Full text of Mimeograph Letters and Statements of the Board : Interpretation of Banking Act of 1933: Director of Member Bank and as Partner in Firm Dealing in Securities, Number X-7811, Volume 40, Page 114

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INTERPRETATION OP BAKKINff ACT OF 1933

X-7811

(Copies to be sent to all Federal reserve banks.)
March 7, 1934.
Mr.

,
9
9

Dear Sir:
The Federal Reserve Board has given further consideration tc
your application under Section 32 of the Banking Act of 1933 for a
permit to serve at the 'same time as a director of the _ _ _ _ _ _ _ _ _ _
Bank Trust Company,
ner in the firm of

, a member bank, and as a part, a dealer in securities, in the light

of advice received through the Federal Reserve Agent at the Federal
Reserve Bank of

___ that the arrangement under which the

bank participated with the firm in accounts formed to bid for State,
county and municipal securities, has been terminated.
After the most careful study, the Federal Reserve Board has
reached the conclusion that it was the intent of the Congress in enacting Section 32 to terminate all relationships of certain types
between member banks and dealers in securities, apparently because
it felt that such relationships might tend to influence the banks'
credit and investment policies and their advice to their correspondent
banks and other customers respecting investments in a manner which
the Congress deemed to be incompatible with the public interest. The
Board accordingly feels that it may not properly grant permits authorizing relationships which are actually of the kind referred to in




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that section, and that its authority to issue permits should be
exercised only in exceptional cases; for example, those which are included within the literal terns of the statute but which are actually
of a kind different from those at which its provisions were directed.
It appears that

is engaged primarily in the

underwriting, flotation and distribution of securities, and that
therefore the relationship covered by your application is within the
class which that section was designed to terminate. Accordingly,
the Board is unable to find that it would not be incompatible with
the public interest as declared by the Congress to grant your applica'
tion, even though nothing has been called to its attention which
would reflect in any degree upon your desirability as a director of
the bank, except that the relationship covered by your application
is within the prohibitions of Section 32.
Copies of this letter are being sent to
and

Bank Trust Company for their information and

records.




Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.