A FINANCIAL INSTITUTION'S DIFFICULTIES.

Auckland Star, Volume XXXVI, Issue 12, 14 January 1905, Page 13

A FINANCIAL INSTITUTION'S DIFFICULTIES.

PLENTY SJTOW BUT LITTLE SUBSTAJVCE. LONDON, December 2. The event or the week in business circles In London has been the failure of th« London and Paris Exchange, Ltd,, an "outside broker's" establishment, which during the last two or three years has been doing an enormous business in speculative stocks and mining options. Au outside broker, it shooid perhaps be explained, is one who is not a member of the Stock Exchange, and who carries on his business unrecognised and uncontrolled by that official body. In the slang of the mono/ market, the establishment of an outside broker is known as a

"bucket-shop." The London and Paris Exchange, Ltd., was one of the largest of these bucket-shops, and the ramifications of its business were many aud varied. The firm actod as brokers for countiy people principally, and there were berweeji 50.000 and 60,000 names of clients on the books, of whom quite 0000 were permauent customers. They belonged largely to Uie smaller class of investors, such as fanners, iradesmru in provinciaJ towns, and eleigyuien. ' About 200 clerk? were employed by the firm, which occupied handsome offices in I he city, and was widely and lavishly advertised. "The offices in the basement of Baslldon House," writes one of the Stock Exchange correspondents, "had become quite a show place for countiy cousins, as well as for not a few nusopMstirated Londoners, who gnzml admiringly at tap busy sceneibe urmy of clerks poring over bis ledgers sjiK-.ad out upon rows of drbUs, while the electric light raat a glamour over all. Such a spectacle was well calculated to dazzle the unwary. To pass through the swing doors, tlanked by iuarbli* columns, name the stock' in Avbich you wished to speculate, deposit your crisp bank notes, and emerge into Moorgnte-strpet with the pleasant eousclcwenrss that under no clr-

■umsumces could you lost , more than a stipulated amomiL, while you mig-ht make :i brilliant coup-all this was so fascinatingly simple (hat the wonder id tfiat the clients tverc Dot more numerous ihan we know them to have bovn." It appears that the directors <>ft h<? l»ndon aud Paris iOxihange found themselves faced with the necessity of meeting heavy liabilities on sharrs ut nun-, and the money was not forthcoming. About iJUM.txW is required to cJejir the linn. aud the cash balance at the bank is ouly

r-Jii.oi.il>. Siiß-p the closing of tlie doon>, however. ;i client is stated to have offered

!'.n advaiiCH to the nmount of £60.000. and the dlreetois appear' t<> have hopes of ral=>!njj tbf balance. lr owes about £25,000 to members of the Stock Exchange, but Its failure is not of great importance to that body, a , ? the brokers and dealers who may be hit have made large commissions In the past, aud, in any event. £25,000 is a comparatively trivial amount in the business of the Stock Exchange. But the small speculators in the country who have bev-n dabbling iv the stock market seem likely to bum their fingers over this business.

"OUTSIDE BROKERS' " BBCOVKBY. LONDON, December 9. The London and Paris Gxeha-nge seems to have successfully tided over the crisis described in last week's letter. The suspension proved only temporary. On M.Oll--ilay uight the company issued the following ruiuoimeeuient: — "All difficulties having been overcome, the ordinary business will br resumed to-morrow.' in order to strengthen the company's position It has been decided to mate v large issue, of r> por cent, debenture bonds, redeemable in three years at 10 per rr-nt. proLnlt:iu, and secured on the whole of the '■nmpnny's assets; and 011 the personal guarantee of the managing director. Mr A. , Mormon Mandcvllle. The trustees are to be a well known banker and a chartered acrountiiut, but for the present their names are being kept a s<?<-rot. Holders of the existing debentures have expressed their willingness to late the. new bonds for those which they now hold. So part of the issue will be offered to the Kener;il public-. Already v large aniouut of the uew bonds have been taken up or guarau- , teed by v prominent City house. The company's investment stocks and securities are stated to b<; in perfect order, bat, if is pointed out. a few weeks will be necessary In which to arrange all details with customers. An official explanation has now been made of the circumstances which led to the suspension of payment by the company last week. It appeared that Mr Mandeville, on discovering that the bufci-ncas--which Is said to hare rapidly increased of late—had got ahead of the capital at the company's immediate disposal, sent a note to certain brokers to close a number of accounts before pay day. This led to the "bansing" of the shares of the Salisbury Buildings and Estate Company and of. Kaffirs Consolidated (Limited), in which the London and Paris Exchange were known to be largely interested. Notwithstanding hie confidence in the intrinsic value of those shares, Mr Mandeville appears to have been disinclined to make heavy purchases of them, not ha vine the requisite capital under bis coatroJ, at toe time, to finance them. TSie. fall In price which followed caused various rumours to be circulated, and the company's clients became nervous. It was, therefore, decided to tile a petition to wind up at once, in order to prevent a "raid" on the available assets and liquid resources. Apart from their Stock Exchange securities, the company are said to have vaiuable assets, including freehold land aud options in connection with industrial undertakings. Additional offices have been acquired on lease at Basildon House, and the directors anticipate that the business will not be permanently prejudiced by the events of the past few daj>