to make these transfers that are so authorized, and to prevent those that are unauthorized; and for every breach of this obligation it is legally liable to the parties injured for the damage it thus inflicts."

§ 72. Implied Power of Bank to Act as Transfer Agent. In an early Pennsylvania case a very interesting review is made to determine long in advance of the express conferring upon trust companies of the power to act as transfer agents, whether it was within the implied power of one bank to act as transfer agent for another bank. There was evidence submitted that to accept such an agency was "a usual and accustomed contract among banks, that maintain general business relations with each other." The opinion speaks of this as a usage of business, saying: "Such usages spring out of necessities and are the best evidence of them." And: "As the customs and usages of trade are part and parcel of every mercantile contract, so a course of uniform. usage, in favor of a particular course of business, prevailing among all banks, foreign and domestic, known to every business man, never called in question by government, never repudiated by stockholders, is stringent evidence of such a course being within the necessary implications of all bank charters." The opinion goes on to mention the existence of such relations between many Philadelphia banks and banks of other cities, and similarly between New York banks and banks of other cities.

I might add that in view of the usage among banks for those at the money centers of this country to be the correspondent banks of those elsewhere located and the right of the latter to sell to their customers, drafts, known as exchange, upon their correspondents, it would

3. Bank of Kentucky v. Schuylkill Bank (1846), Pars. Eq. Cas. (Pa.) 180.

seem well within the implied power of the banks upon which the exchange is drawn, that the drawers of such bills should satisfy them as to strict regularity in their stock issues. To have exchange on a correspondent bank refused payment not only would injuriously affect the drawer, but also the credit of the drawee bank. It was necessary, indeed, that the credit of all such banks should, as far as possible, be like the reputation of Caesar's wife above suspicion.

The transition from reasoning of implied power to the conferring of express power to trust companies or other corporations authorizing them to become transfer agents and registrars for other corporations was easy and natural.

§ 73. Implied Power in Banks to Create Transfer Agencies Not Sufficient for Business Necessities. Express Power of Trust Companies. The arrangements between banks of which I have just spoken, while properly held to be within implied power and of salutary effect, have their evident limitations. When business of the country took on more and more a corporate aspect, and especially all great movements had behind their promotion, furtherance and achievement, corporate agencies, it was but a safeguarding of the public as the investor in these agencies, that they should have the opportunity to prove the regularity of their securities through expressly authorized financial institutions of known responsibility.

Though individuals may act as transfer agents and registrars, there are sufficient reasons why these duties should not be committed to them. The important obligations assumed to the investing public, to the corporation represented, and to its stock or bondholders, justify the

confinement of these functions to corporations that are subject to departmental supervision. The value of these services is negligible unless performed by those whose financial standing is commensurate with the responsibilities assumed.

§ 74. Possibility of Compelling Corporations to Authenticate Their Securities Through Independent Sources. It is true that, though many corporations have not resorted to this means of accrediting their securities, it appears to me to be well within the police powers of the state to require that they should do so. As it is, there might arise against a corporation failing to resort to a presumptively disinterested agency for proof of the fact that it has not by fraud, or inadvertance or mistake exceeded its power in so vital a matter, an inference, which would lead a prudent investor to investigate for himself. What are known as "Blue Sky" laws, enacted in several of the states, are examples of attempts by the police power in the direction of assuring the proper issuance of securities. These laws were sustained by the only state authorities* yet appearing. Adverse ruling as to their constitutionality, in federal district courts, principally upon the ground that they violate the federal commerce clause, was reversed by the United States Supreme Court."

§ 75. Transfer Agent Defined. While I am on the point of a trust company under conferred power acting as transfer agent for another corporation, this does

4. Ex parte Taylor (1914), Fla. -, 66 So. 292; State v. Agey, 88 S. E. 726 (N. C.).

5. Alabama & N. O. Trans. Co. v. Doyle (1914), 210 Fed. 173; Wm. R. Compton Co. v. Allen (1914), 216 Fed. 537; Bracey v. Darst (1914), 218 Fed. 482; Geiger-Jones Co. v. Turner, 230 Fed. 233, etc.

6. Hall v. Geiger-Jones Co. (No. 438, 439 and 440, Oct. Term, 1916), Merrick v. Halsey & Co. (No. 413, Oct. Term, 1916), and Caldwell v. Sioux Falls Stock Yards Co. (No. 386, Oct. Term., 1910).

not preclude looking for definition elsewhere. Indeed just as we get from the common law the meaning of common law terms in the legislation of our federal government, which itself has no common law, so we may get from the usages of law preceding such conferring of power the meaning of terms employed therein.

Thus I refer again to Bank of Kentucky v. Schuylkill Bank, supra, where I find a transfer agency spoken of as follows: "What is a transfer agency? It is a very harmless thing. It amounts to nothing more than the witnessing of the conveyance by one person to another of personal property, viz: stock of an incorporated company: And in this case also to furnishing the purchaser a certificate of ownership of such stock, on the surrender of a previous certificate of like character held by the seller. This is a very simple business, involving little or no risk or hazard, requiring nothing but ordinary care and fidelity in its performance."

This strikes me as quite an inadequate description of what might be the full measure of the responsibility resting on a statutory transfer agency. If only it saw to the exchanging of one share of stock for a purported share, there would be little reason for its existence. If, however, back of the purported share there is the duty to ascertain whether it is regular, its judgment must or not allow it to be transferred to another. This would involve a running back of the present alleged title to the purported share to its source, from the abstract, so to speak, of the title as shown by the agent's records or other means, if these are incomplete. If it allows the transfer this should be deemed equivalent to a represen

7. Standard Oil Co. v. U. S. (1911), 221 U. S. 1, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann Cas. 1912 D 734.

tation by it that the new owner is, not only apparently, but really the record owner of a validly authorized share of stock in the corporation professing to have issued it.

8

In addition to all this a transfer agency ordinarily should see that the stock proposed to be transferred to another is represented by the true owner and his name is not forged. Thus it was held in an English case, where the stock of a registered holder in a joint stock company was left with her broker and he forged her name to the transfer thereof, issuance of a new registered certificate to the supposed purchasers made the company liable to the former holder and it was made to restore her name to the register. It was further held that the giving of the new certificate amounted to “a declaration by the company to all the world that the person in whose name the certificate is made out * is a shareholder in the company."

*

It is easily to be thought that this result could not be avoided by a corporation using a trust company for its transfer agent and the latter ought to be responsible to its employer." It has been expressly held that a purchaser of certificates of stock need not look back of the last registry of transfer.10

§ 76. The Terms "Registrar" and "Registered" Defined. A "registrar" records transfers by crediting the total authorized issue, and debiting securities issued and outstanding. The object is to safeguard against a total debit in excess of the total credit or in other words to prevent an over-issue. The transfer agent makes the transfer and issues the new certificate. The new certificate, the old certificate and any separate proofs and

8. In re Bahia & S. F. R. Co. (1868), 3 Q. B. 584.

9. See, also, Machinists' Nat'l Bank v. Field (1879), 126 Mass. 345. Winter v. Montgomery, G. L. Co. (1889), 89 Ala. 544, 7 So. 773.

10.