In this action by a stockholder of Tide Water Associated Oil Company brought under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78p (b),1 to recover on Tide Water’s behalf *788short swing profits alleged to have been realized by Joseph A. Thomas, a director of Tide Water, and by Lehman Brothers, a partnership of investment bankers and stockbrokers, of which Thomas was a member, the complaint was dismissed as against all the partners other than Thomas, after a trial by the court without a jury, and judgment was entered against him for only $3,893.41 and costs. The trial judge computed the profits of Lehman Brothers at $98,686.77 but refused to direct judgment against Thomas for more than the amount which was, despite his claim that he had received no part of the profits, found to have been “realized by him.” The method of computing the profits was also matter of dispute between the parties. Plaintiff and Thomas have filed cross-appeals. The opinion below is reported in 173 F.Supp. 590.
On August 5, 1954 Thomas, then a partner of Lehman Brothers, became a director of Tide Water. Although he succeeded John Hertz, also a partner of Lehman Brothers, Judge Dawson, after a careful and comprehensive review of the testimony, found that “the invitation to join the Tide Water Board was upon the initiative of Tide Water.” He also found “there was no evidence that the firm of Lehman Brothers deputed Thomas to represent its interests as director on the board of Tide Water.”
On September 17, 1954 public announcement was made in the Wall Street Journal that Tide Water was considering a proposal to allow shareholders to exchange common stock for a new dividend-paying preferred stock; and on October 8, 1954 it was announced in the Wall Street Journal that such a proposal had been approved by the directors. Immediately after this last announcement and on the same day Lehman Brothers, “acting solely on the basis of Tide Water’s public announcements and without consulting Thomas with reference thereto,” decided to purchase 50,000 shares of Tide Water common stock for the purpose of converting them into the new preferred stock and selling the preferred stock to institutional investors. Thomas had provided no confidential information whatever; and he did not even know the transaction concerning the 50,-000 shares of Tide Water stock was under consideration by the Portfolio Committee of Lehman Brothers until the sales slips appeared upon his desk, after the first few thousand shares had been purchased. In response to his inquiry about this he was told that 50,000 shares of Tide Water common were to be bought, converted into preferred and sold. Immediately thereafter Thomas instructed the firm controller “to exclude me from any risk of the purchase or any profit or loss from the subsequent sale and to take the necessary steps to carry out my instructions.” At a meeting of the partners the following Monday he told the other partners that he wanted them to know that he was “not a part of this Tide Water transaction at all,” and they agreed. He later filed SEC Form 4 from time to time setting forth all the facts required to be reported, explaining that these were “transactions and holdings of Lehman Brothers a partnership of which I am a member. I have previously waived all interests in a total of 50,000 of these shares.”
Between October 8, 1954 and November 15, 1954 Lehman Brothers purchased the 50,000 shares of Tide Water common stock for $1,330,800. Pursuant to the contemplated plan of recapitalization, Lehman Brothers on December 8, 1954 exchanged its 50,000 shares of common stock for 50,000 shares of a new preferred stock issued by Tide Water. Between December 9, 1954 and March 8, *7891955 Lehman Brothers sold its 50,000 .shares of preferred stock for $1,361,186.-77. Out of the profits on this series of transactions within a period of six months Thomas received nothing, as his share of the partnership profits was calculated in accordance with his instructions to the firm controller and his oral agreement with his partners to the effect that he was to be cut out of the Tide Water venture.
The Claim Against Lehman Brothers
Plaintiff argues that judgment for the full amount of $98,686.77 should have been rendered against Lehman Brothers. On this phase of the case the contentions of the parties revolve about the decision of this Court in Rattner v. Lehman, 2 Cir., 1952, 193 F.2d 564, 566. While plaintiff does not state in so many words that he asks us to reconsider our rulings in that ease, such is the purport of much that is argued in plaintiff’s briefs, and I shall assume that the contention is: (1) that the decision in Rattner is unsound and the case should be overruled; and (2) that this case is distinguishable on the facts from Rattner.
In that case John D. Hertz, a partner of Lehman Brothers, was a director of Consolidated Vultee Aircraft Corporation. The firm had made short swing profits on the purchase and sale of Consolidated Vultee common stock. Of these profits Hertz received $806.62 which he turned over to Consolidated Vultee. We refused to hold Lehman Brothers liable for the profits realized by the firm on the ground that Section 16(b) “contains no provision requiring the partners of a director to account for profits realized by them.” In answer to the argument that this leaves a loophole in the law Judge Swan, writing for the court, observed that the omission of any provision for such liability “was intentional,” as the legislative history of Section 16(b) indicated that a clause in the earlier drafts imposing such liability had been “eliminated from the statute as finally enacted.” I feel bound by this ruling, especially since it has been in force for some eight years and the Congress has not seen fit to amend the statute; and Judge Swan and I vote to affirm the judgment in favor of Lehman Brothers on the authority of Rattner.
The alleged distinction between this case and Rattner on the question of the liability of the partnership is based upon a dictum by Judge Learned Hand in his concurring opinion in Rattner, to the effect that he agreed that Section 16(b) did not apply, “but I wish to say nothing as to whether, if a firm deputed a partner to represent its interests as a director on the board, the other partners would not be liable.” Plaintiff in the case before us argues that there is ample proof that director Thomas was deputed by Lehman Brothers to represent its interests as a director on the board of Tide Water; but the trial judge states that he finds no such evidence in the case.
To begin with, Judge Swan and I do not agree with this dictum, as we must take Section 16(b) as we find it, and we do not see how any sort of deputizing can make the partners or the partnership a “director” within the meaning of Section 16(b). But we do not have to decide the question, because the evidence in this case will not support an inference that Lehman Brothers deputized Thomas to represent its interests as director on the board of Tide Water. Doubtless the firm was pleased to have Thomas succeed Hertz as a director, and so was John Schiff, of Kuhn, Loeb & Company, who introduced his friend Thomas to David T. Staples, president of Tide Water who thereafter invited Thomas to become a director. However, there is no evidence of any deputizing or other affirmative action by the firm to cause Thomas to be made a director to protect the interests of the firm or to become its representative.
Reference is made in plaintiff’s brief to certain general statements in the findings contained in the opinion in United States v. Morgan et al., D.C.S.D.N.Y. 1953, 118 F.Supp. 621. These must be understood against the background of the entire history of the investment banking business in the United States *790that was in one way or another involved in the comprehensive and exceedingly complicated charges of conspiracy to violate the Anti-trust laws. Thus, in reference to a time prior to World War I, when there was a sort of informal working arrangement between Goldman, Sachs & Co. and Lehman Brothers, the opinion states (at page 639):
“With this background, it is easy to see that many of the issuers, especially those whose securities were not well known to the public, leaned heavily upon the sponsorship of the investment banking firms under whose auspices the securities were sold. Issuers invited partners or officers of investment banking firms to serve on their boards of directors, in order to interest investors in their securities. Some of the prospectuses, which in those early days were little more than notices, stated that a partner or officer of a particular investment banking firm would go on the board of directors of the issuer whose securities were being offered to the public for sale. Investment bankers sometimes asked to be put on the boards of directors of issuers in order to know how they were managed and to protect the interests of the investors to whom they had sold the issuer’s securities. Since the investment bankers sponsored the securities and lent their names to their sale, they felt a certain obligation to the investors to whom they sold the securities to see to it that the issuers did not adopt any policies or engage in any practices which would impair the value of those securities. This was especially important in connection with foreign investors.”
But general statements are of little assistance in the decision of particular issues. The fact that Thomas succeeded Hertz as a director of Tide Water, and the circumstance that there were other instances where one partner of Lehman Brothers succeeded another as a director in companies other than Tide Water, in the face of the credible and uncontradieted specific proof of the conversations that led up to the invitation by Staples to Thomas to become a director of Tide Water, are of no probative force whatever. Moreover, I do not think Lehman et al. v. Civil Aeronautics Board, 1953, 93 U.S.App.D.C. 81, 209 F.2d 289, certiorari denied, 1954, 347 U.S. 916, 74 S.Ct. 513, 98 L.Ed. 1072, has any bearing on the case before us.
For the above stated reasons Judge Swan and I find nothing here to-distinguish this case from Rattner,. which requires an affirmance of the judgment dismissing the case as against Lehman Brothers.
The Claim Against Joseph A. Thomas
Insofar as plaintiff seeks a judgment against Thomas for the full amount of the profits realized by Lehman Brothers on the Tide Water venture, this was one of the points decided in Rattner and Judge Swan and I are content to follow that ruling. Here again, however, plaintiff claims the present case is distinguishable from Rattner. He relies upon a statement in the opinion of Judge Swan that both sides had assumed the stock purchases and sales were made without the knowledge of Hertz, and (193 F.2d at page 565) “Whether the result might be different had he caused the firm to ' make them, we need not now determine.” Plaintiff in the case now before us insists that the proofs clearly demonstrate that director Thomas did cause Lehman Brothers to enter into the Tide Water stock venture, despite the findings of the trial judge to the contrary. We see no basis whatever for a decision by us that this finding of the trial judge is clearly erroneous. Indeed, it is the only finding permissible, as the trial judge believed the testimony adduced by Lehman Brothers to prove that director Thomas had revealed no confidential information whatever, and that he not only did not induce the firm to enter the venture, he had no knowledge that the matter was. even under consideration. True he did say to some of his partners and to others as well that he liked the management of *791Tide Water and thought its general objectives were first-rate, but this is a far cry from the giving of confidential information concerning the forthcoming proposal for recapitalization by the exchange of common stock for a new dividend-paying preferred stock or otherwise causing or inducing the firm to purchase the stock. So, we must reach the same conclusion we did in Rattner: whether the result might be different had Thomas caused the firm to enter the Tide Water venture we need not now determine.
Judge Dawson held Thomas for the amount of the profits he would have received had he not attempted to disassociate himself from the 50,000 share transaction and waive his share of the profits. I agree with Judge Dawson that the profits for which he has been held accountable were, in contemplation of law, “realized by him.”
This phase of the case presents an interesting and important question of novel impression that was left open in Rattner as Hertz did not resort to any waiver and disclaimer, as did Thomas in the case before us, and he had already voluntarily paid over to the corporation the $806.62 received by him as his share of the short swing profits of Lehman Brothers on the purchase and sale of Consolidated Yultee stock. This is not a question of New York partnership law, nor a question of Income Tax law, but rather and solely, as I see it, a question of the interpretation we are to give to a federal statute, Section 16(b).
I hold that when a partnership, one of the partners of which is a director of a corporation, makes short swing profits in speculative buying and selling of the stock of that corporation, the director must be said to have realized the share of the profits to which he would be entitled, irrespective of any waiver or disclaimer by him. Whether or not he actually receives his share of these profits is immaterial; he has “realized” profits and must account for them.
There is only one way to prevent stock manipulation by insiders to whom confidential information is available, and that is to squeeze every possible penny of profit out of such transactions. This has been held to be the clear purpose of Section 16(b), a “broadly remedial statute.” Smolowe v. Delendo Corp., 2 Cir., 136 F.2d 231, 239, 148 A.L.R. 300, certiorari denied, 1943, 320 U.S. 751, 64 S.Ct. 56, 88 L.Ed. 446. One way to do this was to construe Section 16(b) to include the partnership because of the unity of the partnership relationship and the fact that one of the partners is a director. But Rattner decided otherwise, and that is water over the dam as far as I am concerned. If we now hold that the director himself can escape by the mere device of a waiver and disclaimer, we shall have opened a breach in the law through which stockbrokers and investment banking houses, those most likely to be in a position to profit by the use of confidential information in stock speculation, can pass with impunity.
While no confidential information was improperly used in this case, we must bear in mind that the statute is designed to affect cases where confidential information might be used. Moreover, to permit a waiver and disclaimer to immunize the director would almost certainly lead to wholesale waivers and disclaimers by the various partners who are directors of corporations, with the result that the profits waived by one partner would increase the profits of the others and in the end each would have about the same amount of profits he would have received from such transactions had there been no waiver and disclaimer. When the Congress passed Section 16(b) it was never intended to permit any such merry-go-round as this.2
*792The Method of Computing the “Profits Realized by” Thomas
The 50,000 shares of common stock of Tide Water were purchased by Lehman Brothers between October 8, 1954 and November 15, 1954; they were converted into the new preferred stock on December 8, 1954; and the 50,000 shares of new preferred stock were sold between December 9, 1954 and March 8, 1955. Thus all of these transactions occurred within the short swing period of six months specified in Section 16(b). If the conversion into the preferred stock constituted a “purchase” under Section 16(b) the profits amounted to $98,686.77, and the amount of these profits “realized” by Thomas was $3,893.41, as held by Judge Dawson. But Thomas contends that the conversion was not a “purchase” and that the profit must be computed by subtracting the cost of the shares of common stock from the amount received on the sale of the preferred stock, or $30,-386.71.
We are not, however, computing profits in accordance with what might be the custom of traders and speculators in the stock market. We are construing a federal statute designed to prevent certain persons, including directors and officers, from making short swing profits by “the unfair use of information” available to them because of their confidential relationship to the corporation. The cases present the problem of what is a “purchase” in a great variety of factual combinations. But the underlying principle, as I understand it, is that the transaction is a “purchase” if in any way it lends itself to the accomplishment of what the statute is designed to prevent. The leading case is Park & Tilford, Inc. v. Schulte, 2 Cir., 160 F.2d 984, certiorari denied, 1947, 332 U.S. 761, 68 S.Ct. 64, 92 L.Ed. 347. While we held the transaction not to be a “purchase” in Roberts v. Eaton, 2 Cir., 1954, 212 F.2d 82, the same line of reasoning was used.3 What was done in that case did not lend itself to the furtherance of the prohibited purpose. There is no rule of thumb; nor would it be wise to attempt to formulate such a rule.
Here the acquisition of the preferred stock was in all respects voluntary; Lehman Brothers had the choice of retaining its common stock or exchanging it for preferred stock. The stock of Tide Water was registered on the New York Stock Exchange and was widely held by the public. When the common was acquired the success of the Lehman Brothers Tide Water venture still depended on future shareholder approval. It was only after approval, the issuance of the preferred stock and the exchange that the profits were realized. The exchange constituted a necessary step to the consummation of the plan. We cannot say that such a situation did not lend itself to manipulation and to the making of short swing profits within the meaning of Section 16(b). We hold the exchange was a “purchase” and that the profits realized were properly computed by Judge Dawson.
Interest
Judge Dawson refused to allow interest on the recovery against director Thomas. It is well settled that the allowance of interest in Section 16(b) cases is not mandatory. Magida v. Continental Can Co., 2 Cir., 1956, 231 F.2d 843. Judge Swan and I do not believe it was an abuse of judicial discretion to refuse such an allowance of interest in this case.
Affirmed.
. § 16(b), 15 U.S.C.A. § 78p(b) reads as follows:
“For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but -no such suit shall *788be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.”
. There is some evidence of this here. During cross examination the defendant Thomas was asked:
“Q. Is it customary for a partner who is a director in a corporation to waive Ms interests in the short swing profits realized by a corporation?”
He answered:
“A. I think customary is a pretty strong word. But all of us are. aware *792of tlio existence of 16(b) and you certainly wouldn’t want to find yourself in that predicament.”
. See also Ferraiolo v. Newman, 6 Cir., 1958, 259 F.2d 342, 345, certiorari denied, 1959, 359 U.S. 927, 79 S.Ct. 606, 3 L.Ed.2d 629; Blau v. Mission Corp., 2 Cir., 1954, 212 F.2d 77; Shaw v. Dreyfus, 2 Cir., 172 F.2d 140, certiorari denied, 1949, 337 U.S. 907, 69 S.Ct. 1048, 93 L.Ed. 1719; Blau v. Lamb, D.C.S.D.N.Y.1958, 163 F.Supp. 528, 534; Blau v. Hodgkinson, D.C.S.D.N.Y.1951, 100 F.Supp. 361; Truncale v. Blumberg, D.C.S.D.N.Y.1948, 80 F.Supp. 387.