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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." 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