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8-88 Reg• 0—51 INTERPRETATION OF LAW OR REGULATION (Copies to be sent to all Federal reserve banks) April 12, 1938. Mr. , Vice President, Federal Reserve Bank of , _> Dear Mr. • : This refers to your letter of March 12, 1938, inclosing a copy of a letter from Mr. , Executive Vice President of the Trust Company, , , and asking that the Board pass upon the question whether Mr. , as Honorary Chairman of the board of directors of the trust company, should be regarded as an executive officer for the purposes of section 22(g) of the Federal Reserve Act and the Board's Regulation 0. It is noted that the by-laws of the trust company provide that the "office of Honorary Chairman of the board of directors shall be purely an honorary one and the incumbent thereof shall not be exofficio an officer of the Corporation, nor shall he possess any powers nor be burdened with any duties." It is also noted that this office was created in January 1955 and has been held by Mr. since that time. As you know, the Board has consistently taken the position that it would not be justified in excluding inactive officers from the provisions of Regulation 0 for the following reasons which were contained in the Board's letter of December 30, 1937 (S-59): (1) It appears that the principal purpose underlying the enactment of section 22(g) of the Federal Reserve Act was to prevent the exercise of undue influence by executive officers of member banks in obtaining credit from the banks they serve and it is the Board's view that the exercise of such undue influence may be present in the case of inactive or honorary officers; (2) Congress did not make a distinction in section 22(g) between active and inactive officers and the legislative history of the section indicates that the chairman of the board of directors and the president of a member bank should appropriately be regarded as executive officers for the purposes of the law in question even though they may be inactive; -2- S-88 Reg• 0—31 (3) From the standpoint of the public, persons having the usual titles of executive officers in member banks are considered as executive officers whether or not they are active, and the Board does not feel that it should give encouragement to the employment in an inactive capacity of persons who are given the titles of executive officers and held out to the public as such. These reasons are believed to be applicable also to the case under consideration. Moreover, the fact that the powers and duties of the Honorary Chairman are restricted by the by-laws of the bank does not alter the situation. In this connection, the Board has heretofore considered the suggestion that a provision be included in Regulation 0 to the effect that a person, even though he holds one or more positions specified in the regulation, should not be considered an executive officer of the bank if his duties were restricted by a resolution of the board of directors or provisions of the by-laws of the bank. The Board stated, however, that it did not feel that it should make such an exception, (See X-9478, January 31, 1936). In opinion rectors officer and the the circumstances, you are advised that it is the Board's that Mr. , as Honorary Chairman of the board of diof the Trust Company, is regarded as an executive for the purposes of section 22(g) of the Federal Reserve Act Board's Regulation 0. Vary truly yours, (Signed) L. P. Bethea L. P. Bethea, Assistant Secretary.
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