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Hot for publication
until released lagr the
Comptroller of Currency

Comptroller of the Currency

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
(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*

(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