eighth sentences of paragraph (b) and inserting in lieu thereof the words "Secretary of Agriculture";

(j) striking out the words "its chairman or to any member thereof " after the word "to" in the seventh sentence of paragraph (b) and inserting in lieu thereof the word "him"; and

(k) striking out the word "Code" at the end of paragraph (b) and inserting the following: Code, as amended ".

SEC. 9. The Grain Futures Act is amended by adding after section 6 (U. S. C., title 7, secs. 8, 9, 10, and 15) the following new sections:

"SEC. 6a. No board of trade which has been designated as a 'contract market' shall exclude from membership in, and all privileges on, such board of trade, any association or corporation engaged in cash commodity business having adequate financial responsibility which is organized under the cooperative laws of any State, or which has been recognized as a cooperative association

of producers by the United States Government or by any agency thereof, if such association or corporation complies and agrees to comply with such terms and conditions as are or may be imposed lawfully upon other members of such board, and as are or may be imposed lawfully upon a cooperative association of producers engaged in cash commodity business, unless such board of trade is authorized by the commission to exclude such association or corporation from membership and privileges after hearing held upon at least three days' notice subsequent to the filing of complaint by the board of trade. Such commission may prescribe that such association or corporation shall have and retain membership and privileges, with or without imposing conditions, or it may permit such board of trade immediately to bar such association or corporation from membership and privileges. Any order of said commission entered hereunder shall be reviewable by the circuit court of appeals for the circuit in which such association or corporation, or such board of trade, has its principal place of business, on written petition either of such association or corporation, or of such board of trade, under the procedure provided in paragraph (a) of section 6 of this act, but such order shall not be stayed by the court pending review.

"SEC. 6b. If any board of trade, or any director. officer, agent, or employee of any board of trade shall violate any of the provisions of this act or any of the rules or regulations of the Secretary of Agriculture thereunder, or any order issued by the commission pursuant to any provision of this act, the commission, in lieu of revoking the designation of such board of trade as a 'contract market' may, upon notice and hearing and subject to appeal as in other cases provided for in paragraph (a) of section 6 of this act, make and enter an order directing that such board of trade. director, officer, agent, or employee shall cease and desist from continuing such violation or violations, and if such board of trade, director, officer, agent, or employee, thereafter and after the lapse of the period allowed for appeal of such order, shall fail or refuse to obey or comply with such order, such board of trade, director, officer, agent, or employee shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than $500 nor more than $10.000 or imprisoned for not less than six months nor more than one year, or both. Each day during which such failure or refusal to obey such order continues shall be deemed a separate offense."

SEC. 10. The Grain Futures Act is amended by adding after section 8 (U. S. C., title 7, sec. 12) the following new section:

"SEC. 8a. The Secretary of Agriculture is authorized-

"(1) to issue to futures commission merchants and floor brokers upon application in accordance with rules and regulations and in form and manner to be prescribed by the Secretary of Agriculture; and

"(2) to refuse to issue a license to any person if such person has violated any of the provisions of this act or any of the rules or regulations promulgated by the Secretary of Agriculture hereunder for which the license of such person has been revoked; and

"(3) to suspend or revoke the license of any futures commission merchant who shall accept any order for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market from any person if such person has been denied trading privileges on any contract market by order of the Secretary of Agriculture under the provisions of paragraph (b) of section 6 of this act and the period of denial specified in such order shall not have expired; and

"(4) to fix and establish from time to time fees and charges for the issuance of licenses and renewals thereof and for copies, not to exceed $10 for each such license, renewal, or copy; and

"(5) to make and promulgate such rules and regulations as, in the judgment of the Secretary of Agriculture, are reasonably necessary to effectuate any of the provisions or to accomplish any of the purposes of this act; and

"(6) to communicate to the proper committee or officer of any contract market and to publish, notwithstanding the provisions of section 8 of this act, the full facts concerning any transaction or market operation, including the names of parties thereto, which in the judgment of the Secretary of Agriculture disrupts or tends to disrupt any market or is otherwise harmful or against the best interests of producers and consumers."

SEC. 11. Section 9 of the Grain Futures Act (U. S. C., title 7, sec. 13) is amended by:

(a) striking out the word "section" and the numeral "4" and inserting in lieu thereof the following: "section 4, section 4a, section 4b, section 4c, section 4d, section 4e, section 4h, section 4i, or section 4j";

(b) inserting after the comma following the word "act" the following: "or who shall manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any board of trade, or who shall corner or attempt to corner any such commodity,"; (c) striking out the words "said section" after the words "mentioned in " and inserting in lieu thereof the words "section 4 of this act"; and

(d) inserting after the word "deliver" the words "or cause to be delivered ".

SEC. 12. If any provision of any section of the Grain Futures Act shall be held invalid by reason of any amendment thereof by this act, then and in that event such section, in its original form without amendment, shall continue in force and effect. No proceeding shall be abated by reason of any such amendment, but shall be disposed of pursuant thereto.

SEC. 13. This act shall take effect ninety days after the date of its enactment. The CHAIRMAN. I will state for the benefit of those who may be interested that in past years we have had rather full hearings on the various propositions involved in this bill. We had a rather full hearing again last spring on most of the features in the bill, and the committee feels that those hearings, which are available in printed form, cover substantially all of the proposed features in the bill before us except the one feature which has not been covered, that of control or licensing of floor brokers, and we have had no specific hearings for floor brokers who would be directly affected. That was commented on from time to time, and we decided to devote one morning's session to that particular subject.

A number of witnesses have requested permission to be heard. I made the request the other day that they choose two or three, or agree on those who would represent them in a full discussion, which would permit more time. Nevertheless, we have several here, and if we are to hear the entire group it will be necessary to limit them to about 10 minutes each.

We will hear Mr. Wickham, chairman of the grain committee on national affairs.

STATEMENT OF THOMAS Y. WICKHAM, CHAIRMAN OF THE GRAIN COMMITTEE OF THE NATIONAL ASSOCIATION, CHICAGO, ILL.

Mr. WICKHAM. Mr. Chairman, so far as we are concerned we will stay within the time allotted.

The CHAIRMAN. Very well.

Mr. WICKHAM. Mr. Chairman and members of the committee, my name is Thomas Y. Wickham. I am appearing as chairman of the grain committee on national affairs. That is the National Association of Grain Exchanges, connected with the Grain Association of San Francisco and the National Grain and Feed Dealers' Association. The latter, as the name implies, is a national association of the local grain and feed dealers of the Nation.

As I understand it, the hearing this morning is to be confined to the question of licensing floor brokers. The time allotted us will be directed entirely to that point. However, if the committee is willing, I should like to reserve just a moment at the end of the hearing to urge upon you the necessity of a full hearing, covering every phase of a matter as important as this.

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Hearing Before the Committee on Agriculture, House of Representatives ...