.10. Usual methods of dividing it be assumed that a typical transaction takes place, in which a syndicate of three members buys $1,000,000 worth of bonds, and each participant agrees to take a one-third interest. Assume that the members are to try to sell these bonds to their respective clients, and that they succeed in disposing of bonds as follows: A, 500,000: B, 200,000 and C, 100,000. The syndicate is then closed out with $200,000 of bonds on hand. How shall these bonds be dis tributed ? In most of the old agreements the contract is so worded that bonds sold by any members are deemed sold for the benefit of the syndicate, and not for the benefit of the member himself. In the case. that has been assumed, therefore, A, B and C would each take and pay for one-third of the $200,000 of bonds on hand.
Sometimes the agreement provides that if any mem ber, instead of selling to outsiders, cares to withdraw his proportionate share of the property he may do so, and may take pay for it at the price it cost the syndi cate. If A withdrew one-third of the bonds according to this provision, his liability for everything but a pro portionate share of the expenses would immediately cease.
Recently more stress has been placed on. the ability of a member to help the syndicate to sell its properties. In such agreements allowance is made for the fact that certain members may be more successful in their sell ing campaigns than the others. A t.,-pical provision of this kind is as follows: Each member who has sold bonds in excess of the amount of his participation shall have his proportional amount of the unsold bonds reduced by an amount which shall be the same per cent of the unsold bonds as he has sold of the ac count in excess of his participation. The total of these reductions shall be added to the amounts of those members who have sold less than their participations, in proportion to that percentage of the account by which their sales have fallen short of their participations.
Method of settling a syndicate.—If the rule stated in the previous section is applied to the set of facts assumed above, the results given below are ob tained, which, for the sake of clearness and brevity, are tabulated: Since the amount each member would have to take up, if the amounts, were not increased or decreased on account of the amounts sold, is $66,666 2/3, and since, according to the agreement, ,A would be relieved of 16 2/3 per cent of the entire amount unsold, i.e., 16 2/3 per cent of $200,000, or $33,333 1/3, A would be required to take only $66,666 2/3 minus $33,333 1/3 or $33,333 1/3. . B and C would take, in addition
to their respective shares of $66,666 2/3, the amount deducted from A's liability, in proportion to their re spective deficiencies. That is, B and C would be re quired to take the $33,333 1/3 deducted from A's share in the ratio of 13 1/3 to 23 1/3, i.e., they would take $12,121 7/33 and $21,212 4/33 respectively. The results, so far, may be smnmarized as follows : It is unnecessary to add that the above rule, and the figures that accompany it, do not state the only methods of dividing responsibility, altho they do illus trate the agreement most frequently used.
12. 1?ights of syndicate members.—The rights of syndicate members are set forth in the agreement. They consist chiefly of the right to a share in the divi dends, or profits, and of the right to earn commis sions by helping dispose of the syndicate property. There is also the withdrawal right, already alluded to. If a syndicate member is an investor and would like to take and hold some of the securities for investment or speculative purposes, he is given the right of with drawal, i.e., the right to take the securities at cost. He saves the difference between the syndicate's cost price and the selling price. Of course Ile is entitled to no other profit, and still remains liable for his share of the syndicate expenses.
A man who frequently took part in syndicates, once characterized them as "blind pools." He went on to explain that at the termination of the syndicate, a statement of profits is given each member, but none of the details are supplied. No account is rendered. "I think if they ask for it they get it," he continued, "but they seldom ask for it. I do not think they would be allowed in the syndicate again if they did." It is undoubtedly true that a court of equity could force the managers to render an accounting, but as has been hinted, the court is seldom appealed to.
13. Famous dcals.—In the period of riotous specu lation following the Restoration, and even as late as the year 1720, England and France saw the creation of many deals, the most important of which was John Law's _Mississippi Bubble. Business men would find it interesting to study the eventful career of that famous promoter. After the change in the corpora tion laws of England, in 1720, syndicates or deals did not come into prominence until about the time of our Civil War. Since then deals have been of common occurrence; in some of them many of our big finan ciers have amassed their fortunes.