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F ederal R eserve Bank o f D allas F I S C A L A G E N T O F T H E U N IT E D S T A T E S DALLAS, TEXAS 75222 Circular No. 67-168 August 23, 1967 PROPOSED AM ENDM ENT OF TREASURY DEPARTMENT CIRCULAR N O . 3 00 PROVIDING FOR BOOK-ENTRY TREASURY SECURITIES To All Banking Institutions an d Others Concerned in the Eleventh Federal Reserve District: Enclosed is an excerpt from the F ederal R egister of August 2, 1967, containing a notice of proposed rule m aking issued by the T reasury D epartm ent th a t would am end its Circular No. 300, “G eneral R egulations W ith R espect to U nited States Securities.” T he proposed am endm ent provides for the issuance of transferable T reasu ry bonds, notes, certificates of indebtedness, and bills in the form of “book entries,” as well as in definitive (o r physical) form as a t present. Such book-entry T reasury securities would be m aintained on the records of the several F ederal R eserve Banks, as fiscal agents of the U nited States, and the book-entry procedure would apply w henever T reasury securities are deposited, on original issue or otherwise, w ith F ederal R eserve B anks for any of the following purposes: ( 1 ) by a m em ber bank of the F ederal R eserve System for its sole account and in lieu of the safekeeping of definitive T reasury securities by F ederal R eserve B anks in their individual capacities, ( 2 ) as collateral for advances under R egulation A of the B oard of G overnors of the F ederal R eserve System, ( 3 ) as collateral for T reasury T ax and Loan accounts under T reasury D epartm ent Circular No. 92, or ( 4 ) as collateral for deposits of public m oneys under T reasury D ep artm en t C ircular No. 176. T h e proposed am endm ent provides th a t any depositor which has definitive T reasury securities on deposit w ith a F ederal R eserve B ank for any of the purposes specified above on th e effective d ate of the am endm ent, or which th ereafter deposits definitive T reasury securities w ith a F ederal R eserve B ank for any such purpose, will be deem ed to have consented to their conversion to book-entry T reasury securities. F ederal R eserve B anks would continue, of course, to hold definitive T reasury securities for purposes other th an those indicated above. U nder the proposed book-entry procedure, F ederal R eserve B anks would send depositors, for whose account book-entry T reasury securities are entered, an advice describing such securities and indicating the purpose for which the securities are held. W ithdraw als and transfers of book-entry T reasury securities m ay be m ade upon a depositor requesting ( a ) delivery of like definitive T reasu ry securities to itself or on its order to a transferee, or ( b ) transfer in book-entry form to any transferee eligible to deposit T reasury securities for one of the purposes indicated above. T h e T reasury D epartm ent has advised th a t the proposed am endm ent does not change th e taxable or exem pt status of T reasury securities and does not set forth special rules of identification of book-entry T reasu ry securities for tax purposes. Although such securities will not be identifiable by serial num ber, depositors may, for purposes of determ ining the cost or other basis and holding period of securities, follow tax record-keeping procedures essentially th e sam e as those they now follow w ith respect to definitive T reasury securities. How ever, in any case where a depositor (1 ) has on deposit under the book-entry procedure securities of the sam e issue acquired on different dates or a t different prices, (2 ) is not on a “first in-first out” (F IF O ) basis, and ( 3 ) is disposing of or w ithdraw ing only a p art of such book-entry securities, it should in its letter requesting such action, or in a confirm atory letter or wire (if the original request was m ade by telephone), identify by date or dates of acquisition and price or prices the lot or lots affected. If it does not do so, the IR S m ay conclusively presum e th a t the bank is on a F IF O basis. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) T h e identifying d ata referred to would be solely for th e purpose of perm itting depositors to m ake appro priate current records to support, if the occasion should subsequently arise, the taxpayers’ own records and tax reports. F ederal R eserve B anks would, accordingly, have no responsibility for attem pting to verify the accuracy of th e identification data so specified and would not do so. In its first phase, the book-entry procedure will not apply to securities held by a bank as “dealer” (as defined in 26 C FR §1.471-5) for sale to custom ers in the ordinary course of business, as distinguished from those held for investm ent. Therefore, during this phase book-entry T reasury securities deposited under the procedure would be identified in the depositor’s own records as held for investm ent and the depositor would not need to refer to this fact in its instructions to the F ederal R eserve B ank regarding the securities. T h e proposed book-entry procedure is designed to help the T reasury D epartm ent and the F ederal R eserve B anks handle a large volum e of T reasury securities through the use of m odern high speed data-processing equipm ent. Use of the new procedure should lead to increased efficiency in the handling and servicing of T reasu ry securities by the F ederal R eserve Banks. W hile the book-entry procedure will initially be applied only to T reasu ry securities held by F ederal Reserve B anks for the purposes noted, it is hoped th a t the procedure m ay ultim ately be extended to T reasury securities held for other purposes and depositors. T h e notice of proposed rule m aking states th a t prior to final adoption consideration will be given to any data, views or argum ents pertaining to the proposed am endm ent th a t are subm itted in writing, in duplicate, to the Commissioner of Public D ebt, W ashington, D. C. 20220, within the period specified in th e notice. At the p resent tim e it appears th a t th e earliest effective date of the book-entry procedure will be October 2, rath er th an the Septem ber 5 date indicated in the Notice of Proposed R ule M aking. Y ours very truly, W atrous H. Irons President 11216 Proposed Rule Making DEPARTMENT OF THE TREASURY Fiscal Service [31 CFR Part 3 0 6 ] UNITED STATES SECURITIES Book-Entry Procedure; Notice of Proposed Rule Making N otice is hereby given, pursuant to th e A dm inistrative Procedure A ct, approved June 11, 1946, th a t th e regulations set forth in Treasury D epartm ent Circular No. 300, T hird R evision (31 CFR P art 306) are proposed to be further am ended as ten tatively show n below. However, prior to their final adoption, considera tion w ill be given to any data, views, or argum ents pertain ing thereto w hich are subm itted in w riting, in duplicate, to th e C om m issioner o f th e Public Debt, W ashington, D.C. 20220, w ith in th e pe riod of 30 days from th e date o f th is n o tice in th e F e d e r a l R e g i s t e r . [seal] J ohn K. C arlock, Fiscal Assistant Secretary. J uly 28,1967. D epartm ent Circular No. 300, Third R evision, dated D ecem ber 23, 1964, is hereby am ended effective Septem ber 5, 1967, by redesignating Subpart O (en titled “M iscellaneous P rovisions” ) as Subpart P, and renum bering §§ 306.115 through 306.118 as §§ 306.123 through 306.126, respectively, and by inserting a new Subpart O as fo llo w s: Subpart O— Book-Entry Procedure § 3 0 6 .1 1 5 D e fin itio n o f term s. In th is subpart, un less th e con text otherw ise requires or in d ic a tes: (a) “Reserve B an k ” m eans a Federal R eserve B ank and its branches acting as Fiscal A gent of th e U nited S tates. (b) “Treasury secu rity” m ean s a transferable Treasury bond, note, certifi ca te of indebtedness, or bill issued under th e Second L ib e r t y B o n d Act, as am ended, in th e form of a definitive Treasury security or a book entry T reas ury security. (c) “D efinitive Treasury secu rity” m eans a transferable Treasury bond, note, certificate of indebtedness, or bill issued under th e Second Liberty Bond Act, as am ended, in th e form of a p h y si cal security. (d) “B ook-entry Treasury secu rity” m eans a transferable Treasury bond, note, certificate o f indebtedness, or bill issued under th e Second Liberty Bond Act, as am ended, in th e form of an entry m ade as prescribed in th is subpart on th e records o f a R eserve Bank. § 3 0 6 .1 1 6 A p p licab ility. T h is subpart is applicable to any T reasury securities now on deposit or hereafter deposited w ith any Reserve B an k for any purpose specified in § 306.118(a) except th a t no deposits w ill be accepted thereunder on or after th e date of m aturity or call of th e securities.1 Any depositor w hich on th e effective date of th is subpart h as definitive Treasury securities on deposit w ith a R eserve B ank (in eith er its individual capacity or as F iscal A gent) for any purpose specified in § 306.118(a) shall be deem ed to have consented to their conversion to bookentry Treasury securities pursuant to th e provisions of th is subpart, and in th e m anner and under th e procedures pre scribed by th e R eserve Bank. § 3 0 6 .1 1 7 A u thority o f R eserve B ank s. E ach R eserve B ank is hereby au th or ized and directed, in accordance w ith th e provisions of th is subpart, to (a) issue book-entry Treasury securities by m eans of entries on its records w hich sh a ll in clude th e nam e of the depositor, th e am ount, th e title of th e loan (or th e series) and th e m atu rity d a te ; (b) effect conversions betw een book-entry T reas ury securities and definitive Treasury securities; and (c) otherw ise service and m a in ta in book-entry Treasury securities. § 3 0 6 .1 1 8 A ccounts su b ject to entry p ro ced u re; p led g es. b ook - (a) T he book-entry procedure applies to Treasury securities now on deposit or h ereafter deposited in accounts w ith any R eserve B ank (1) as collateral pledged to a Reserve B ank (in its individual c a p acity) for advances by it, (2) as co lla t eral pledged to th e U nited S ta tes under T reasury D epartm ent Circulars No. 92 or 176, both as revised and am ended, and (3) by a m em ber bank of th e Federal R eserve System for its sole accou n t and in lieu of th e safekeeping o f definitive T reasury securities by a R eserve Bank in its individual capacity. E ntries w ill be m ade for th e am ounts deposited for each specific purpose. (b) A pledge of book-entry Treasury securities in th e nam e of a pledgor, or any in terest therein, in favor of a R e serve B ank in its ow n right as pledgee or in favor of th e U nited S ta te s as pledgee, is effected, n o tw ith sta n d in g any provision of law to th e contrary, by th e m aking of an appropriate en try under paragraph (a) (1) or (2) of th is section, of th e am ount o f th e securities pledged. T he m aking of such entry sh a ll have th e effect of a delivery o f a definitive T reas 1 The date of call as defined In these regu lations (sec. 306.2) is “the date fixed in the official notice of call published in the Federal Register * * * on w hich th e obligor will make paym ent of th e security before m a turity in accordance w ith its term s.” ury security in bearer form representing th e am ount of th e obligations pledged and sh all effect a perfected security in terest th erein in favor o f th e pledgee, w ho sh all be a holder. N o filing or record in g w ith a public recording office or officer sh all be necessary to perfect th e pledge or security in terest in book-entry Treasury securities under th is section. P ledges of, or security in terest in, de fin itive Treasury securities w hich are under pledge to a R eserve B ank in its ow n right or to th e U nited S ta tes at the tim e of th eir conversion to book-entry Treasury securities sh all be fu lly effective w ith respect to su ch book-entry Treasury securities. A R eserve B ank, w hen re quested by th e pledgee, sh all convert book-entry T reasury securities into d e fin itive T reasury securities and deliver th em to th e pledgee for disposition under th e applicable pledge arrangem ent; and th e pledge or security in terest o f the pledgee in th e book-entry Treasury se curities prior to conversion sh all con tin u e to be fu lly effective w ith respect to such definitive Treasury securities. § 3 0 6 .1 1 9 L im ita tio n s o n tran sfers or p led ges. E xcept as provided in th is subpart, book-entry T reasury securities m ay not be assigned, transferred, hypothecated, pledged as collateral, or used as security for th e perform ance of an obligation, and th e Treasury D ep artm en t will n ot recog nize any such assignm ent, transfer, h y pothecation, pledge or use. § 3 0 6 .1 2 0 W ithdraw als and transfers. W ithdraw als and tran sfers of bookentry T reasury secu rities m ay be m ade upon a depositor requesting (a) delivery o f like definitive Treasury securities to itse lf or on its order to a transferee, or (b) tran sfer to any transferee eligible under § 306.118(a). T h e m aking o f any book-entry tran sfer by a R eserve B ank sh a ll have th e sam e effect as a delivery to th e tran sferee o f definitive Treasury securities in bearer form . T h e tran sfer of book-entry T reasury securities w ith in a R eserve B ank w ill be m ade in accordance w ith procedures established by th e latter n o t in con sisten t w ith th is subpart. T he tran sfer o f book-entry T reasury secu rities betw een R eserve B anks will be m ade through a telegraphic tra n sfer procedure. All requests fo r w ithdraw al or for tran s fer m u st be m ade prior to th e m aturity or d ate of call of th e securities. Treasury bonds and n o tes w hich are to be delivered p h ysically upon w ithdraw al or transfer m ay be issued eith er in reg istered 2 or in bearer form . 8 Except for Treasury notes, EA and EO Series. FEDERAL REGISTER, VOL. 32 , NO. 148— WEDNESDAY, AUGUST 2, 1967 PROPOSED RULE MAKING § 3 0 6 .1 2 1 R egistered b on d s and n o tes. No form al assign m en t sh all be required for th e conversion to book-entry T reas ury secu rities of registered Treasury se curities held by a R eserve B ank (in eith er its individual cap acity or as fiscal agen t) on th e effective date of th is subpart for any purpose specified in § 306.118(a). R egistered Treasury securities deposited th ereafter w ith a R eserve B ank for any purpose specified in § 306.118(a) sh a ll be assigned for conversion to book-entry T reasury securities. T h e assignm ent, w hich sh all be executed in accordance w ith th e provisions of Subpart P of th e regulations of th is part so fa r as appli cable, sh all be to “T he Secretary o f th e T reasury for conversion to book-entry T reasury secu rities by th e Federal R e serve B ank o f _________________________ _ as F iscal A gent o f th e U nited S ta tes.” § 3 0 6 .1 2 2 Servicin g book -en try T reas u ry se cu rities; p a y m en t o f in terest, p a y m en t at m aturity or u p o n call. In terest becom ing due on book-entry T reasury securities sh a ll be charged in th e Treasurer’s accou n t on th e in terest due date and rem itted or credited in accordance w ith th e depositors’ in stru c tions. S uch securities sh all be redeem ed and charged in th e Treasurer’s accou n t on th e d ate o f m aturity, call or advance refunding, and th e redem ption proceeds, principal and interest, sh all be disposed o f in accordance w ith th e depositors’ instructions. [F.R. Doc. 67-9042; Filed, Aug. 1, 1967; 8 :49 a.m.] FEDERAL REGISTER, VOL. 32 , NO. 148— WEDNESDAY, AUGUST 2, 1967 11217
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