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BOARD OF GOVERNORS
or

THE

FEDERAL RESERVE SYSTEM

Office Correspondence
Chairman Eccles
Prnm

Mr* Kiiapp

Date

25, T9/.7

Subject! ^r^mitlira Suasion of
Advisory Council held this morning

At its executive session this morning, the National Advisory Council
approved a letter to the Securities and Exchange Commission supporting the Bankfs
request for the following exemptions:
(1) Exemption from the provision of the Securities Act
of 1933 imposing civil liabilities upon dealers in the Bankfs
securities;
(2) Exemption from the provisions of the Securities
Exchange Act of 1934 that (a) require dealers in the Bank1 s
securities to register with the S.E.C. as over-the-counter
dealers and to comply with membership requirements of the
N.A.S.D., and (b) forbid pre-issue listing of the Bank f s
securities on the Stock Exchange;
(3) Exemption from the provisions of the Trust Indenture
Act of 1939.
Secretary Snyder informed the Council that following his discussions
with Mr. Caffrey he had been informed that the S.E.C. would grant the exemptions
listed above if they received a letter from the N.A.C. requesting such action*
Secretary Snyder added that he was opposed to exemption of the Bank f s securities
from the anti-manipulation provision of the Securities Exchange Act of 1934 and
that the Bank was reconciled to this conclusion*
With respect to the first point, the main question has always been
whether or not the S.l.C. had legal power to grant the exemption* Mr. OfConnell
stated that he had prepared a legal opinion for the S.S.C. concluding that it had
such power. He admitted that he had to stretch things a lot in writing this
opinion, but that he was prepared to stand on it.
With respect to the exemption of dealers in the Banfcfs securities from
the requirements of registering with the S.E.C. and joining the N.A.S.D., it was
pointed out by My. OfConnell that at the S.E.O. hearings on this matter held
yesterday, representatives of the N.A.S.D. has opposed the exemption. Mr. OfConnell
explained this as simply a desire by the Association to retain business for its
members, and the Council did not seem inclined to attach much weight to it.
(Incidentally, immediately after my return to my office, I received a telephone
call from Mr. Grarner of the International Bank who thought that the N.A.C. meeting
had not yet been held. Mr. Sarner had called you (and then me) to inform us that
last night he met the chairman of the N.A.S.D. who informed him that their representative in Philadelphia had been instructed not to oppose the proposed exemption




To: Chairman Iccles

~2~

June 25, 1947

at the S»S»C* hearings• In any case, the Council has now acted, and the matter
is closed.)
There was no particular discussion on items 2(b) and 3 listed above*
However, Bill Martin again stated in a general way that he regretted seeing
the National Advisory Council become involved in business of this character.