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• * - Hot for publication until released lagr the Comptroller of Currency TREASURY Comptroller of the Currency si&ramas Issued by the Comptroller <*f *&• Currency By virtue of the authority vested in tho Comptroller of the Carreaey by paragraph Seventh of Section 5136 of the Revised Statutes, tho following regulation is promulgated! (1) in obligation of indebtedness which w*y be purchased for its om account \p a national bank or State seaber bank of the Federal Reserve System, in order to eosse within the classification of *lnveet&eat securities* within the aesalag of paragraph Seventh of said Section 5136, stast bo a marketable obligation, i.e., It »ost bo salable under ordinary circumstances with reasonable proaptneee at a fair valuef end with respect to Hie particular security, there wist bo present m«^ or more ot tho following characteristicsi (a) 1 public distribution of the securities arust have been provided for or made in a manner to protect or insure the marketability of tho issue; or, (b) Other existing securities of the obligor mist have small a public distribution as to protect or insure the sarketabillty of the issue under consideration| or, (e) In the ease of investment securities for which a public distribution a* set forth ia (ft) or (b) ebov© not be so provided, or 66 made, and which are issued by established commercial or industrial busiaesaas or enterprises that ceo d«woi!0trftt6 th« ability to service such securities, th* debt evidenced thereby mist »ature not later th«n t«a jr©«ri» aft*r the 4st« of i^euance of the security s&a aust be of ©uch sound Tslue or so seeored ss reesoiMibly to essisre its peyaetit; sueh securities «ustf by their tennsf providt for the assortiof the &*tot evldeneed thereby so that at lessi 75^ of the principal trt.ll be extinguished by the seturity date by subst«atisl periodic payaeutsi Pritvide^, thet no amortisation needi be required tor the period of the first year after the date of if?nuance of euc^i securities. (2) *her« tlxe security is issued under a trust a^ree»ent9 the agreeaent wist priTlde for a trustee independent of the obligor, en& s*a«h trustee cost be a bank or trust eo*peny, (3) 4X1 • urc^itsteee of investment securities by national and State sasaber basks for their owa account aust be of securities "is the fora of boade, notes, aad/or debeaturesf conaonly knows as investsent tecurities "| sad every transaction which is In faet stioh a purchase atust, regardless of Its f o m f cosily with this regulation* II (1) Although the beak Is permitted to purchase "imrestBe&t securities*1 for Its owa account for purposes of investment wtt&t the provisions . . J . ~ 3of &* S« 5 U 6 acid this regulation, the bank is not permitted otherwise to participate as a principal in the marketing of securities. (2) The statutory limitation on the amount of th« *invest»eat securities" of etjy one obligor or maker which aay bo hold by the beak, li to be deieraioed on the baeia of the par or faee value of the securities and not oa their market value. (3) The purehaee of ^lsvestKent securities* in vhleb the investme&t charecterieticR are distinctly or predominantly speculative, or the porciiftif« of eeeuritiee «hiefct are is default, either &z to principal or interest, ia prohiMted* of an inveetment aeeurity at a price exceeding par ie proalbited tmleet the bank shallt (a) Provide for tbe regular amortisation of tlie premi^oi paid so that the premiS* ahall be entirely eactinpdahed at or before the maturity of the security and the security (including premium) shall at no intervening date be &mrr±9d at wn amount in excess of toat at «hieh the obligor me? legally redeem snob • security- or (b) Set up a rmm*r99 account to amortise the prasdist* said account to be credited periodically with as amount not less than tlie amount required for amortisation under (a) above* (5) Purchase of securities convertible into stock at the option of the issuer is prohibited* (6) Purchase ot securities convertible into stack at the option of the holder or with stock purchase warrants attached is prohibited if the prls# paid for «ueh stmariiy I© la ©SCOP* of th« lnve«ts«iit vain* of ill* £«eurity ttaslf, eoai&darocS izt&#f*m<lttfiUy of tit* sioek piureh&«« s*rr*ot# or conversion future. If I t 1# tppertnt that th© price paid for ea d^i«rtlf* alifibl® eacurity f a i r l / r*fl«etg th« Vfclud of tlM security ite«lf and do«a not incslti^e m? •®lu« ba»dd up<m tfe« |^e«iwa.@© of & atock purehane «arr»at or option ihm porah**® of such & tteeajrit/ le not prohibit»d. (?) Is to purchase of 8«curiti»» under repurch^Be *ubj«et to th« Xljii&tioaii and r#otriction» • • t forth lit the 1** this r«gal«tiofii (a) I t 1« j eraleelble for the talk to pureh«#s eeeritioc^ froa «noth*r undar «n agre«tt«at «fh«r#l^r th« fetattr an option or « r i # t to roquir^ tli# »#il#r of the eecuriti#& to ropurcbMis th^B from the bank at * $*ri@@ »t&t©4 or *i subject to determination xaadmr tlt# t«rs^ ©f ths in ao c*»e I»sg th«a th« value m% %h® tia« of (b) I t ie |3«pffli8fiibi* for th« fros «moth«r under m ftgretaoat hereby ^it »«ll«r the b*nk ageiagt loss oa r«#ml« of It i* mot iNBitiseibl© for th« b«ak to purehtt«« a«at ••euritiofi 0 froii aaotii«r w&mt aaftgreommtmorobf the e#ll«r r«fl#rvee th© ri^it or the option to curlties itetiXf or through its nominee at a price stated or at « jsriee aubject to determination mtd«r the terase of tb« agreement, notwithstanding the fact that the beak aay also, under •uch agreement* have th# right or option to eoapel the seller to repurehaae the securities at a prtc* ct&tod or at it price subject to dotorsInattOB under th» toraii of th« &gr«e»«nt, (8) ie to r«puroh««« 6»;rooa«nts aqcoapeaying «»l»s of «ecuriti«e (a) It i» pormliislbXft for the bank soiling s#curiti*c to asiothor to agroo ^ a t th« bank «hall hav« as option or ri^it to r«purdia«a tha securities fr©« the buyer at e priee stated or at e prlcn sub* jeet to determination uuder the terst of the agrenaent, bat la no ease in exee** of the aarket Yalue at the tise of repurchase. (b) It in not perwUuible for the bank gelling %ecuritiea to another to agree that the purc&aaer shall have the r i ^ t or the option to require the bank to rcjpiureheee said aeomritiea at a price at&te<3 or at a prloe subjeet to determination under the ter*« of the agreeaeat, notwithataading the fact that the bank say also, under such agreement* here the right or option to ropurchase the aeeurities fro» the buyer at a price etated or at * price subject to determination under the tense of the agreement* In vi#* of the fast that cose bnakg nay have bought or eold #emiritiet under a for* of agreement which i* prohibited by thia regulation, the bank should either terminate or «©dii> wmm go «» to conforts to this regulation, ehere »uch action say lawfully be taken, IxistlBg aireetteatp of ^s« pro* hibitad %y$m vast not be ran*«a4» r^atrictiona and li*dtatioa» of this regulation do not apply to 6©curitl«e aequlred through formtlowurM on collator*!, or acquired in good faith fey way of coaproaisa of fe doubtful claiw or to avert an eppr^iendad loae in connection with a d«fet f>r*svlo^i#ly eontr&et«it or to r»al oatftt© a«curitias> acqulrad pursuant to Section 54 of th» Fadoral Mt 9 ae ra^ul&tion eixportoclec prior regulations gor«rniag tti# purehaft« g #cxiriti«ep and Is «ft«ctiv« froa and aftar July 1, 1938, and promilgatad tfei* 23th day of Juno, Acting Cosptrollftr of the