Scholion. On the Buying and Selling of Bonds and Shares

I. Notions. Bonds are monetary certificates by which someone lends his money to some company, with this agreement, that each year he receive a determinate interest.

Shares are monetary certificates by which someone hands over his money to some company, so that in a certain way he becomes a member of this company and thus receives a variable interest, a dividend, according to the greater or lesser success of the company.

II. Morality. 1. With respect to bonds. It is lawful for clerics equally as for laymen to buy bonds, because clerics equally as laymen can freely lend their money to others and receive a just interest from it. But by buying bonds they do nothing else. Nor is it prohibited to sell them at an opportune time, because this pertains to the economic administration of goods. Nevertheless, clerics should take care not to sin in the manner, for example by personally going to the stock exchange, or by taking part in lucrative trades and speculations, concerning which below.

2. With respect to shares. It is lawful for clerics to buy and sell shares concerning fruitful things. Thus it is lawful, for example, to buy lands together with several persons, or to take shares in them, for this end, that from the fruits sold by the company they may take profit.

Likewise it is lawful to take shares in industrial companies, where a change of matter occurs through hired labor, for example in factories; likewise in commercial companies, where goods are bought in great quantity so that they may be sold in smaller amounts with profit. It is lawful to take the aforesaid shares, I say, provided the conditions soon to be reported are observed. For the single reason on account of which some deny this does not hold. They object, namely, that by buying shares a cleric exercises trading through an interposed person, which is prohibited by law. Now, if the matter is well examined, this reason does not proceed. For a shareholder properly does not influence the trading exercised through others, or influences it so remotely that this ought not to be attended to in law. For others, with the money received, trade for themselves rather than the shareholder for himself. Hence shares today are almost equated with bonds, with only this difference, that in shares, in place of determinate interest, variable interest is received. There are added responses of the Holy Office,¹ from which it is deservedly deduced that the buying of shares is lawful for clerics, provided they are prepared to stand by the commands of the Holy See, and the following conditions are observed:

a) Let them know certainly that those companies have no illicit or suspect end.

b) Let them undertake no part of the administration. Therefore let them not be reckoned among the primary associates, who can have a part in the direction of the company; but secondary associates or simple shareholders are excluded from every direction.

c) Nor should they exercise trading in the shares of those same companies. Therefore:

a) It is certainly lawful to buy shares at a low price and to sell them at a dearer price, if just economy demands this. Likewise it is lawful to buy them even with the intention of selling them more dearly at an opportune time, if just economy will demand this. Nor does it seem to be disapproved if someone does this more often, indeed even habitually, whenever he actually needs money. The reason for all these things is that trading strictly so called is not present.

b) It is not lawful to buy shares and bonds² with the intention of selling them more dearly, even if just economy will not demand this; for in this case strict trading in them is present.

c) Let them abstain from every contract which has the appearance, as it is commonly called, of "games of the stock exchange"; concerning these, see the things said in n. 955.

d) Besides the conditions required by the Holy See, others are commonly assigned by authors, at least by way of prudence. Namely: 1° Let them take bonds and shares by means only of their own money,³ not because otherwise they offend against the trading forbidden to them, but because otherwise they expose themselves to danger of harming others in their goods.

2° Let them take care not to give their name to companies still to be constituted or recently constituted, because then there is easily the danger that they may be too much absorbed by desire for profit.

3° Let them not go to general meetings, in which commissioners are appointed and an account is given of business transacted.

4° The greatest solicitude is required concerning ecclesiastical goods, which must be placed altogether safely, as various canons declare (cf. can. 1516, § 2; 1523, nn. 3 and 4; 1547).

¹ Holy Office, 17 November 1875; 15 April 1885.

² Although ecclesiastical documents speak only about trading in shares, it is nevertheless manifest that the same must be applied also to bonds.

³ Holy Office, 1 April 1857.