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F E D E R A L RESERVE BOARD WASHINGTON X-3046 December 2 S t h , 1 9 2 0- Dear S i r : The F e d e r a l Reserve Board, has r e c e i v e d your l e t t e r i n which you r e q u e s t t o he informed i n some d e t a i l c o n c e r n i n g t h e o r g a n i z a t i o n and o p e r a t i o n of f e d e r a l l y i n c o r p o r a t e d i n t e r n a t i o n a l f i n a n c i a l c o r p o r a t i o n s a u t h o r i z e d under the p r o v i s i o n s of t h e s o c a l l e d Edge A c t . The Edge Act makes p r o v i s i o n f o r t h e i n c o r p o r a t i o n under F e d e r a l law and s u b j e c t t o Federal s u p e r v i s i o n of i n t e r n a t i o n a l f i n a n c i a l c o r p o r a t i o n s o r g a n i z e d , as the f i r s t p a r a g r a p h of the Act exp r e s s e s i t , " f o r t h e purpose of engaging i n i n t e r n a t i o n a l or f o r e i g n banking o r o t h e r i n t e r n a t i o n a l or f o r e i g n f i n a n c i a l o p e r a t i o n s , or i n "banking o r o t h e r f i n a n c i a l o p e r a t i o n s i n a dependency o r i n s u l a r p o s s e s s i o n of the United S t a t e s , e i t h e r d i r e c t l y or t h r o u g h t h e agency, ownership o r c o n t r o l of l o c a l i n s t i t u t i o n s i n f o r e i g n c o u n t r i e s , or i n such dependencies o r i n s u l a r p o s s e s s i o n s . " The Act g i v e s to t h e s e c o r p o r a t i o n s powers s u f f i c i e n t l y broad to e n a b l e them to compete on terms of s u b s t a n t i a l e q u a l i t y w i t h s i m i l a r i n s t i t u t i o n s i n c o r p o r a t e d under f o r e i g n laws or under the laws of any S t a t e of t h e United S t a t e s and engaged i n s i m i l a r b u s i n e s s . I t wag the aim of Congress i n p a s s i n g t h i s Act, as evidenced by t h e expressed purposes f o r which t h e s e c o r p o r a t i o n s may be o r g a n i z e d , t o p r o v i d e f o r two d i s t i n c t k i n d s of i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n s , (1) i n t e r n a t i o n a l banking c o r p o r a t i o n s o r g a n i s e d f o r the purpose of g r a n t i n g o r d i n a r y s h o r t time commercial or b a n k i n g c r e d i t s and (2) i n t e r n a t i o n a l investment c o r p o r a t i o n s o r g a n i s e d f o r the purpose of g r a n t i n g c r e d i t s f o r l o n g e r p e r i o d s and engaged g e n e r a l l y i n the investment b u s i n e s s . While the p r o v i s i o n s of t h e Act s p e c i f i c a l l y d e f i n i n g the powers of such c o r p o r a t i o n s a r e t e c h i n c a l l y a p p l i c a b l e t o any c o r p o r a t i o n organized t h e r e u n d e r i r r e s p e c t i v e of whether organized f o r the purpose of engaging i n i n t e r n a t i o n a l banking or f o r the purpose of engaging i n t h e i n v e s t m e n t b u s i n e s s , i t w i l l be n o t e d t h a t the Act e x p r e s s l y p r o v i d e s t h a t such powers may be e x e r c i s e d only "under such r u l e s and r e g u l a t i o n s a s the F e d e r a l Reserve Board may p r e s c r i b e , E and, f u r t h e r , t h a t " n o t h i n g c o n t a i n e d i n t h i s s e c t i o n s h a l l b e c o n s t r u e d t o p r o h i b i t t h e F e d e r a l Reserve Board, under i t s power t o p r e s c r i b e r u l e s and r e g u l a t i o n s , from l i m i t i n g t h e a g g r e g a t e amount of l i a b i l i t i e s of any o r a l l c l a s s e s i n c u r r e d by t h e c o r p o r a t i o n and o u t s t a n d i n g a t any one t i m e . " P u r s u a n t to t h e s e p r o v i s i o n s of t h e Act and i n o r d e r t o X-3046 ^-*7*7 -2- give e f f e c t t o the purpose of Congress a s o u t l i n e d above, the Board i n i t s Regulation K, Subdivision X l l l , h a s provided t h a t , except w i t h the a p p r o v a l of t h e F e d e r a l Reserve Board, and s u b j e c t to such l i m i t a t i o n s a s i t may p r e s c r i b e , no c o r p o r a t i o n s h a l l e x e r c i s e t h e power t o a c c e p t d r a f t s or b i l l s of exchange i f a t the time such d r a f t s o r b i l l s a r e presenbed f o r acceptance i t has o u t s t a n d i n g any d e b e n t u r e s , bonds, n o t e s , or o t h e r o b l i g a t i o n s i s s u e d b y i t - In o t h e r words, i f a c o r p o r a t i o n i s organized f o r the purpose of i s s u i n g i t s debent u r e s , i t may n o t a t the same time c a r r y on an acceptance b u s i n e s s except w i t h t h e B o a r d ' s express a p p r o v a l . Oh the o t h e r hand, a c o r p o r a t i o n which proposes to engage i n the g e n e r a l b u s i n e s s of i n t e r n a t i o n a l banking, i n c l u d i n g t h e making of b a n k e r s ' a c c e p t a n c e s , cann o t i s s u e i t s debentures u n l e s s i t f i r s t o b t a i n s t h e Board's c o n s e n t . So f a r a s the power t o make acceptances i s concerned, the B o a r d ' s r e g u l a t i o n s provide t h a t c o r p o r a t i o n s organized u n d e r S e c t i o n 25(a) may only a c c e p t d r a f t s and b i l l s which grow out of t r a n s a c t i o n s i n v o l v i n g the i m p o r t a t i o n or e x p o r t a t i o n of goods ( t h e term "imp o r t a t i o n and e x p o r t a t i o n " i n c l u d e s , however, an i m p o r t a t i o n o r exp o r t a t i o n i n t o o r from any f o r e i g n country a s w e l l a s i n t o or from the United S t a t e s ) , and d r a f t s or b i l l s which a r e d r a m by banks or bankers i n f o r e i g n c o u n t r i e s f o r the purpose of f u r n i s h i n g d o l l a r exchange, p r o v i d e d , however, t h a t except w i t h the approval of the F e d e r a l Reserve Board, no acceptance which grows out of a t r a n s a c t i o n i n v o l v i n g the i m p o r t a t i o n o r r e x p o r t a t i o n of goods s h a l l have a m a t u r i t y i n excess of s i x months, and no acceptance which i s drawn f o r the purpose of f u r n i s h i n g d o l l a r exchange s h a l l have a m a t u r i t y i n excess of t h r e e months. So f a r a s acceptances of t h e f i r s t c l a s s a r e concerned, the Board f e e l s t h a t only unusual and e x t r a o r d i n a r y circumstances j u s t i f y a banking c o r p o r a t i o n i n a c c e p t i n g d r a f t s i n exc e s s of s i x months. I n unusual times, such as the p e r i o d of the war through which we have j u s t p a s s e d , and i n c e r t a i n c o u n t r i e s , a d r a f t of a longer m a t u r i t y may perhaps be p r o p e r l y a c c e p t e d . The n e c e s s i t y , however, f o r making bankers 1 acceptances w i t h a m a t u r i t y i n excess of s i x months must appear very c l e a r b e f o r e t h e Board w i l l a u t h o r i z e a c ceptances i n excess of t h a t p e r i o d . Since t h e purpose f o r which a bankers 1 acceptance may p r o p e r l y be made should r a r e l y r e q u i r e a m a t u r i t y l o n g e r than s i x months, normally a t r a n s a c t i o n r e q u i r i n g a longer c r e d i t should be f i n a n c e d by means of a d i r e c t l o a n . The Board h a s , however, i n one i n s t a n c e , p e r m i t t e d a c o r p o r a t i o n organized und e r S e c t i o n 2 5 ( a ) t o make a l i m i t e d amount of bankers 1 acceptances of n i n e and twelve months, b u t a s a c o n d i t i o n of g r a n t i n g i t s p e r m i s s i o n i t r e q u i r e d t h a t no acceptances i n excess of s i x months' m a t u r i t y be f o r a l o n g e r p e r i o d than the u s u a l and customary c r e d i t extended f o r t r a n s a c t i o n s s i m i l a r t o t h a t b e i n g f i n a n c e d by t h e a c c e p t a n c e s i n quest i o n , t h a t t h e customer f o r whom each acceptance i s made a g r e e t h a t a l l payments on account of the t r a n s a c t i o n which i s b e i n g f i n a n c e d by the acceptance s h a l l be a p p l i e d a t once t o t h e payment of the acceptance as and when r e c e i v e d , and t h a t a weekly r e p o r t be made t o t h e F e d e r a l Reserve Board of a l l a c c e p t a n c e s made i n e x c e s s of s i x months- 178 X-3046 As f o r t h e o p p o r t u n i t i e s a f f o r d e d a c o r p o r a t i o n o r g a n i z e d under S e c t i o n 25(a) t o r e a l i z e upon i t s p a p e r by r e d i s c o u n t i n g such p a p e r w i t h a F e d e r a l Reserve Bank, you w i l l n o t e t h a t t h e Act i t s e l f e x p r e s s l y p r o h i b i t s such a c o r p o r a t i o n from becoming a member of any F e d e r a l Reserve Bank and, i t , t h e r e f o r e , cannot a v a i l i t s e l f of t h e r e d i s c o u n t p r i v i l e g e s a f f o r d e d by t h e p r o v i s i o n s of t h e F e d e r a l Reserve Act. L i k e any o t h e r non-member bank, however, such a c o r p o r a t i o n may o f f e r f o r s a l e i n t h e open market b a n k e r s ' a c c e p t a n c e s and bil&'Of exchange which a F e d e r a l Reserve Bank may i n i t s d i s c r e t i o n p u r c h a s e as an open-market o p e r a t i o n under S e c t i o n 14 of t h e F e d e r a l Reserve A c t , p r o v i d e d t h a t such a c c e p t a n c e s o r b i l l s of exchange h a v e a m a t u r i t y a t t h e time of p u r c h a s e of n o t more t h a n t h r e e months o r n i n e t y days r e s p e c t i v e l y , e x c l u s i v e of days of g r a c e , and a r e i n o t h e r r e s p e c t s e l i g i b l e f o r p u r c h a s e under t h e terms of t h e Act and t h e B o a r d ' s r e g u l a t i o n s . I n t h i s c o n n e c t i o n i t should be remembered, however, t h a t u n d e r the B o a r d ' s R e g u l a t i o n B, S e r i e s of 1920, b a n k e r s ' a c c e p t a n c e s , o t h e r t h a n those a c c e p t e d o r endorsed by member banks a r e n o t e l i g i b l e f o r p u r c h a s e u n l e s s t h e a c c e p t o r f u r n i s h e s a s a t i s f a c t o r y s t a t e m e n t of f i n a n c i a l c o n d i t i o n and a g r e e s i n w r i t i n g w i t h t h e F e d e r a l Reserve Bank t o i n f o r m i t upon r e q u e s t concerning t h e t r a n s a c t i o n u n d e r l y i n g t h e a c ceptance. One way h a s been suggested whereby a c c e p t a n c e c r e d i t s running over a p e r i o d of s i x months* and even l o n g e r where u n f o r e s e e n e v e n t s i n t e r v e n e , may be f i n a n c e d by means of a c c e p t a n c e s idhitih would a t a l l times be e l i g i b l e f o r p u r c h a s e by F e d e r a l Reserve Banks. I h e p a r t i c u l a r c r e d i t s r e f e r r e d t o a r e known a s " f i n i s h i n g " c r e d i t s . They i n v o l v e t h e e x p o r t a t i o n f r o m t h e U n i t e d S t a t e s of raw or o t h e r m a t e r i a l s t o be u s e d i n t h e manufacture i n f o r e i g n c o u n t r i e s of f i n i s h e d p r o d u c t s . If t h i s e x p o r t a t i o n f r o m t h e United S t a t e s t o the c o u n t r y of t h e f o r e i g n manuf a c t u r e r norma lly t a k e s not more than t h r e e months i t may, of c o u r s e , be f i n a n c e d by means of a c c e p t a n c e s vehich a r e a t a l l times e l i g i b l e f o r p u r c h a s e . I f the f o r e i g n m a n u f a c t u r e r p u r c h a s i n g t h e s e m a t e r i a l s h a s , a t t h e time of t h e m a t u r i t y of t h e o r i g i n a l d r a f t s , bona f i d e c o n t r a c t s f o r t h e e x p o r t a t i o n of t h e f i n i s h e d p r o d u c t s , t h e m a n u f a c t u r e of those p r o d u c t s and t h e e x p o r t a t i o n t h e r e o f from t h e f o r e i g n c o u n t r y may be f i n a n c e d by a n o t h e r a c c e p t a n c e c r e d i t , and i f t h e p e r i o d normally r e q u i r e d f o r t h e consummation of the second e x p o r t t r a n s a c t i o n i s n o t i n excess of t h r e e months t h e a c c e p t a n c e s drawn u n d e r t h i s c r e d i t may be e l i g i b l e a t a l l t i m e s . I f t h e r e i s some u n f o r e s e e n d e l a y i n complet i o n of e i t h e r of t h e e x p o r t a t i o n t r a n s a c t i o n s , a renewal of the a c c e p t ances based upon the t r a n s a c t i o n mi^txt be j u s t i f i e d u n d e r t h e p r i n c i p l e s h e r e t o f o r e announced by t h e Board w i t h r e f e r e n c e t o r e n e w a l s . The second e x p o r t t r a n s a c t i o n need n o t n e c e s s a r i l y i n v o l v e t h e r e t u r n of t h e f i n i s h e d p r o d u c t s t o t h e U n i t e d S t a t e s , f o r t h e Board h a s r u l e d t h a t a t r a n s a c t i o n i n v o l v i n g t h e e x p o r t a t i o n of goods f r o m one f o r e i g n c o u n t r y • t o a n o t h e r nay be the b a s i s of an a c c e p t a n c e g r a n t e d by a member bank. In t h i s way t h e e n t i r e t r a n s a c t i o n , i n c l u d i n g t h e e x p o r t a t i o n from the United S t a t e s of t h e u n f i n i s h e d m a t e r i a l , t h e m a n u f a c t u r e i n t h e f o r e i g n c o u n t r y of t h e f i n i s h e d p r o d u c t s , and t h e f i n a l shipment t o t h e U n i t e d S t a t e s o r some o t h e r c o u n t r y may be f i n a n c e d by means of 179 -4- eligible definite finished there i s ance can X-3046 a c c e p t a n c e s . This can only be s o , of c o u r s e , when t h e r e i s a and bona f i d e c o n t r a c t p r o v i d i n g f o r t h e e x p o r t a t i o n of the p r o d u c t from the country where i t i s manufactured. Otherwise, no export or import t r a n s a c t i o n upon Which the second a c c e p t be based. The Board h a s taken no d e f i n i t e a c t i o n upon t h e s e s o - c a l l e d f i n i s h i n g c r e d i t s but i s merely c a l l i n g your a t t e n t i o n to them because i f , as seems p o s s i b l e , they may be brought w i t h i n the p r i n c i p l e s of the B o a r d ' s p r e v i o u s r u l i n g s , they would seem t o be a d e s i r a b l e means of extending t h e c r e d i t s r e q u i r e d i n o r d e r t o f i n a n c e the e x p o r t a t i o n of American p r o d u c t s t o f o r e i g n c o u n t r i e s . I t i s contemplated t h a t the f i n a n c i a l o p e r a t i o n s of c o r p o r a t i o n s organized under Section 25(a) s h a l l c o n s i s t p r i m a r i l y of i n t e r n a t i o n a l or f o r e i g n b u s i n e s s . In f a c t t h e domestic b u s i n e s s which such a c o r p o r a t i o n may c a r r y on w i t h i n the United S t a t e s i s e x p r e s s l y l i m i t e d to t h a t which i s , i n the judgment of the Federal Reserve Board, i n c i d e n t a l to i t s i n t e r n a t i o n a l or f o r e i g n b u s i n e s s . The Board h a s n o t attempted to determine what domestic b u s i n e s s i s i n i t s judgment i n c i d e n t a l to the i n t e r n a t i o n a l o r f o r e i g n b u s i n e s s of such a c o r p o r a t i o n , b u t g e n e r a l l y speaMng, the Board takes the view t h a t such b u s i n e s s must a r i s e out of or bear some d i r e c t r e l a t i o n to the i n t e r n a t i o n a l or f o r e i g n b u s i n e s s of the c o r p o r a t i o n , such as r e c e i v i n g d e p o s i t s w i t h i n the United S t a t e s as a u t h o r i z e d i n s u b d i v i s i o n (a) of Section 25(a) or m a i n t a i n i n g agenc i e s f o r s p e c i f i c purposes n e c e s s a r i l y i n c i d e n t a l t o the c o r p o r a t i o n ' s f o r e i g n b u s i n e s s . However, where goods produced or manufactured i n the United S t a t e s a r e d e s t i n e d f o r export to a f o r e i g n c o u n t r y , and where t h e r e i s i n e x i s t e n c e a s p e c i f i c and bona f i d e c o n t r a c t p r o v i d i n g f o r the e x p o r t a t i o n of such goods a t or w i t h i n a s p e c i f i e d and r e a s o n a b l e time, a d r a f t drawn to f i n a n c e such goods i s a f o r e i g n d r a f t r a t h e r than a domestic d r a f t and the b u s i n e s s of a c c e p t i n g such a d r a f t would c o n s t i t u t e i n t e r n a t i o n a l or f o r e i g n b u s i n e s s w i t h i n the meaning of S e c t i o n 25(a) and consequently could be undertaken by a c o r p o r a t i o n organized under that section. I n t h i s connection your a t t e n t i o n i s c a l l e d to Subdivision XIV of t h e B o a r d ' s Regulation K which p r o v i d e s t h a t no c o r p o r a t i o n organized under S e c t i o n 25(a) s h a l l r e c e i v e i n the United S t a t e s any d e p o s i t s , except such as a r e i n c i d e n t a l t o or f o r the purpose of c a r r y i n g out t r a n s a c t i o n s i n f o r e i g n c o u n t r i e s . Deposits of any kind may bo r e c e i v e d o u t s i d e the United S t a t e s , p r o v i d e d , however, t h a t i f i t s d e b e n t u r e s a r e o u t s t a n d i n g i t may r e c e i v e abroad only such d e p o s i t s as a r e i n c i d e n t a l to the conduct of i t s e x p o r t , discount or l o a n o p e r a t i o n s . Agencies may be e s t a b l i s h e d abroad a t such p l a c e s as the f e d e r a l Reserve Board may approve. Agencies may a l s o bo e s t a b l i s h e d i n t h e United S t a t e s with t h e Approval of t h e F e d e r a l Reserve Board, b u t f o r s p e c i f i c purposes only and n o t g e n e r a l l y f o r the purpose of c a r r y i n g on the b u s i n e s s of the c o r p o r a t i o n . No b r a n c h , however, may be e s t a b l i s h e d under any circumstances w i t h i n the United S t a t e s , and branches may be e s t a b l i s h e d abroad only with t h e B o a r d ' s a p p r o v a l . X-3Q46 -5A1though i t was r e a l i z e d t h a t t h e s e i n t e r n a t i o n a l f i n a n c i a l c o r p o r a t i o n s mast h a v e s u f f i c i e n t a u t h o r i t y t o compete e f f e c t i v e l y w i t h s i m i l a r f o r e i g n i n s t i t u t i o n s , o r d i n a r y p r i n c i p l e s of banking prudence made i t a p p e a r i n a d v i s a b l e t o a l l o w such c o r p o r a t i o n s , whose r e a l f u n c t i o n s i s t o f i n a n c e t h e movement of commodities, t o engage i n buying and s e l l i n g commodities a s w e l l . S e c t i o n 2 5 ( a ) p r o v i d e s , t h e r e f o r e , t h a t no c o r p o r a t i o n orga nize d t h e r e u n d e r s h a l l engage i n commerce or t r a d e i n commodities, except such commodities a s i t i s s p e c i f i c a l l y a u t h o r i z e d t o d e a l i n , such a s gold and b u l l i o n . For much t h e same r e a s o n i t i s a l s o s p e c i f i c a l l y provided i n Section 25(a) t h a t a corporation organized under t h a t s e c t i o n s h a l l n o t own s t o c k i n a n o t h e r c o r p o r a t i o n i f such o t h e r c o r p o r a t i o n i s engaged i n buying o r s e l l i n g commodities i n the United S t a t e s . I t s h o u l d be n o t e d , however, t h a t t h i s l a t t e r p r o v i s i o n does not p r e v e n t a c o r p o r a t i o n organized under S e c t i o n 2 5 ( a ) from owning a a l i m i t e d amount of s t o c k of a c o r p o r a t i o n d e a l i n g i n commodities p r o v i e d t h a t such c o r p o r a t i o n i s engaged s o l e l y i n p u r c h a s i n g and s e l l i n g commodities i n a f o r e i g n c o u n t r y o r p u r c h a s i n g i n a f o r e i g n c o u n t r y and s e l l i n g i n a n o t h e r f o r e i g n c o u n t r y , and only t r a n s a c t s such b u s i n e s s i n the U n i t e d S t a t e s a s i s , i n t h e judgment of the F e d e r a l Reserve Board, i n c i d e n t a l t o i t s i n t e r n a t i o n a l o r f o r e i g n business* However, w h i l e an Edge c o r p o r a t i o n may n o t i t s e l f engage i n commerce or t r a d e i n commodities and w h i l e i t may n o t own s t o c k i n c o r p o r a t i o n s engaged i n buying or s e l l i n g commodities i n the U n i t e d S t a t e s , S e c t i o n 2 5 ( a ) does n o t p r e v e n t a c o r p o r a t i o n o r g a n i z e d t h e r e u n d e r from b e i n g c l o s e l y a l l i e d with and t o a c e r t a i n e x t e n t s u b j e c t t o t h e c o n t r o l of the commercial c o r p o r a t i o n whose i n t e r n a t i o n a l b u s i n e s s i t f i n a n c e s . Nothing i n t h i s s e c t i o n , f o r i n s t a n c e , p r e c l u d e s an American o r f o r e i g n e x p o r t e r or i m p o r t e r , o r a group of e x p o r t e r s o r i m p o r t e r s , from o r g a n i z i n g an Edge c o r p o r a t i o n f o r t h e p u r p o s e of f i n a n c i n g t h e i r i n t e r n a t i o n a l b u s i n e s s , the s t o c k of which may be l a r g e l y owned by the c o r p o r a t i o n engaged i n d e a l i n g i n commodities. I n f a c t one of t h e main advantages a f f o r d e d by t h i s s e c t i o n i s t h e o p p o r t u n i t y o f f e r e d t o e x p o r t e r s and i m p o r t e r s t o o r g a n i z e a c o r p o r a t i o n t o f i n a n c e t h e i r own i n t e r n a t i o n a l b u s i n e s s and through s t o c k ownership p e r m i t t h a n t o d i r e c t i t s p o l i c i e s t o some e x t e n t and t o h a v e a t l e a s t some v o i c e i n i t s management. Furthermore, w h i l e an Edge c o r p o r a t i o n c a n n o t i t s e l f d e a l i n commodities, t h e r e seems t o be no r e a s o n why i t s h o u l d n o t through i t s f o r e i g n branches and a g e n c i e s d i v e r t b u s i n e s s t o t h e commerc i a l c o r p o r a t i o n whose i n t e r e s t s a r e a l l i e d w i t h i t o r even i n f o r m a l l y s o l i c i t b u s i n e s s abroad and t u r n t h i s b u s i n e s s over t o i t s p a r e n t c o r p o r a t i o n , p r o v i d e d t h a t t h e a c t u a l b u s i n e s s t r a n s a c t e d i s between t h e •American p r o d u c e r and the f o r e i g n i m p o r t e r and p r o v i d e d , of c o u r s e , t h a t the Edge c o r p o r a t i o n does n o t e i t h e r d i r e c t l y o r i n d i r e c t l y t h e r e b y cont r o l or f i x o r a t t e m p t t o c o n t r o l o r f i x t h e p r i c e of such c o m n o d i t i e s . dhe n e c e s s a r y f o r m a l i t i e s i n c i d e n t t o t h e o r g a n i z a t i o n of corporations under Section 25(a) are s e t f o r t h i n d e t a i l i n the Board's .?5gu]iktion K, S e r i e s of 1920. You w i l l n o t e t h a t no c o r p o r a t i o n vhich •issues i t s d e b e n t u r e s or o t h e r s i m i l a r o b l i g a t i o n s i s p e r m i t t e d t o u s e the Word " t a n k " a s p a r t of i t s t i t l e and no c o r p o r a t i o n which h a s t h e 181 —— 6 X—3046 word. " F e d e r a l " i n i t s t i t l e i s p e r m i t t e d t o USQ t h e word "bank" i n i t s title. No c o r p o r a t i o n may be o r g a n i z e d w i t h a c a p i t a l s t o c k o f l e s s t h a n $ 2 , 0 0 0 , 0 0 0 and no c o r p o r a t i o n w i l l b e p e r m i t t e d t o i s s u e s t o c k o f n o p a r value. You w i l l a l s o n o t e t h a t t h e a n n u a l m e e t i n g o f t h e s t o c k h o l d e r s m a s t b e h e l d a t t h e home o f f i c e o f t h e c o r p o r a t i o n w h i c h m a s t b e i n t h e U n i t e d S t a t e s , and t h a t a l l the d i r e c t o r s mast be c i t i z e n s of the U n i t e d States. A f t e r t h e A r t i c l e s o f A s s o c i a t i o n and t h e O r g a n i z a t i o n C e r t i f i c a t e h a v e b e e n made and f i l e d w i t h t h e Board and a f t e r t h e Board h a s a p p r o v e d them, a p r e l i m i n a r y p e r m i t t o b e g i n b u s i n e s s w i l l b e i s s u e d , a f t e r vfoitih t h e a s s o c i a t i o n s h a l l become and b e a b o d y c o r p o r a t e , b u t i t c a n n o t e x e r c i s e a n y o f i t s p o w e r s e x c e p t s u c h a s a r e i n c i d e n t a l and p r e l i m i n a r y t o i t s o r g a n i z a t i o n u n t i l a f t e r i t h a s b e e n a u t h o r i z e d by a f i n a l p e r m i t i s s u e d by t h e Board g e n e r a l l y t o commence b u s i n e s s . One of the p r e r e q u i s i t e s of t h i s f i n a l permit i s that a t l e a s t 25$ of the a u t h o r i z e d c a p i t a l s t o c k s h a l l be p a i d i n c a s h , t h e r e m a i n i n g i n s t a l l ments b e i n g p a i d i n accordance w i t h the p r o v i s i o n s of the law, Die Board r e q u i r e s t h a t t h e by—laws o f t h e c o r p o r a t i o n , t h e f o r m o f c e r t i f i c a t e o f s t o c k w h i c h i t p r o p o s e s t o i s s u e , and s u c h s i m i l a r documents be f i l e d with i t for i t s information. The B o a r d , h o w e v e r , d o e s n o t a t t e m p t t o a p p r o v e s u c h b y - l a w s o r o t h e r documents i n a n y manner b u t m e r e l y r e q u i r e s them t o b e f i l e d w i t h i t a s a m a t t e r o f r e c o r d . S e c t i o n 25(a) p r o v i d e s i n p a r t t h a t a m a j o r i t y of the s h a r e s of t h e c a p i t a l s t o c k of a c o r p o r a t i o n o r g a n i z e d t h e r e u n d e r s h a l l a t a l l t i m e s b e h e l d and owned by c i t i z e n s o f t h e U n i t e d S t a t e s , b y c o r p o r a t i o n s t h e c o n t r o l l i n g i n t e r e s t s i n w h i c h i s owned b y c i t i z e n s o f t h e United S t a t e s , chartered under t h e laws of the United S t a t e s or of a S t a t e of the U n i t e d S t a t e s , o r by f i r m s ' o r companies, the c o n t r o l l i n g i n t e r e s t s i n w h i c h i s owned by c i t i z e n s of t h e U n i t e d S t a t e s . In t h i s c o n n e c t i o n t h e Board w i s h e s t o c a l l y o u r a t t e n t i o n e s p e c i a l l y t o t h e p r o v i s i o n s o f S u b d i v i s i o n V l l of R e g u l a t i o n K w h i c h m a s t be s t r i c t l y complied w i t h i n order t o insure compliance a t a l l times w i t h the r e quirements of the Act. You w i l l a l s o n o t e t h a t t h e b y - l a w s o f t h e c o r p o r a t i o n nnst p r e s c r i b e appropriate r e g u l a t i o n s f o r the r e g i s t r a t i o n of t h e s h a r e s o f s t o c k i n a c c o r d a n c e w i t h t h e t e r m s o f t h e l a w and t h a t t h e b y - l a w s m a s t a l s o p r o v i d e t h a t t h e c e r t i f i c a t e s o f . s t o c k i s s u e d by the corporation s h a l l contain provisions s u f f i c i e n t to put the holder o n n o t i c e o f t h e t e r m s o f t h e law and t h e B o a r d ' s r e g u l a t i o n d e f i n i n g t h e l i m i t a t i o n s upon the r i g h t of t r a n s f e r . The B o a r d w i l l b e v e r y g l a d t o a n s w e r a n y f u r t h e r i n q u i r i e s w h i c h may s u g g e s t t h e m s e l v e s t o y o a i n c o n n e c t i o n w i t h t h e o r g a n i z a t i o n and o p e r a t i o n o f t h e s e c o r p o r a t i o n s . Very t r u l y y o u r s , Governor.
@FedFRASER