US SUPREME COURT DECISIONS

While a broker who carries stocks for a customer on margin may not be strictly a pledgee at common law, he is essentially a pledgee and not the owner of the stock. Markham v. Jaudon, 41 N.Y. 235, approved. Neither the right of the broker to repledge stock carried on margin for a customer nor his right to sell such stock for his protection when the margin is exhausted alters the relation of the parties, is inconsistent with the customer's ownership, or converts the broker into the owner of the stock. chanrobles.com-red

Page 209 U. S. 366

A certificate of stock is not the property itself, but the evidence of the property in the shares, and, as one share of stock is not different in kind or quality from every other share of the same issue and company, the return of a different certificate, or the right to substitute one certificate for another of the same number of shares, is not a material change in the property right held by the broker for his customer.

A broker who turns over to a customer, upon demand and payment of advances, stock which he is carrying on margin for that customer, or certificates for an equal number of shares, does not make the customer a preferred creditor within the meaning of § 60a of the Bankrupt Law; in the absence of fraud or preferential transfer the broker has the right to continue to use his estate for the redemption of pledged stocks in order to comply with the valid demand of a customer for stocks carried for him on margin.

A payment by the broker to a customer on account of excess margins to which the customer is entitled and which is taken into consideration when the account is finally closed held, under the circumstances of this case, not to be a preferential payment within the meaning of 60a of the Bankrupt Law.

147 F.6d 9 affirmed.

The facts are stated in the opinion. chanrobles.com-red

Page 209 U. S. 371