interpreting regulation providing that a dealer is one “regularly engaged in the purchase of securities and their resale to customers” (emphasis added) (quoting Treas. Reg. 45, art. 1585 (promulgated under Revenue Act of 1918))
How later courts described this case
- interpreting regulation providing that a dealer is one “regularly engaged in the purchase of securities and their resale to customers” (emphasis added) (quoting Treas. Reg. 45, art. 1585 (promulgated under Revenue Act of 1918))
Written by the judges who cited it.
The opinion
L. HAND, Circuit Judge
(dissenting).
I do not believe that we ought to decide this case alone by the verbal correspondence of the facts to the regulation. I agree that the bank sold some of its securities to “customers” at a “regularly established place of business,” was ready to sell all, and that in buying it had the possibility of such sales in mind. However, it did not prove how large a proportion of these it sold each year, though the facts were all in its hands. Rather it contented itself with general statements which throw no light on that question. An individual may do a business in securities with customers and he may combine with it trading on exchanges and holding securities for investment. I should not call him a merchant as to all his securities if the proportion he sold to customers was trivial. Rather I should say that the sales to customers were a side-line, as it were, of the general business.
It is eertainly curious when one examines the schedules here in evidence that by far the greater part of the supposed sales are of those securities which matured in the year in question. My brothers say that they might have been sold notwithstanding. So they might, but I submit that the bank ought to •have shown that they were. If we do not so assume the sales may have been a trifling part of the transactions. Even as to these the bank does not tell us how many went to customers, how many were sold on the exchanges. If it wished to come within the regulation, it ought to have been more specific.
Certainly it would not be enough to show that a bank was ready to sell anything which it held; most people are. One cannot practically apply the regulation without knowing the proportion between what is held and what is sold to customers. It will not do to say that any merchant may have to hold over unsalable securities; this was a steady business and there is no reason to assume that these were sluggish years. Moreover, the bank had other quite adequate reasons than sales to customers to retain such large amounts. Its deposits had to be.invested anyway and some of the securities required of it were prescribed by law. I can see no more in its proof than that it bought with an eye to possible resales and that it made an undisclosed number of such resales. I cannot think that this was enough.