class of work has been the field of some of the most successful operations of these companies. The duties require experience, good credit and large financial responsibility. Acting under the authority of the court the receiver is often required for the time being to carry on a mercantile, manufacturing or transportation business. The receivership may be cancelled if the enterprise is put upon a satisfactory basis, and the property be handed over again to its owners. Or it may be neccessary to effect a sale of the property, settle the debts, and pay the balance to the owners. Sometimes, when the circumstances warrant, large advances of money are made, thereby tiding the concern over its difficulties and reestablishing it as a profitable enterprise, or saving the assets for creditors or stockholders. Often the circumstances make advisable a readjustment of corporate indebtedness, and the trust company is peculiarly adapted to the work of formulating plans, recalling outstanding stocks or bonds and issuing new securities.

SUNDRY BUSINESS AS TRUSTEE OR AGENT FOR CORPORATIONS.

It is not too much to say that the affairs of the great corporations of the present day, as well as those of the smaller ones under existing conditions, could be carried on only with the greatest difficulty, if at all, without the aid of some such financial concerns as the trust companies.

Probably the most common function of this kind is that of acting as trustee under a trust deed or mortgage securing an issue of bonds.63 In signing the trustee's certificate on the bonds, the company certifies to the regularity of the issue, and to the genuineness of the document When necessary it sees to the refiling of the instrument, although the mortgage often specifically relieves the trustee of this responsibility. It does not guarantee the value or the payment of the bond, although the public often seems to think that it does. As a matter of fact, while the form of certification varies somewhat, it never covers more than the regularity of the issue and the genuineness of the document. Most trust companies do, however, make it a point not to authenticate bonds without having reason to believe that the undertaking represented is presumably safe. Unquestionably the best companies do, and ought to, exercise the greatest care in this matter.

In its capacity of trustee under a trust deed, the trust company is charged with the duty of acting as agent and protector of the bondholders. In case of default of the company issuing the bonds, it usually has the duty of foreclosing on the property in the interests of the holders of the securities, and of exercising numerous incidental duties connected therewith.

It is often charged with the custody and management of a sinking fund, either in connection with its duties as trustee under a trust deed, or as a separate undertaking.

63 See Chapter XVI.

It acts as fiscal or financial agent for corporations of all kindsStates, municipalities, railroads, industrial concerns. It pays bonds, coupons, interest. It may take entire charge of the disbursement of dividends and interest, attending to the publication and mailing of notices, etc.

For syndicate managers, voting trusts, etc., it issues and collects calls for installment payments, and computes and distributes to the proper parties the amounts of their participations in the profits or proceeds.

It acts as depositary of cash and securities, under varying conditions. Underwriting syndicates appoint it depositary and trustee.

It is made agent to receive subscriptions to stocks and bonds, and to deliver the same when issued.

It may receive and execute for corporations any of the trusts that have already been mentioned as undertaken for individuals under private agreement.

BUSINESS AS TRANSFER AGent and RegISTRAR.*

Trust companies are very generally used as transfer agent for stocks, and as registrar for stocks and bonds. In the older financial communities the value of such services has come to be so generally recognized that securities not registered by a responsible agent are looked upon with suspicion. The historical reason usually given for the adoption of the custom of having a registrar not connected with the concern issuing the stock, was the discovery some years ago in New York that a prominent railroad president had fraudulently overissued the stock of his company many hundreds of shares. The employment of a responsible. registrar makes such a fraud impossible, for the essential function of the registrar is to see that not more than the authorized amount of stock is issued.

The transfer agent assumes the entire work of transferring the stock of a corporation-a duty requiring thorough knowledge of the laws governing such matters, and great care and accuracy in the performance of the details. The cancellation of a single certificate of stock and the issuance of a new certificate often involve the change in ownership of thousands of dollars' worth of property; yet it may be done by a few strokes of the pen.

It is often desirable to register bonds, either as to principal or as to interest, or both. Usually the trust company that acts as trustee under the bond issue also acts as registrar of the bonds. In some communities the same company is often appointed both transfer agent and registrar of the same stock. This is illogical, since the function of the registrar is to operate as a check upon any error or irregularity on the part of the transfer agent.

See Chapter XVI.

CORPORATION REORGANIZATION AND FINANCING.

Some trust companies handle a large amount of business in the reorganization or financing of corporate enterprises of different kinds. This field is one concerning which a wide difference of opinion exists among managers of trust companies as well as among the general public. There are companies which devote themselves to this business very largely, while others abstain from it absolutely, believing it not a proper field for companies which handle funds in trust.

In the consideration of the problem much depends upon the character of the financing that is to be undertaken. No well-informed person will deny that there is a field for services in this line whose legitimacy is beyond question, and whose performance involves little risk. It is likewise evident that there is a class of operations so risky that no corporation which handles the funds of others ought to undertake them. The temptation to step from one class of operations into the other is sometimes great; and this fact doubtless accounts for the prejudice that exists in some quarters against trust companies undertaking corporation financing of any kind.

When it becomes necessary for any reason to reorganize a corporation having outstanding securities, the trust company offers exceptional facilities for the work. The plan of reorganization must first be determined.. If new securities are to be issued the old ones must be called in and temporary receipts given. When the new securities are ready they must be distributed among the receipt-holders in the proper proportions-the determination of which may require careful computation. At the same time an assessment may have to be collected, or a cash or stock dividend be distributed. Fractional shares or bonds may need to be purchased or sold.

When a new corporate enterprise is proposed in any community. some one in whom the public has confidence must investigate and report, or else each prospective investor must make investigation for himself. Some one must see that the new corporation actually owns the property which it claims to have; that its title is good; that the securities which it offers to the public are correctly prepared, and that they give the purchaser a real lien upon the property; in short, that the whole proposition is legitimate and made in good faith. The services here outlined appear to be perfectly legitimate, and to involve no risk to the trust company undertaking them other than the risk assumed in accepting any responsible trust.

These services, however, constitute only the preliminary steps in the financing of enterprises. The securities are ready for sale; they must now be sold. It is at this point that the most serious differences of opinion arise regarding the attitude of the trust company. In placing the securities upon the market, the trust company may act, if it acts at all, as a mere agent for the sale and delivery of same; or it may set the

stamp of its approval upon them to the extent of recommending them for purchase to its group of customers, or to the extent of purchasing same, in its capacity of trustee, for some of its trust accounts; or it may purchase a portion of the issue for its own account. Here the trust company is clearly treading upon ground which may or may not be dangerous, according to circumstances, but which in any event requires the highest degree of honor and integrity and business judgment of the finest type.

FIDELITY INSURANCE AND TITLE INSURANCE.

Some of the States empower trust companies to undertake the business of fidelity insurance and of title insurance, but comparatively few trust companies undertake these duties. As a rule, where they do undertake them, they make such work a specialty, and confine themselves mainly to the specialty. The larger part of fidelity insurance business is done by independent bond or surety companies.

Fidelity insurance consists chiefly in becoming surety for or guaranteeing the honesty and fidelity of employees, officers and other persons holding positions of trust and responsibility. Bonds for this purpose were formerly signed by friends of the person holding such position, but the practice is rapidly growing of having such bonds executed by companies who make it their business. Beyond any question the new plan is better than the old, whether from the standpoint of the person bonded, the one signing the bond, or the security afforded the beneficiary named in the bond. The person who is required to give bond feels, or ought to feel, a delicacy about asking his friends to go on his bond. If he does ask a friend to do so, that friend must, if he complies with the request, assume for himself and his heirs a responsibility whose degree is not determinable, which may last for a number of years, and which may involve himself and family in ruin. To the beneficiary under the bond, the individual is not satisfactory as a surety, because, among other reasons, his financial ability is not always determinable with accuracy, and it may be ample to-day and nothing to-morrow. On the other hand, the company which makes a business of fidelity insurance receives compensation of a reasonable annual premium for its services, assumes the risk as a business proposition on the same general principles as the life or fire insurance company, and protects the beneficiary by a capital and financial responsibility that are known. Fidelity insurance companies are also often called upon to sign bonds guaranteeing the financial responsibility of individuals, partnerships and corporations.

A title insurance* policy is "an agreement under which the company agrees to defend, at its own expense, all litigation directed against the title insured by it, and if attacked successfully, it will pay the parties guaranteed the amount of the loss up to the full sum insured for." In short, it is an ordinary certificate of title, with insurance of the title added. This is a comparatively new business, the oldest companies hav

* See Chapter XII.

ing existed only about twenty years, but it is one which is growing rapidly. For its successful performance, a special and elaborate equipment is

necessary.

SAFE-DEPOSIT BUSINESS.*

As already noted, trust companies very generally conduct safedeposit departments. For this purpose the best companies have speciallyconstructed vaults in the preparation of which the greatest care is used to insure that they shall be absolutely proof against fire, burglars, mobs and water. In addition guards are on duty twenty-four hours a day, and there are usually automatic alarms to give notice of any trouble. For the keeping of money and valuable papers individual boxes within the main vault are rented, access to which may be had only by the renter or his authorized deputy in company with the vault attendant. For the storage of larger articles of value, vaults are provided in which space is rented by the cubic foot or yard. Many companies maintain delivery wagons, and call for or deliver valuables entrusted to their care. Coupon rooms are provided, where each customer may cut his coupons or examine his papers in absolute privacy. The large companies also provide other conveniences, such as toilet-rooms, reading-rooms, parlors, committeerooms, etc.

This department is a valuable, if not a necessary, part of the equipment of a good trust company. An increasing number of depositors feel the need of such accommodations, and much prefer to have them under the same roof as their bank or trust company. While the expense of

equipping the best vaults is great, it is not all chargeable to the safedeposit department, since trust companies need large and impregnable vaults for the safe keeping of the securities and other valuables entrusted to them in the other departments of their business.

SUPERIORITY OF TRUST COMPANIES OVER INDIVIDUALS ACTING IN TRUST

CAPACITIES

The advantages which the trust company has over individuals for the performance of the various trust duties outlined in the preceding pages are many. The following are among the most conspicuous of these

advantages:

The life of the trust company is perpetual-it will live long enough to execute the trusts that are committed to it. On the other hand, an individual to whom a trust is committed may die on the very day that he undertakes the trust. To install another individual trustee will then involve delay and additional expense-perhaps serious loss. And when it is done, there is no guarantee that he will not die, making another change necessary. Even if the individual lives, he may for various reasons resign the trust, or may become incapacitated through sickness or other cause.

See Chapter VIII.