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X-7625 (INTERPRETATION OF BANKING ACT OF 1933) Copies to be sent to all Federal reserve banks. September 28, 1933. Mr. J. N. Peyton, Federal Reserve Agent, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. Dear Mr* Peyton: Receipt is acknowledged of your letter of September 19, 1933, and of your letter of August 23, 1933, relative to the participation by subsidiary member banks of the same holding company affiliate within the same Federal reserve district in the nomination and election of directors of a Federal reserve bank. Section 4 of the Federal Reserve Act contains tho following provisos * * * * * Provided, That whenever any two or more member banks within the same Federal reserve district are affiliated with the same holding company affiliate, participation by such member banks in such nomination or election shall be confined to one of such banks, which may be designated for the purpose by such holding company affiliate." In view of this provision of the law, you request to be advised whether a holding company affiliate having one or more subsidiary member banks in each of the three groups into which member banks of each Federal reserve district are divided for electoral purposes, may designate one such bank in each group which may participate in the nomination and election of the director of Class A and of the director of Class B chosen by the group of "which it is a member, or whether it may designate only one such bank in the Federal reserve 819 Mr. J. N. Peyton -2-. X-7625 district which may participate in the nomination and election of the director of Class A and the director of Class B chosen by the group of which it is a member. In other words, the question is presented whether, in a case in which one or more member banks in each group are subsidiaries of a holding company affiliate, such member banks may lawfully have three of their number participate in the nomination and election of Class A and Class B directors, one bank in each group participating in the nomination and election of the Class A and the Class B director chosen by such group; or whether in such case only one such bank may participate in the nomination and election of directors, such bank, of course, participating only in the nomination and election of the Class A director and the Class B director chosen by the group of which it is a member. Since only one director of Class A and one director of Class B may be elected by the member banks of any one group and the terms of office of no two Class A directors and no two Class B directors expire in the same year, it is the Board's opinion that the nomination and election of each Class A director and of each Class B director are separate and distinct from the nomination and election of each other Class A or Class B director• Accordingly, it is the Board's view that an organization which is a holding company affiliate of one or more subsidiary member banks in each group may designate one of such banks in each group to participate in the nomination and election of each Class A director and each Class B director chosen by the group of which such bank is a member and that such member bank so Mr, J. N. Peyton -3' X-7625 designated may validly participate in such nomination and election. Very truly yours, (Signed) L. P. Bethea L. P. Bethea, Assistant Secretary#
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