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206 X-987'3 Reg. F'...,;lo INTERPRETATION OF LAW OR REGULATION (Copies to be sent to ecll Federal reserve banks) April 10, 1957 Honor:.:L ble J. F. T. 0 1 Connor, Comptroller of tho Currency, vtr.shir.gton, D. C. Duar ~iir. Comptroller: 'l'his refor2 to ivlr. Gough' r; btter of iv!arch 31, 1937, inclosing a copy of a letter from The National Bank, , _ _ _ , requesting rulings concerning two questions involving interpretations of tho Board's Ru,::;ul::ttion F. It appears that it is the prc.ctico of tho national bank to purchase from time to time for its various trusts one or more of a series of notes of the same obligor <J.nd secured by the same deed of trust on ren.l ooT-c,te, without purchasing all of the notes. It further appears that thE; bank in its own right has no interest in t.ny of tho soriws of notes and that such notes are purchased after an independent appraisal on beho.li' of the trust department. It is understood tr~t the bank desires to know whether the in7estment of trust funds in this manner is in conflict with the requirements of tho Board's Regulation F • • ... " The only i)rovisions of Rr:lgulation F which might be construed as prohibiting the_prnctice described above are those contained in section 12 of the regulation which are to the effect that securities and investments of each trus~ sill1ll be kept separate from those of all other tru.sts. However, it is the view of tho Board that these provisions do not forbid the investment of trust funds in the manner described; it being understood, of course, that in any case the investments are otherwise proper investments for particular trusts in view of all the circumstances reluting to each trust r.md that i:>Uch invostments are not otherwise subject to criticism. The bank's second question has to do with the renewal for trust accounts of real estate mortgage notf..-!S purchased prior to the effective date of the Board's Regulation F through a corporation which is principally owned by a director of the bank or his immediate family. It a 1)poars that, prior to the effective dDte of the regu.lation, tho bank invested funds of trusts administered by it in real estate mortgage notes purcl~sed through 207 X-9875 Reg. F-10 -2such corporution. It io understood th<d the corporation recoi ves a commission from the borrower ao compc:ns~l tion :i.'or securing the renewal of such notos from tinre to timo. 'l'hH question is raised as to whether, in vievJ of nll tho circumstances, tho renewal of these notes would be prevanted by provisions of heguhttion F. , tiection 11 of the Board 1 s Rcgull:,tion F pr·:>vioes, among other things, that trust funds held by a nntional b.-::nk sht.ll not be inve~~ted in property o.cquired frorr: directors, officers, or employees of the bank or their interests. These provisions relate to tho investment of trust funds rnd th:;;y do not require that assets which had rdrec~dy been ccqy.irod at the time of the effective date of the regulation shall be removod from trv.sts held by a nat:l.onal bani:. 'l'he Board does not feel that a renewal of a note held as an asset of a trust at the time of the effective dute of thu regulation should be considered [~S r.,n inv,:Jstment of trust funds within tl:o nKw.ning of these, requirements ')f the regulation. TlH.;ref:)ro, it is -t~he view of the Board t11u.t the rcE,!'ltb.tion does not prevent ·lJl'J renewal ')f the notes hc::ld by trusts as described above; it being understood, of co'.lrse, t!w.t the investment~; are othurwise propel' investmGnts for prcrticulOJ.r trusts in view of all the circumsts.ncos ralnUng t:) ench trust o.nd that such investments ere not othorwi~e subject to criticiom • • Ver:/ truly y0urs, (Signed) Chost0r Morrill Chester Morrill, Secretary.
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