View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

CAPITAL ISSUES COMMITTEE
Created by the
WAR FINANCE CORPORATION ACT

THE LAW
and

CIRCULAR NO. ONE
Embracing the

RULES AND

REGULATIONS

of the
CAPITAL ISSUES COMMITTEE

[Indexed]

From the Records of
37 Wall Street, New York.
Affiliated with

QJtjrr (Enrpnratum Slruat (Bnmpmuj &gnfcmt
15 Exchange Place, Jersey City
Organized 1892
Boston, 511 Exchange Bldg.
Philadelphia, 1428 Land Title Bldg.
(Corporation Registration Company)
Portland, Me., 281 St. John Street
Chicago, 112 W. Adams Street
St. Louis, Federal Reserve Bank Bldg.
Pittsburgh, 1202 Oliver Bldg.
Wilmington, 486 duPont Bldg.
Washington, D. C , 501 Colorado Bldg.
(Corporation Trust Co. of America)




WAR FINANCE CORPORATION

DIRECTORS AND OFFICERS OF THE CORPORATION.
(June 15, 1918.)
W. G. M C A D O O ,

Chairman

W. P . G. H A R D I N G , Vice-Chairman
CLIFFORD M.

and General

LEONARD

EUGENE MEYER, J R .
ANGUS W.

MCLEAN

MEMBERS OF THE CAPITAL ISSUES COMMITTEE
C H A R L E S S. H A M L I N ,
F R E D E R I C C. G O F F ,
J O H N SKELTON
F R E D E R I C A.
JAMES B.
J O H N S.
HENRY

Chairman
Vice-Chairman

WILLIAMS

DELANO

BROWN
DRUM

C.

FLOWER

Stephen L. Selden, Executive
W. T . C h a p m a n ,

Secretary

Oliver E . Foulk, Fiscal

Bradley W . Palmer,




Agent

Counsel
2

Secretary

Manager

THE FEDERAL RESERVE CITIES A N D DISTRICTS AS MODIFIED
BY THE FEDERAL RESERVE BOARD TO J U N E 15, 1918.

[For the name and location of each of the twelve Federal Reserve Banks and
such branches thereof as had been established to June 15, 1918, see page 4.]




3

LOCATION OF THE TWELVE FEDERAL RESERVE BANKS AND THEIR BRANCHES.
(June 15, 1918.)
District No. 1
Federal Reserve Bank of Boston
Boston, Mass.
District No. 2

Federal Reserve Bank of New York

New York, N. Y.

District No. 3

Federal Reserve Bank of Philadelphia

Philadelphia, Pa.

District No. 4

Federal Reserve Bank of Cleveland

Cleveland, 0 .

Cincinnati Branch of the Federal Reserve Bank of Cleveland, Cincinnati, O.
Pittsburgh Branch of the Federal Reserve Bank of Cleveland, Pittsburgh, Pa.

District No. 5

Federal Reserve Bank of Richmond

Richmond, Va.

Baltimore Branch of the Federal Reserve Bank of Richmond, Baltimore, Md.

District No. 6

Federal Reserve Bank of Atlanta

Atlanta, Ga.

New Orleans Branch of the Federal Reserve Bank of Atlanta, New Orleans, La.

District No. 7

Federal Reserve Bank of Chicago

Chicago, 111.

Detroit Branch of the Federal Reserve Bank of Chicago, Detroit, Mich.

District No. 8

Federal Reserve Bank of St. Louis

St, Louis, Mo.

Louisville Branch of the Federal Reserve Bank of St. Louis, Louisville, Ky.

District No. 9
District No. 10

Federal Reserve Bank of Minneapolis

Minneapolis, Minn.

Federal Reserve Bank of Kansas City

Kansas City, Mo.

Omaha Branch of the Federal Reserve Bank of Kansas City, Omaha, Neb.
Denver Branch of the Federal Reserve Bank of Kansas City, Denver, Colo.

District No. 11

Federal Reserve Bank of Dallas

Dallas, Tex.

El Paso Branch of the Federal Reserve Bank of Dallas, El Paso, Tex.

District No. 12




Federal Reserve Bank of San Francisco

San Francsico, Cal.

Spokane Branch of the Federal Reserve Bank of San Francisco, Spokane, Wash.
Portland Branch of the Federal Reserve Bank of San Francisco, Portland, Ore.
Seattle Branch of the Federal Reserve Bank of San Francisco, Seattle, Wash.
Salt Lake City Branch of the Federal Reserve Bank of San Francisco, Salt Lake City, Utah.
[See page 3 for map showing the territory embraced within each of the twelve Federal Reserve Districts.]

WAR FINANCE CORPORATION ACT
Public—No. 121—65th Congress.
Approved by the President, April 5, 1918.
AN ACT
To provide further for the national security and defense, and, for
the purpose of assisting in the prosecution of the war, to provide credits for industries and enterprises in the United States
necessary or contributory to the prosecution of the war, and to
supervise the issuance of securities, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled:
TITLE II.—CAPITAL ISSUES COMMITTEE.

SEC. 200. That there is hereby created a committee to be known
as the "Capital Issues Committee/' hereinafter called the Committee,
and to be composed of seven members to be appointed by the President of the United States, by and with the advice and consent of the
Senate. At least three of the members shall be members of the
Federal Reserve Board.
No member, officer, attorney, agent, or employee of the Committee shall in any manner, directly or indirectly, participate in the determination of any question affecting his personal interests, or the
interest of any corporation, partnership, or association in which he
is directly or indirectly interested. Before entering upon his duties,
each member and officer shall take an oath faithfully to discharge
the duties of his office. Nothing contained in this or any other Act
shall be construed to prevent the appointment as a member of the
Committee, of any officer or employee under the United States or of
a director of a Federal reserve bank.
The terms during which the several members of the Committee
shall respectively hold office shall be determined by the President
of the United States, and the compensation of the several members
of the Committee who are not members of the Federal Reserve
Board shall be $7,500 per annum, payable monthly, but if any such
member receives any other compensation from any office or employment under the United States the amount so received shall be
deducted from such salary, and if such other compensation is $7,500
or more, such member shall receive no salary as a member of the
Committee. Any member shall be subject to removal by the President of the United States. The President shall designate one of
the members as chairman, but any subsequent vacancy in the chairmanship shall be filled by the Committee. Four members of the
Committee shall constitute a quorum for the transaction of business.
SEC. 201. That the Committee may employ and fix the compensation of such officers, attorneys, agents, and other employees as
may fee deemed necessary to conduct its business, who shall be
5



CAPITAL ISSUES COMMITTEE—THE ACT.

appointed without regard to the provisions of the Act entitled "An
Act to regulate and improve the civil service of the United States,"
approved January sixteenth, eighteen hundred and eighty-three
(volume twenty-two, United States Statutes at Large, page four
hundred and three), and amendments thereto or any rules or regulations made in pursuance thereof. No such officer, attorney, agent,
or employee shall receive more compensation than persons performing services of like or similar character under the Federal Reserve
Board.
SEC. 202. That all the expenses of the Committee, including all
necessary expenses for transportation incurred by the members or by
its officers, attorneys, agents, or employees under its orders in
making an investigation or upon official business in any other places
than at their respective headquarters, shall be allowed and paid on
the presentation of itemized vouchers therefor approved by the
chairman.
The Committee may rent suitable offices for its use, and purchase
such furniture, equipment, and supplies as may be necessary, but
shall not expend more than $10,000 annually for offices in the District of Columbia.
The principal office of the Committee shall be in the District of
Columbia, but it may meet and exercise all its powers at any other
place. The Committee may, by one or more of its members, or by
^uch agents as it may designate, prosecute any inquiry necessary
to its duties in any part of the United States.
S E C 203. That the Committee may, under rules and regulations
to be prescribed by it from time to time, investigate, pass upon, and
determine whether it is compatible with the national interest
that there should be sold or offered for sale or for subscription any
issue, or any part of any issue, of securities hereafter issued by
any person, firm, corporation, or association, the total or aggregate
par or face value of which issue and any other securities issued by
the same person, firm, corporation, or association since the passage
of this Act is in excess of $100,000. Shares of stock of any corporation or association without nominal or par value shall for the
purpose of this section be deemed to be of the par value of $100
each. Any securities which upon the date of the passage of this
Act are in the possession or control of the corporation, association, or
obligor issuing the same shall be deemed to have been issued after
the passage of this Act within the meaning hereof.
Nothing in this title shall be construed to authorize such Committee to pass upon (1) any borrowing by any person, firm, corporation, or association in the ordinary course of business as distinguished from borrowing for capital purposes, (2) the renewing
or refunding of indebtedness existing at the time of the passage of
this Act, (3) the resale of any securities the sale or offering of which
the Committee has determined to be compatible with the national
interest, (4) any securities issued by any railroad corporation the




6

CAPITAL ISSUES COMMITTEE—THE ACT.

J0

property of which may be in the possession and control of the
President of the United States, or (5) any bonds issued by the War
Finance Corporation.
Nothing done or omitted by the Committee hereunder shall be
construed as carrying the approval of the Committee or of the
United States of the legality, validity, worth, or security of any
securities. .

11

SEC. 204. That there is hereby appropriated out of any money
in the Treasury not otherwise appropriated, for the remainder of
the fiscal year ending June thirtieth, nineteen hundred and eighteen,
and the fiscal year ending June thirtieth, nineteen hundred and nineteen, the sum of $200,000 for the purpose of defraying the expenses of the establishment and maintenance of the Committee, including the payment of the salaries and rents herein authorized.

Ig

SEC. 205. That the Committee shall make a report to Congress
on the first day of each regular session, including a detailed statement of receipts and expenditures, and also including the names of
all officers and employees and the salaries paid to each.

13

SEC. 206. That this title shall continue in effect until, but not
after, the expiration of six months after the termination of the
war, the date of such termination to be determined by a proclamation of the President of the United States, but the President may at
any time by proclamation declare that this title is no longer necessary, and thereupon it shall cease to be in effect.
TITLE III.—MISCELLANEOUS.

14

SEC. 300. That whoever wilfully violates any of the provisions of
this Act, except where a different penalty is provided in this Act,
shall, upon conviction in any court of the United States of competent jurisdiction, be fined not more than $10,000 or imprisoned for
not more than one year, or both; and whoever knowingly participates
in any such violation, except where a different penalty is provided
in this Act, shall be punished by a like fine or imprisonment, or
both.

15

SEC. 301. That no stamp tax shall be required or imposed upon
a promissory note secured by the pledge of bonds or obligations of
the United States issued after April twenty-fourth, nineteen hundred
and seventeen, or secured hv the pledge of a promissory note
which itself is secured by the pledge of such bonds or obligations;
Provided, That in either case the par value of such bonds or obligations shall equal the amount of such note.

16

SEC. 302. That if any clause, sentence, paragraph, or part of
this Act shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, or, in case any court of competent
jurisdiction shall adjudge to be invalid any provisions hereof in




7

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.

respect of any class or classes of securities, such judgment shall not
affect, impair, or invalidate the remainder of this Act, but shall be
confined in its operation to the clause, sentence, paragraph, part, or
subject matter of this Act directly involved in the controversy in
which judgment shall have been rendered.
17

SEC. 303. That the term "securities/' as used in this Act, includes stocks, shares of stock, bonds, debentures, notes, certificates
of indebtedness, and other obligations.

T8

SEC. 304. That the right to amend, alter, or repeal this Act is
hereby expressly reserved.

19

SEC. 305. That the short title of this Act shall be the "War Finance Corporation Act."

20

SEC. 306. That all provisions of any Act or Acts inconsistent
with the provisions of this Act are hereby repealed.

CIRCULAR NO. 1.
CAPITAL ISSUES COMMITTEE
WASHINGTON
Created by Act of Congress Known as the War Finance Corporation Act,
Approved April 5, 1918.

RULES AND REGULATIONS.
[All communications intended for the Committee must be addressed
to "Capital Issues Committee, National Metropolitan Bank Buildings
Washington, D. C."]
21

22
23

1. The act.—The War Finance Corporation Act authorizes
the Capital Issues Committee, under rules and regulations to be
prescribed by it from time to time, to investigate, pass upon, and
determine whether it is compatible with the national interest that
there should be sold or offered for sale or for subscription any issue,
or any part of any issue, of securities issued after April 5, 1918,
by any person, firm, corporation, or association, the total or aggregate par or face value of which issue and any other securities issued
by the same person, firm, corporation, or association, since the said
date may be in excess of $100,000. Shares of stock of any corporation or association without nominal or face value are deemed to
be of the face value of $100 each.
Any securities which upon April 5, 1918, were in the possession
or control of the corporation, association, or obligor issuing the same,
shall be deemed to have been issued after that date.
The term "securities" as used herein includes stock, shares of
stock, bonds, debentures, notes, certificates of indebtedness, and
other obligations.




8

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.
24

25

26

27

28

29

30

T h e C o m m i t t e e is not authorized to pass upon (1) any borrowing
b y any person, firm, corporation, or association, in t h e ordinary
course of business as distinguished from borrowing for capital purposes; (2) t h e renewing or refunding of indebtedness existing
upon April 5, 1918; (3) t h e resale of a n y securities, t h e sale or offering
of which t h e C o m m i t t e e has determined to b e compatible with t h e
national interest; (4) any securities issued b y a n y railroad corporation, t h e property of which m a y be in t h e possession and control
of t h e President of t h e United S t a t e s ; or (5) a n y bonds issued by t h e
W a r Finance Corporation.
N o t h i n g done or omitted b y t h e C o m m i t t e e under t h e act shall
be construed as carrying t h e approval of t h e C o m m i t t e e or of t h e
United States of t h e legality, validity, worth, or security of any securities.
2. Object of the Committee.—The object of the creation of
t h e C o m m i t t e e is to assist in t h e conservation of financial resources,
labor and material, so t h a t they m a y be available for uses essential
t o t h e prosecution of t h e war.
T h e necessity of such conservation has often been m a d e known
and the G o v e r n m e n t has adopted various methods of accomplishing
it, one of the most i m p o r t a n t of which is t h r o u g h the regulation
of t h e issue of securities. In order t h a t this m e t h o d m a y be pursued
with due regard to t h e requirements of the N a t i o n a l G o v e r n m e n t
as well as to private interests, Congress has created t h e " C a p i t a l
Issues C o m m i t t e e . " In order to perform its duties and fulfill its
responsibilities in the fairest and most effective manner, the Comm i t t e e has prescribed these rules and regulations, not only e s t a b lishing forms for procedure, b u t also defining general principles
of construction and policy which it will apply equally and uniformly
t h r o u g h o u t the United States.
3 . Interpretation of the act.—The provisions of the act applying
to t h e C o m m i t t e e will be interpreted by it in a manner to enable
t h e C o m m i t t e e to perform its duties in a broad and comprehensive
manner, in accordance with t h e i n t e n t of Congress. These p r o visions m a y be considered with respect to (a) t h e classes of securities (b) the classes of persons and corporations issuing securities,
and (c) t h e classes of financial transactions involved in t h e issue
of securities which come within t h e scope of t h e act.
W i t h regard to (a), t h e description of securities is t h e b r o a d e s t
possible, and includes every class of securities t h a t can be issued
and sold or offered for sale or subscription, whether the issue is m a d e
b y an existing corporation or other issuing principal or b y one organized or created after t h e passage of t h e act. T h e form or length
of time for which notes or other securities are t o run is n o t a n y
criterion. Original issues of stock and securities are included as well
as all increases thereof.
W i t h regard to (b), t h e act applies to every class of person, association, and corporation which can issue securities, w h e t h e r now
existing or hereafter created or organized.




9

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.
31
32
33
34
35
36

37

38

39

With regard to (c), there are several classes of financial t r a n s a c tions which do not come within t h e province of t h e C o m m i t t e e
to wit:
(1) Borrowing in t h e ordinary course of business, as distinguished
from borrowing for capital purposes;
(2) Renewing or refunding indebtedness existing on April 5,.
1918; and
(3) T h e sale of securities up to b u t not exceeding $100,000 in
a m o u n t since April 5, 1918.
In construing these exceptions, t h e n a t u r e of t h e transaction
and not t h e form of security is to govern.
Borrowing in t h e ordinary course of business is usually d o n e
for seasonal requirements, through bank loans, advances, or t h r o u g h
the issue of short-time notes, b u t borrowing m a y be done in t h e
same m a n n e r for capital purposes, and in such cases b a n k loans,
advances, or short-time notes come within the province of the
Committee.
As to securities issued to refund or renew indebtedness existing
on April 5, 1918, t h e Committee construes t h e act to mean t h a t
in the opinion of Congress, t h e issue of such securities is c o m p a t i b l e
with the national interest, and t h a t the C o m m i t t e e is n o t t o pass
upon t h e same for t h e purpose of determining t h a t fact. B u t
before a n y such issue is made, application should be m a d e to t h e
Committee stating t h e a m o u n t of the indebtedness existing on t h e
said date, and the a m o u n t of securities necessary to renew or refund
t h e same. T h e Committee being satisfied on these two points will
pass t h e issue as a m a t t e r of course. This procedure is designed
t o give refunding securities t h e official sanction t o which t h e y a r e
entitled, and to save investors desiring to purchase t h e m from the
burden of making unnecessary investigation. I t is not intended
to extend the jurisdiction of the Committee beyond the limits defined
b y the act.
T h e finding given by the Committee on refunding
issues, for the sake of convenience, will be in the same form as used
for other issues (see paragraph 21 hereof [If89]), unless some different
form is requested by t h e applicant. I t will be understood, however,,
t h a t the expression t h a t such issues are not incompatible with t h e
national interest, is m a d e b y t h e C o m m i t t e e in execution of t h e
congressional intent, and is not an independent determination of t h e
Committee in excess of its authority.
W i t h respect to t h e limitation of $100,000, it is to be observed
t h a t after an issuing principal has issued securities of all classes
amounting to $100,000, since April 5, 1918, all future issues of any
a m o u n t come within t h e province of t h e Committee. T h e C o m mittee, however, does not pass upon issues of $100,000 or less, unless
a district committee for special reasons shall recommend action by
the Committee. In case a district committee should feel t h a t an
issuing principal is resorting to successive small issues for t h e purpose
of evading t h e spirit of t h e act, the m a t t e r should be b r o u g h t to t h e
attention of t h e Committee.
%
f
I t should be remembered, however, t h a t the reasons for conserving
capital for war purposes apply always, whether t h e a m o u n t s involved




10

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.

40

41
42

are large or small, and while it is wholly impracticable for any governmental agency to pass upon all issues of securities separately, t h e
principles involved affect all alike. Patriotic citizens should not
permit capital under their control to be wasted or used for any purpose
not contributory to the prosecution of the war, no matter how small the
amount, and they should be even more diligent when they must decide
for themselves without the benefit of specific advice from the Government.
4. S t a t e s a n d subdivisions thereof.—In defining the issues of
securities which t h e Committee was authorized to investigate and
pass upon, Congress did not in express terms refer to States, counties,
or municipalities. T h e reason for this omission is presumed to b e
because Congress did not wish even indirectly to appear to regulate
t h e affairs of the sovereign States. On the other hand, Congress
did not forbid t h e C o m m i t t e e to pass upon such issues, and it is so
obvious t h a t t h e purpose and object of t h e act of Congress will not
be effective to a very large extent unless V-t Committee do<.s so,
t h e C o m m i t t e e will entertain and act upon t h e applications of
States and all subdivisions.
W i t h respect to t h e position of t h e States and subdivisions, t h e
Committee, for convenience, repeats t h e views it has expressed in
response to m a n y official inquiries, as follows:
T h e purpose of t h e a c t of Congress is clear—to conserve national
resources. Its appeal is addressed to all patriotic citizens, in w h a t ever capacity they m a y be acting. All are expected to cooperate
in giving effect to t h e act "for the purpose of assisting in t h e prosecution of t h e w a r . " T h e same reasons and t h e same inducements
applicable to t h e officers of private corporations and to individuals
in their private capacity apply with even greater force to t h e officers
of States, counties, and municipalities and t h e y should be t h e
leaders in t h e national effort to conserve resources. E v e r y issue
of bonds and securities of States and all subdivisions should b e
submitted to t h e C o m m i t t e e before being sold or offered for sale.
G e n e r a l Policies.

43

44

5. W a r W o r k . — W i t h regard to issues for t h e purpose of aiding
war operations, w a r contracts, production of war materials, or
intended to assist t h e National G o v e r n m e n t in the prosecution
of t h e war, t h e C o m m i t t e e will feel free to consult and avail itself
of t h e advice of t h e d e p a r t m e n t s or officers of t h e National G o v e r n m e n t having knowledge of the requirements, conditions, or facts
affecting t h e G o v e r n m e n t . T h e C o m m i t t e e will endeavor n o t only
to restrict t h e use of capital for nonessential purposes, b u t also t o
encourage its use'for essential purposes.
6. I s s u e s of s h a r e s for property.—The issue of securities in
exchange for property or for other shares, m a y or m a y not constitute
a sale or offer of such securities within t h e meaning of t h e act. N o
general rule can be laid down and each case m u s t be considered
b y t h e C o m m i t t e e separately. Applications for such issues should
b e m a d e in t h e usual manner.




11

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.

45

46

47
48

49
50

51

52

7. Stock dividends.—The issue of shares through a stock
dividend should be made only from bona fide surplus earnings or
profits to present shareholders, without payment by them, and must
not require the use of additional capital. All such issues should
be submitted to the Committee by application in the usual manner.
^ 8. Private issues.—There is no distinction between "public"
issues and "private" issues. Whenever securities or shares of any
kind are issued to obtain fresh capital, the transaction comes within
the province of the Committee. It is not important whether the
fresh capital is obtained from the public, or from any portion of it
—that is, from private individuals. The approval of the Committee is required regarding all issues sold, offered for sale or for
subscription, in excess of $100,000, regardless of whether the transaction is public or among individuals privately.
9. Merits.—The Committee will not express any opinion upon
the intrinsic merits of securities to be offered for sale. It is authorized
to examine into two questions:
(1) Whether the issue is timely with respect to the financial
operations to be undertaken by the Government from time to time,
and
(2) Whether the objects for which the funds are to be raised are
compatible with the national interest.
Intending purchasers of securities which have been passed by
the Committee must thoroughly understand and appreciate the above
statement. The fact that securities have been passed is no criterion
whatever as to their value or standing as an investment in any
respect. The favorable action of the Committee is not even any
criterion as to the merits of an issue in a national or patriotic sense.
In some cases the Committee feels obliged to pass issues on account
of local or special circumstances, when it would not do so if such
reasons did not exist. While it will, of course, result that patriotic
citizens will purchase only securities that have been passed by the
Committee, nevertheless the decision whether to make any such
purchase must be made by the purchaser without being influenced
in any manner by the favorable action of the Committee.
10. Roads.—It is recommended that all State authorities
(including counties, districts, commissions, and municipalities)
shall undertake only such paving and other road improvement work
as may be actually necessary to be undertaken at this time, thereby
avoiding the use of men and money needed for the service of the
National Government. In order to justify the construction of
roads, either military necessity or unusual economic necessity must
be clearly proved.
l l . Municipal expenditures.—The amount of capital invested
in municipal bonds every year is very large, and if this amount, or
a substantial portion thereof, could be saved, the fundsof investors
and savings banks would be available in corresponding amounts
for the use of the National Government. There are certain classes




12

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.
of municipal improvements and expenditures which should wholly
cease, such as parks and b e t t e r m e n t s solely designed for purposes
of appearance or architecture. All others should be curtailed a n d
postponed until after the war whenever possible. T h i s applies to
public buildings, hospitals, street and road construction, w a t e r works extensions, sewerage and drainage improvements, sidewalks,
etc.
Ordinarily only a small proportion of t h e improvements
planned by a municipality are of such a character t h a t t h e y can
not be postponed for a period w i t h o u t endangering t h e health or
welfare of the community.
53

For example, it is said t h a t no schoolhouses have been built in
England since the war except in munition centers where t e m p o r a r y
and inexpensive structures have been erected. In this country,
if such additional facilities are necessary, such t e m p o r a r y structures
should be resorted to whenever possible.

54

T h e fact t h a t the expense is to be repaid wholly or in p a r t b y
special assessments does not make any difference.

55

T h e fact t h a t there appears to be labor available is n o t a t r u e
criterion, because war industries in m a n y parts of t h e c o u n t r y are
in such need of labor t h a t labor organizations are making comprehensive efforts to transport surplus labor, wherever most needed,

56

12. Elections authorizing i s s u e s . — I n cases where t h e opinion
of the Committee is desired before the proceedings authorizing t h e
issue have been completed, caution will be exercised so t h a t t h e
action of the Committee can not be used to influence t h e decision
as to the issue. Whenever the decision of t h e C o m m i t t e e can be
postponed until after the completion of such proceedings, w i t h o u t
involving undue delay, expense, or hardship, it will be the policy
of the Committee to do so. This is especially t r u e in cases of popular
elections because the limited scope of the Committee's action
c a n n o t be justly appreciated by electors and it might influence
their v o t e .

57

In cases, however, where the C o m m i t t e e is clear t h a t its opinion
would be unfavorable, it is not improper t h a t suggestion to t h a t
effect should be made in order to save t h e expense of calling and
holding a popular election.

58

13. Applications.—Applications respecting t h e proposed issue
or offering of any securities shall be executed in triplicate, the
original and one copy transmitted to the Capital Issues Committee,
N a t i o n a l Metropolitan Bank Building, Washington, D . C , and t h e
other copy to the district committee in care of the Federal Reserve
B a n k in the district of the applicant.

59

T h e committee has prepared a form of application and all applicants are urged to obtain such forms from the committee or a district
committee and make their applications on t h e m . In addition t h e
applicant must provide all the information which will enable t h e

Instructions to Applicants.




13

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.

60
61
62

63

64

65
66
67
68

69

C o m m i t t e e to perform its duties with a full knowledge of all circumstances and conditions appropriate thereto.
T h e following suggestions are made with regard to applications,
and the additional information required:
(a) T h e purpose of t h e proposed issue shall be fully and accuratelydescribed.
(b) If t h e purpose of the issue is to renew or refund i n d e b t e d n e s s
created before April 5, 1918, describe fully the n a t u r e and c h a r acter of such indebtedness and the time or times and t h e general
purposes for which it was incurred.
(f) If t h e issue is to be created wholly or partly for war purposes,
or to raise capital or secure advances in connection with war contracts
or war supplies, or to provide equipment, buildings, materials, or
facilities of any kind for war work, full details thereof, and of t h e
kinds and in general t h e q u a n t i t y of supplies or materials to be
furnished, and the amounts needed therefor, should be stated as welL
as t h e proportion which such war work bears to t h e total business
of t h e applicant. W h e r e any war purpose exists, mention should be
m a d e of t h e controlling governmental authorities at Washington
and elsewhere in order t h a t the Committee may obtain from such
authorities any further information it may desire.
(d) If t h e issue is deemed necessary by reason of any governmental requirement, national, State, or municipal, or on account
of t h e requirement of any commission or other authority, t h e application should give complete details.
(<?) If t h e issue is deemed necessary for public health or for educational or road purposes or other public necessity, t h e application,
should describe t h e same in full.
( 0 If t h e issue is desired for private purposes and no public
necessity or requirement exists, very complete exposition of purpose
and necessity should be stated.
(g) T h e consideration, stating amount and character, for which
t h e proposed securities are to be issued, the price of sale, and t h e
amounts to be received by the applicant should be shown.
(h) hi all cases, except for war work, explicit reasons must be
given why the proposed issue can not be postponed until after the war,
or why the necessity of the- issue is greater than the paramount
need
of the National Government to conserve the financial resources, materials,
and labor of the country for the prosecution of the war.
14. Identification.—It is necessary to identify t h e issues accurately. T h e following information must be furnished:

With Regard to Proposed Issues of Bonds, Notes, Certificates of
Indebtedness, and Other Securities.
70

71

(a) N a m e or designation of the proposed issue, a m o u n t , d a t e
of issue, dates of m a t u r i t y , and rate of interest. T h e serial numbers
shall be given whenever possible. T h e serial numbers are necessary
when t h e proposed issue is part of a larger authorized a m o u n t ,
either then o u t s t a n d i n g or issuable in future.
(b) A m o u n t of total authorized issue of which proposed issue
is p a r t .
14




CIRCULAR ISSUES COMMITTEE—CIRCULAR NO. 1.
72
73
74

(c) Attested copies of t h e votes, ordinances, or resolutions
authorizing the proposed issue,
(d) In case the proposed issue is to be m a d e u n d e r or secured b y
a mortgage, deed of trust, indenture, or similar instrument, a t t e s t e d
copy of such instrument.
(e) Certified copies of the last balance sheet of applicant, including a s t a t e m e n t of bills payable and income s t a t e m e n t for three
years past, including last preceding 12 m o n t h s . (This does n o t
apply to States or municipalities.)

With Regard to Proposed Issues of Shares of Stock.
75
76
77
78

79
80

(/) T o t a l capitalization of t h e corporation.
(g) Certified copies of the last balance sheet of applicant, including a statement of bills payable and income s t a t e m e n t for t h e
last preceding 12 months.
(h) T o t a l authorized issue of stock of which proposed issue
is p a r t .
(t) N a m e or designation and a m o u n t of the proposed issue;
t h e m e t h o d and dates of issue, stating whether the issue is to b e
m a d e b y offer to shareholders, by sale, public subscription, or
otherwise.
(J) Attested copies of the votes or resolutions authorizing t h e
proposed issue.
15. Time of application.—Applications with respect to p r o posed issues should be made as early as possible in order to enable
the Committee to co-operate most effectively. Municipalities should
forecast expenditures for the year, and agree with the C o m m i t t e e
upon necessary items without waiting until an issue of bonds is
a b o u t to be advertised or sold. This procedure has already been
followed in several important instances with satisfaction, both to
the municipality and to the Committee. A program once decided
enables agreed issues of bonds to be- expedited when ready for
sale.
District Ccmmittees and Auxiliary Ccmmittees.

81
82

83

84

16. In each Federal Reserve District there shall be a district
committee of the Capital Issues Committee, with h e a d q u a r t e r s a t
the Federal Reserve Bank of the district.
E a c h district committee shall consist of the Federal Reserve
Agent as chairman, the Governor of the Federal Reserve B a n k as
vice chairman, and three or more other members chosen because of
special qualifications to aid the district committee in its work.
Bankers and others having experience in municipal, m a n u f a c turing, or public utilities securities m a y be invited to become affiliated
with a district committee as an auxiliary committee, the m e m b e r s
of which, from time to time, as their advice and experience m a y
be useful or helpful, m a y be asked to join in investigating a n d
making recommendations regarding specific applications.
N o m e m b e r of a district or auxiliary committee shall in
a n y manner, directly or indirectly, participate in the d e t e r m i n a tion of any question affecting his personal interests or t h e i n t e r e s t




15

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.
of any corporation, partnership, or association in which he is directly
or indirectly interested.
17. T h e district committees upon receipt of applications will
examine t h e m in order to determine whether the necessary information has been furnished by the applicant in accordance with these
rules and regulations, and without waiting for t h e direction of t h e
C o m m i t t e e will advise the applicant to supply such additional
information as m a y a p p e a r to be necessary or desirable. F r o m
time to time t h e C o m m i t t e e will advise the district committees
when t h e latter should t a k e further action upon such applications,
a n d in accordance with such advices the district committees will
m a k e full and complete investigation into all m a t t e r s connected
with the application and into all considerations bearing thereon. T h e
district committees will m a k e an analysis or summary of the application, verifying t h e detailed description of the securities to be issued
and especially describing the purpose or object of the issue. T h e
district committee will complete its analysis with a recommendation
to the C o m m i t t e e giving an accurate and full s t a t e m e n t of its reasons
for such recommendation, and the district committee will thereupon send forward to the Committee its analysis, s u m m a r y , and
recommendations, together with all original documents, certificates,
and other papers not already filed with the Committee.
18. T h e applicant shall not be informed of the recommendations
of t h e district committee unless and until such recommendations
shall have been adopted b y the Committee. T h e final action of t h e
C o m m i t t e e will in general be sent to the district committee and t h e
applicant a t the same time. In special cases t h e Committee will
communicate with t h e district committee, requesting the l a t t e r
t o inform the applicant.
19. District committees are requested whenever possible t o
discourage or postpone for the period of the war proposed issues
of securities and all expenditures for nonessential purposes,whatever
t h e a m o u n t . If t h e y are successful in discouraging or postponing
an issue or expenditure, t h a t fact shall be reported p r o m p t l y t o
t h e C o m m i t t e e . District committees are also charged with the d u t y
of furthering t h e public understanding of the functions and purposes
of the C o m m i t t e e in their districts, especially with bankers a n d
public officials.
20. Cases referred to district committees by the C o m m i t t e e
shall each be the subject of separate correspondence, in order t h a t
office files m a y be kept intact.




16

CAPITAL ISSUES COMMITTEE—CIRCULAR NO. 1.
21.

Form of favorable opinion:
CAPITAL ISSUES

COMMITTEE.

WASHINGTON.

Issue of
[Here follows an accurate description of the securities passed upon.]
After due investigation into the purpose of the issue above described, we have determined t h a t the sale thereof is not incompatible
with the national interest.
This finding constitutes no approval of such issue as regards
its legality, validity, worth, or security, in any respect.
I n a n y public offer of the said issue for investment b y advertisem e n t or circular, and whenever reference is m a d e to this finding,
it is requested t h a t the s t a t e m e n t quoted below shall be incorporated
in full.
CAPITAL

ISSUES

COMMITTEE,

By
Chairman.
"Passed by the Capital Issues C o m m i t t e e as n o t incompatible
with t h e national interest, b u t w i t h o u t approval of legality, validity >
worth, or security. Opinion N o
"
[ N O T E . — T h i s opinion can not be given unless an accurate a n d
complete description of the securities necessary for identification has
been furnished, as hereinbefore prescribed. Applicants will save
delay by carefully regarding this requirement.]

22.

Form of unfavorable opinion.
CAPITAL ISSUES C O M M I T T E E .
WASHINGTON.

Referring to the proposed issue of the following securities, to w i t : .
[Here follows a brief description of the securities.]
I n accordance with the a u t h o r i t y vested in the Capital Issues Comm i t t e e b y act of Congress, approved April 5, 1918, this c o m m i t t e e
has investigated the proposed issue of securities above mentioned
and has determined t h a t the sale, or offer for sale or subscription
thereof a t this time, is not compatible with the national interest.
Opinion N o

CAPITAL ISSUES

COMMITTEE,

By

.
Chairman.
CAPITAL ISSUES COMMITTEE,

B y Charles S. Hamlin,
J u n e 4, 1918.



17

Chairman-

INDEX TO LAW AND REGULATIONS.
[References are to paragraph numbers.]
Act expires by limitation when. . 13
Address of Committee. .58 (See note top of 1f21.)
Advances for current needs. .9, 24, 32, 36
Advertisements of approved issues. .89
Amendment of Act: right to amend reserved. 18
Applications to Committee for approval of issue..58-80
Action on and disposition of.. 85-90
Examination of, by district committees. . 85
Form for making. .59
Forms of approval or disapproval. .89, 90
Investigations of. .85
When filed. .80
Where filed. .58
Appropriations . . 1 1
Approved issues not vouched for by Committee or by the U. S.. . 10, 25, 47, 89
Advertisements of approved issues.. 89
Such only, however, to be purchased by patriotic citizens. .50
Authorization of issue; seeking opinion of Committee prior to. .56
Auxiliary committees in local districts. .83
Balance sheet of applicant, certified, to be supplied. .74, 76
Bank loans for current needs. ,9, 24, 32, 36
Bond issues; detailed information in connection with application. .60, 70
Bonds are "securities". . 17, 23
Bonds: refunding those issued prior to April 5, 1918. .9, 24, 33, 37
To be passed on by Committee. .37, 62
Capital Issues Committee. . 1
Address .58 (See note top of 1f2l.)
Auxiliary committees in local districts. . 83
Creation of; size of; appointment of. . 1
District committees (See "District Committees.")
Employees: officers, attorneys, agents, etc.. .4
Expenses of. .5
Expires by limitation. . 13
Interpretation of Act by. .28
Limitation of authority to pass on issues. .9, 24, 31
Meetings to be held where. .7
Object of.. 26
Offices of. 6
Principal office. .7, 58
Personnel, page 2
Policy outlined. .27, 43
Powers and duties of. .8-10, 21
Qualifications: restrictions. .2
Report to Congress annually. . 12
Sub-committees (See "District Committees.")
Term; salary; chairman; quorum. .3
Certificates of indebtedness are "securities". . 17, 23
* Detailed information in connection with application. .60, 70
~
Classes of financial transactions exempt. .9, 24, 31
Classes of persons or corporations issuing securities affected. .8, 21, 30
Classes of securities affected. . 17, 23, 29
Close corporations .46
County bonds and other securities. .40
Debentures are "securities". .17, 23
Deeds of trust: attested copies of, when issue is made under. .73
Detail of issue to be submitted. .58-80
District Committees 81
Application to be filed with. .58, 85
Auxiliary committees. .83
Discourage or postpone when possible non-essential issues or expenditures. .87




18

INDEX TO LAW AND REGULATIONS
References are to paragraph numbers.
.District Committees—concluded.
Forms of application may be secured from 59
Headquarters 81
Inform public of functions and purposes of Committee. 87
Investigations of applications to be made by 85
Location of. 81 (See location of Federal Reserve Banks, page 4.)
Membership of. 82
Passes on small issues after $100,000 minimum has been reached. 38
Recommendations of district committees to Committee. .85
Dividends; stock. 45
Drainage improvements: expenditures for 52
Effective date of authority of Committee 8, 21
Elections authorizing issues and the passing on issues by the Committee. .56
Essential issues encouraged. .26, 43
Exempt securities 9, 24, 31
Nature of transactijn, not form of security, to govern. .35
Favorable opinion of Committee; quoting in advertisements, circulars, etc.. .89
Federal Reserve Agents: chairmen of respective district committees 82
Federal Reserve Banks: headquarters of district o m m i i t e e . 81 (Seepage 4
for location of Banks.)
Federal Reserve Board; at least 3 members of, to serve on Committee. . 1
Federal Reserve Districts (See map on page 3.)
Form for making application. .59
Form of favorable opinion. .89
Form of unfavorable opinion. .90
Form of security no criterion. 29
-Government departments or officers to be consulted by Committee. .43, 63
Governors cf Federal Reserve Banks: vice-chairmen of respective district
committees. . 82
Hospitals: expenditures for..52
Identification of issues. .69
Income statement of applicant, certified, to be supplied. . 74, 76
Increases to prior issues. .29
Indebtedness existing prior to April 5, 1918; renewing or refunding. .9, 24, 33j 37
To be passed on by Committee. 37, 62
Indenture: attested copy when issue is made under. 73
Individuals affected as well as firms, corporations, etc. 8, 21, 30
Issues: the $100,000 limitation. 8, 21, 34, 38
Smaller issues after $100,000 minimum has been reached. 38
Smaller issues before $100,000 minimum has been reached. 39
Instructions in detail to applicants. 58-80
Interpretation of Act by Committee. .28
Invalidating clause 16
Investigations to be made by district committees.. 85
Labor in connection with municipal expenditures. 55
Legality of approved issues not vouched for by Committee. . 10, 25, 47, 89
Limitation of $100,000. 8, 21, 34, 38
Smaller issues after $100,000 minimum has been reached. .38
Smaller issues before $100,000 minimum has been reached. .39
Limitation of authority of Committee to pass on issues. .9, 24, 31
Loans: current. 9, 24, 32, 36
Meecings: Committee may meet and execute its powers where. .7
Merits, intrinsic; no opinion to be expressed 10, 25, 47, 89 ^
Approved issues only, to be purchased by patriotic citizens..50
Minimum issue affected. 8, 21, 34, 38
Smaller issues afer $100,000 minimum has been reached. .38
Smaller issues bef .re $100,000 minimum has been reached. .39
Mortgages securing issues: attested copies. 73
Municipal bonds and other securities. .40, 52
Municipal expenditures. .52, 80
New corporations: securities issued by. .30
Non-essential issues and expenditures. .39, 68
Discouraged bv district committees. .87




19

INDEX TO LAW AND REGULATIONS
References are to paragraph numbers.
Non-par value stock. .8, 21
Notes are "securities". .17, 23
Detailed information in connection with application 60, 70
Secured by Liberty Bonds: free from stamp tax. . 15
Short-term for current needs 9, 24, 32, 36
Notification to applicant of Committee's opinion.. 86, 89, 90
Object of Act and Committee. 26
Obligations affected. . 17, 23, 29
Opinion of Committee: notification to applicant. .86
Form of favorable opinion. .89
Form of unfavorable opinion. 90
Opinion of Committee sought before authorization of issue 56
Ordinances authorizing proposed issue: attested copies. .72
Original issues as well as increases affected. .29
Parks: expenditures for. .52
Parts of issues 8, 21
Penalties. . 14
Persons affected as well as firms, corporations, etc. 8, 21, 30
Policy of Committee outlined 27, 43
Powers of Committee. .8-10, 21
Private issues vs. public issues. .46
Promissory notes (See "Notes.")
Property: stock issued for. .44
Public vs. private issues. 46
Public buildings; expenditures for. .52
Publicity of favorable opinion of Committee. 89
Quorum of Committee: four members constitutes. .3
Quoting favorable opinion of Committee. .89
Railroad securities. .9, 24
Renewing or refunding indebtedness existing prior to April 5, 1918. .9, 24, 33, 37
To be passed on by Committee. .37, 62
Repeal of Act: right reserved 18
Repeal of prior inconsistent provisions of law. .20
Report of Committee to Congress annually. . 12
Resale of authorized securities 9, 24
Resolutions authorizing proposed issues: attested copies. .72, 79
Roads: issues for new, for paving, for repairs. .51, 52
Rules and regulations to be prescribed. .8
Circular No. 1. .21
Schoolhouses: expenditures for..53
Securities defined. . 17, 23, 29
Securities: sale of, offering for sale, or subscriptions t o . 8, 21
Authorized but unsold at time of passage of A c t . . 8, 22
Exempt from provisions of Act 9, 24, 31
Form or length of time no criterion. .29
Sewerage construction: expenditures for..52
Short term obligations for current needs. .9, 24, 32, 36
Short title. .19
Sidewalks: expenditures for new, repairs, etc. ..52
Special assessments: county aad municipal obligations to be met b y . . 54
State bonds and other securities. 40 »
Statement of approval by Committee: quotation of, in advertisements, circulars, e t c . . 8 9
Stock and shares of stock are "securities". .17, 23
Original issue as well as increases. .29
Stock dividends. .45
Stock issues. .8, 21, 29
Detailed information in connection with application. .60, 75
For other shares of stock. .44
For property. .44
Private vs. public issues. .46
Stock dividends. .45




20

INDEX TO LAW AND REGULATIONS
References are to paragraph numbers.
Stock without nominal or par value. 9, 21
Streets: expenditures for new, repairs, e t c . . 52
Sub-committees (See "District Committees.")
Time of application. .80
Time running before maturity of security no criterion. 29
Treasury stock. .8, 22
United States does not vouch for approved issues.. 10, 25
Unsold securities authorized prior to passage of Act. 8, 22
Validation of issues passed on by Committee. 10, 25, 47, 89
Approved issues only, to be purchased by patriotic citizens
Votes authorizing proposed issues: attested copies 72, 79
War Finance Corporation bonds are exempt. 9, 24
War: issues essential to prosecution of. 26, 43
War: issues not essential to prosecution of 39, 68
Waterworks: expenditures for 52




21

50

T h e Records of

The foregoing copies of the law and of the rules and regulations
of the Capital Issues Committee are taken "From the Records of
The Corporation Trust Company."

These records contain new

laws enacted by Congress and the various State Legislatures on
every subject relating to business, taxation and corporations; also
rulings, regulations, opinions, decisions and other official data of
interest and value to attorneys.

Any one of our offices will be

pleased to explain the extent and scope of these records and how
our service may save the time of the busy lawyer and facilitate his
work.




22

WHAT W E DO
DEPARTMENTS
CORPORATION DEPARTMENT—Assists attorneys in the organization of corporations and in the licensing of foreign corporations in every State and in the Provinces of Canada—
subsequently furnishes statutory representation and maintenance for domestic and foreign corporations.
REPORT AND TAX DEPARTMENT—Attends for attorneys
to corporation reports and tax matters in every State and
Province.
LEGISLATIVE DEPARTMENT—Reports on pending legislation; furnishes copies of bills and new laws in every State
and Congress.
TRUST DEPARTMENT—Acts as trustee under deed of trust,
custodian of securities, escrow depository and depository
for reorganization committees.
TRANSFER DEPARTMENT—Acts as registrar and transfer
agent of stocks, bonds and notes.
FEDERAL DEPARTMENT—Reports decisions of the United
States Supreme Court, rulings of the Interstate Commerce
Commission, Federal Trade Commission, Bureau of Internal
Revenue and Federal Reserve Board.
Furnishes agent at Washington for conmon carriers to
accept service of orders, process, etc., of Interstate Commerce Commission.
SERVICES
INCOME TAX SERVICE—Reports rulings and regulations under
the Federal Income Tax Law.
WAR TAX SERVICE—Reports rulings and regulations on the
Federal Estate Taxes, the Special Excise Tax on Corporations, the Excess Profits Tax, the Stamp Taxes and other
special and miscellaneous taxes made necessary by the war.
RESERVE ACT SERVICE—Reports rulings and regulations of
the Federal Reserve Board.
FEDERAL TRADE COMMISSION SERVICE—Reports rulings
and decisions of the Federal Trade Commission.
SUPREME COURT SERVICE—Reports decisions of the U. S.
Supreme Court.




23

Be Right on Your
Corporation
Matters




W

HERE there is a lawyer who is
going ahead with sure knowledge,
you will find him consistently utilizing
the services of this Company in cor*
poration matters.
Resourceful, responsible, and above all
trained in accuracy, this organization
for twenty-five years has rendered a
specialized service to representative corporation lawyers everywhere.

Our personal talk No. 1—on the importance of a corporation being licensed before
doing business—will be sent to counsel
on request.

37 WALL STREET, NEW YORK

24


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102