§ Order for Second Reading read.
§ MR. LEEMAN,
in moving the second reading of this Bill, said, that he would 1135 in the first place remind the House that last year he brought in a similar Bill, which, however, applied to all joint-stock companies; but that upon the suggestion of the hon. Member for Grimsby (Mr. Fildes) he consented to limit its operations to banking companies, and the Bill now before the House was limited in the same way. The broad ground upon which he asked the House to legislate in the matter was that bank shares, being themselves the creation of Parliament, having attached to them by Parliament various onerous conditions, and having no existence other than that which Parliament had given them, the House would, if it found that circumstances had occurred which rendered it necessary to protect the shareholders in these companies, afford them that protection with the same readiness as it imposed the conditions. The Acts under which joint-stock hanks now existed dated back to 1826. By the Act of that year the proprietors were subjected to liabilities extending over three years after they had ceased to be members of the company. In 1844, it appeared to Sir Robert Peel to be desirable for the public interests that further restrictions should be imposed, and it was accordingly determined that there should be a registration and publication of the names of all proprietors of joint-stock hanks. Since that time many new joint-stock banks had been established, and there were now 120 such banks in England, and twenty-five in Scotland and Ireland. The shareholders in these concerns constituted a very large portion of the middle classes of the country. In 1866 there were no less than 51,000 persons in England and Wales registered as the holders of shares in joint-stock banks, and this number included persons in every grade of life. These persons had, for the most part, become shareholders not as mere speculators, but with a view to a safe and permanent investment, and they were the persons contemplated by Sir Robert Peel as affording to the public a substantial guarantee for the debts of the companies. The Stock Exchange of London was a self-constituted confederation of brokers and parties who took upon themselves the conduct of the transfer of shares in various companies, and they put out the daily list which formed the barometer which marked the fluctuation in the value of shares from day to day. The Stock Exchange was composed of many highly honourable men, who had con- 1136 ducted the business with honour and credit; but there were persons upon the Stock Exchange who, during last year, permitted themselves to be parties to transactions which brought ruin upon hundreds of innocent persons who held shares in various banks. It was a matter of notoriety that millions of stock were made the subject of pretended sale from A to B, which actually did not result in half-a-dozen registered transfers; and these transactions were carried on by persons not possessing a single share in the company the shares of which they professed to sell. It was found that on one single day there was no less than sixty-four different joint-stock companies, in which persons who had contracted to purchase shares gave notice to "buy in" against the person who had professed to sell. A having entered into a contract with B to sell what he did not possess, sufficiently alarmed those who did hold shares to induce them to part with them; and this was nothing less, in his opinion, than a swindling transaction. He did not doubt that the House would endeavour by some mode to put an end to such a state of things. The first thing done by these freebooters—as they had been correctly termed by the public press—was, immediately after having entered into a contract of this kind, to take means to depreciate the stock of which they professed to make a sale. With regard to two or three banks the shares went down; but no particular injury was done to the general public. This course of proceeding was carried forward against some of the most stable companies in the country. One mode of operation was to send anonymous letters to the depositors to induce them to withdraw their deposits, and they also sent anonymous letters to shareholders in different parts of the country advising them to draw out or sell. In the case of one of the soundest banks in the metropolis a large number of letters of this class were sent to shareholders in the country, all of which were in the same handwriting, and all to the same effect—namely, "Sell bank shares at once. From a Friend, June, 1866." These were sent to almost every county where the bank had shareholders; and the same system had been carried on with regard to other banks. The effect of these letters was to induce many timid persons to part with their shares at prices far short of their true value, and to bring an irreparable loss upon a great number 1137 of shareholders. The whole press of England denounced the system, and the Committee of the Stock Exchange was called upon to take some course which would put an end to such proceedings. A large number of members of the Stock Exchange united in requesting the Committee to adopt some means for the prevention of the evil; and the Committee, which consisted of thirty members, met for the purpose, but came to a resolution, by fifteen to twelve, that it was not expedient to make any alteration in the mode of dealing with joint-stock shares. A number of gentlemen, well known in the City, were so dissatisfied with this result that they presented another memorial, and again the matter was discussed, and the former decision was confirmed, with the slight alteration that instead of ten days for giving the name, the time should in future be seven. A man professing to sell shares on the Exchange by sale note had till the next settling day, a period of fourteen days, before any other step could be taken, and he was entitled to ask for another ten days before handing over the name of the purchaser; so that he had twenty-four days for his operations, and in the interval he sent forth letters of the character already described. The alteration made by the Stock Exchange would be no alleviation whatever of the evil. The Committee of the Stock Exchange were asked to make a by-law by which it should be incumbent upon the seller when he signed the sale note to give the broker the numbers of the shares which he contracted to sell; and in his opinion nothing could be more reasonable than such a condition. There would be no difficulty whatever in complying with it. At Liverpool the brokers, departing from the course pursued by the London Stock Exchange, had refused to sell any shares of a joint-stock bank unless the seller gave them the numbers, In France a purchaser could call upon the seller for the stock immediately. [A MEMBER: So he can here.] If anyone had called upon these pretended sellers for the stock, there would have been instantly an end to the transaction. The Stock Exchange had assumed to itself the power of making bylaws and regulations which as customs had the force of law; but they had refused to interfere in this case, and it was only by the interposition of Parliament on the part of boná fide proprietors of banks that it was possible to put an end to the abuse to which he referred. For this reason he 1138 proposed that all contracts for the sale or transfer of shares in joint-stock banks should be void unless such contract should be in writing, and should set forth and designate the stock or shares by the numbers by which they were distinguished in the books of the company. The panic of which these persons took advantage had passed away; but another might come, and the present, therefore, was a favourable moment for careful legislation on the subject. He was surprised that his measure was to be opposed, and particularly that its rejection was to be moved by the Gentleman who last year proposed to limit it as it was now limited—namely, to joint-stock banking companies. He did not think anyone would venture in that place to contend that there was no difference between a bank share and any other article with regard to which time-bargains were customary, and he was sure that if shareholders in banks were to continue under the obligations which Parliament had imposed upon them, the House would not refuse them the protection which they required.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Leeman.)
§ MR. FILDES moved that the Bill be read a second time that day six months. His assent to the second reading of the Bill of last Session ought not to preclude him from opposing it now, and further experience and thought upon the subject had brought him to the conclusion that this Bill would be rather adverse to the interests of shareholders than in their favour. The fact that all the letters to which the hon. Gentleman (Mr. Leeman) had referred were in one handwriting, proved that the evil complained of was not the result of a wide-spread conspiracy; and he believed that if this Bill passed it would render the shares of joint-stock banks less current in the market, and diminish their value as a marketable commodity. It was, in fact, a re-enactment of Sir John Barnard's Act, which, while it remained on the statute book, was wholly inoperative, while it afforded a convenient shelter for rogues to avoid their contracts under, and it was accordingly repealed in 1860 by an Act brought in by the right hon. Member for South Lancashire. Sir John Barnard's Act simply rendered all transaction in the nature of time bargains void, whereas the present Bill made any persons entering 1139 into such transactions guilty of misdemeanour, and punishable accordingly. If it were to be laid down that selling that which the vendor did not possess was a misdemeanour, of what nature were the advertisements inserted in the daily papers by the Admiralty, asking persons to send in tenders for the supply of beef, &c., for the use of the army or navy? It could scarcely be supposed by the authorities at the Admiralty that the persons who sent in such tenders were in actual possession of the goods they undertook to sell, and yet it would be most unfair to stigmatize them as swindlers. He would recommend the House to consider most carefully before they legislated upon a subject like this. The freer the market was, the better it would I be for both vendors and purchasers; and in the interests of the public, and on the ground that every prohibitory principle in the making of contracts was bad in itself, he would ask the House to read the Bill a second time this day six months.
§ MR. ALDERMAN LUSK,
in seconding the Amendment, opposed the measure on the broad ground that the less legislative interference there was with trade, the better it would be for the interests of the public. Did hon. Members think that the public would have been benefited by the bolstering up of the unsound institutions that fell to the ground last year? Most of the establishments that stopped during the panic had lost all their paid-up capital, and were trading upon credit, and when that credit failed, they fell to the ground as a matter of course, and any legislative interference that might have propped them up for a short time longer, would have inflicted additional injury upon the country. He saw no reason why he should not purchase a cargo of wheat which had not yet arrived, nor why he should not be at liberty to sell that cargo before it had actually come into his possession, or why he should not sell even that which he had not yet bought, if he liked to take the risk of the market. The best precautions against the conspiracies which the Bill was intended to meet, were for people not to put their money into establishments of which they knew nothing, and for bankers to keep their capital within reach by investing it in convertible securities. By good management bankers could defy all the "bears" of the Stock Exchange.
§ Question proposed, "That the word 'now' stand part of the Question."
§ MR. GOLDNEY
thought that the Legislature having interfered with trade to the extent of rendering shareholders in unlimited joint-stock companies liable for three years after they had disposed of their shares, and also compelled that there should be a registration of shareholders, it should now further interfere to protect the property of those shareholders from being; unwarrantably depreciated by unprincipled speculators. Under the present law the stockbrokers might deal with the shares of any company to any extent, without rendering themselves liable to any of the company's debts, and without relieving the shareholders of any liability to the public. Sir John Barnard's Act applied to the public stocks, and not to shares.
§ SIR FRANCIS GOLDSMID
said, that Sir John Barnard's Act prohibited time; bargains as pernicious things; but it was found impossible to put its provisions in force, and time bargains continued to be made as freely as though the Legislature had never prohibited them. This should teach the House that legislation of this description must be inefficacious, and if the present Bill were agreed to the result would be the same. If shareholders were so silly as to be frightened by anonymous letters into disposing of their shares at low prices, they must take the consequences. The real and only proper protection for the public must be found in investing their money in concerns that were known to be honestly conducted, as in the absence of this unreasonable panics must always occur.
§ MR. ALDERMAN SALOMONS
thought that the hon. Member for Chippenham (Mr. Goldney) was mistaken when he said that shareholders in unlimited companies were liable for three years after they had got rid of their shares. He believed their liability ceased at the end of the first year. Perhaps the Solicitor General would give the House some information upon this point.
THE SOLICITOR GENERAL
was not able to answer the hon. Member's question off-hand; but believed that the liability of the shareholders in unlimited companies 1141 ceased one year after they got rid of their shares.
§ MR. NEATE moved the adjournment of the debate until Tuesday next. The hon. Member who had introduced the Bill had been somewhat taken by surprise by the objections that had been raised to the Bill, and that it was desirable that a question of such importance should be further discussed before the House pronounced an opinion upon it.
§ Debate adjourned till Tuesday next.
§ House adjourned at ten minutes before Six o'clock.