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F ederal Reser v e Bank of Da lla s DALLAS. TEXAS 7 5 2 2 2 Circular No. 68-39 February 16, 1968 AMENDMENT TO REGULATION K T o A H M e m b e r Banks in the Eleventh Federal Reserve District: The Board of Governors of the Federal Reserve System has adopted, effective February 8, 1968, an amendment to its Regulation K, “Corpo rations Engaged in Foreign Banking and Financing Under the Federal Reserve Act.” Enclosed is a copy of an explanatory press release dated February 8, 1968, concerning the amendment. A copy of the amendment is enclosed for insertion in the ring binders containing the Regulations of the Board of Governors and the Bulletins of this Bank. Yours very truly, P. E. Coldwell President Enclosures (2) This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) CORPORATIONS DOING FOREIGN BANKING OTH E R FOREIGN FINANCING U N D E R THE FEDERAL AM EN DM EN TS TO RESERVE OR ACT REGULATION K (12 CFIi PART 211) ISSU E D BY THE BOARD OP GOVERNORS OF THE FED ER AL R ESERV E SYSTEM Effective immediately, Section 211.8 is amended to read as follows: SECTION 211.8 — IN V E STM EN T S IN SHARES O F O T H E R CORPORATIONS. (a) Specific consent. Prior specific consent of the Board is required with respect to the acquisition of any shares by a Corporation, except as provided in the ninth paragraph of section 25(a) of the Act (relating to purchases of stock to prevent loss on debts previously contracted). (b) Conditions. (1) Shares of stock in a corporation shall be disposed of as promptly as practicable if (i) such corporation should engage in the business of underwriting, selling, or distributing securities in the United States or (ii) the Corporation is advised by the Board that their holding is inappropriate under section 25(a) of the Act or this part. (2) In computing the amount which may be invested in the shares of any corporation under section 25(a) of the Act, there shall be included any such investments in other corporations controlled by such corporation. Unless otherwise specified, “shares” in this section include any rights to acquire shares, except that prior Board consent is not required for the acquisition and exercise of stock rights in lieu of dividends which are declared on shares already held by a Corporation and which do not result in an increase in percentage ownership of the corporation. (c) Reports. A Corporation shall inform the Board through the Federal Reserve Bank of its district within thirty days after the close of each quarter with respect to any acquisition or disposition of shares during that quarter, including the following information concerning any corporation whose shares it acquired for the first time (unless previously furnished) : (1) Recent balance sheet and income statement, (2) brief descriptions of the corporation’s business (including full information concerning any such business transacted in the United States), the shares acquired, and any related credit transaction, (3) lists of directors and principal officers (with address and principal business affiliation of each) and of all shareholders (known to the issuing corporation) holding 10 per cent or more of any class of the corporation’s shares (and the amount held by each), and (4) information concerning the rights and privileges of the various classes of shares outstanding. FEDERAL press RESERVE release For immediate r e l e a s e . February 8 , 1968. The Board o f Governors o f t h e F e d e r a l R e s e r v e System to d a y announced t h a t i n v i e w o f t h e p u r p o s e s o f P r e s i d e n t i a l E x e c u t i v e Order 11387 o f January 1, 1968, "Governing C e r t a i n C a p i t a l T r a n s f e r Abroad," t h e Board i s amending, e f f e c t i v e i m m e d ia t e ly , i t s R e g u l a t i o n K, "C o r p o r a tio n s Engaged i n F o r e i g n Banking and F i n a n c i n g Under t h e F e d e r a l R e s e r v e A c t , " t h e s o - c a l l e d "Edge Act" and "Agreement" c o r p o r a t i o n s , to r e q u i r e t h e B o a r d 's s p e c i f i c a p p r o v a l b e f o r e such a c o r p o r a t i o n may make any e q u i t y i n v e s t m e n t i n a f o r e i g n b u s i n e s s . F or m er ly, t h e f o l l o w i n g i n v e s t m e n t s by s u c h c o r p o r a t i o n s c o u ld have be e n made w i t h o u t a p p l i c a t i o n t o t h e Board: o f s h a r e s i n c i d e n t a l to an e x t e n s i o n o f c r e d i t , (1) a c q u i s i t i o n (2) a c q u i s i t i o n o f l e s s than 25 p e r c e n t o f t h e s h a r e s o f a f o r e i g n bank, and ( 3 ) a c q u i s i t i o n o f s h a r e s a t a c o s t o f l e s s th a n $ 2 0 0 ,0 0 0 i f such in v e s t m e n t was l i k e l y t o f u r t h e r t h e develop m ent o f U n it e d S t a t e s f o r e i g n commerce. Under t h e new r u l e , a l l su c h i n v e s t m e n t s , as i n th e c a s e o f o t h e r e q u i t y i n v e s t m e n t s by banks or such c o r p o r a t i o n s , a r e s u b j e c t to t h e s p e c i f i c a p p r o v a l o f t h e Board. The B oar d 's a p p r o v a l w i l l a l s o be n e c e s s a r y f o r such a c o r p o r a t i o n or a bank t o c o n t i n u e to h o ld s h a r e s o f a s u b s i d i a r y t h a t makes any e q u i t y i n v e s t m e n t . In t a k i n g t h i s a c t i o n t h e Board i n d i c a t e d t h a t t h e new p r o v i s i o n s are i n t e n d e d t o be o f temporary d u r a t i o n , and t h a t each r e q u e s t -2- f o r i t s approval w i l l be con sid ered in the l i g h t o f the purposes and aims o f th e Government' s Balance o f Payments Program. In g e n e r a l , the Board w i l l c o n s id e r on i t s m e r its any a p p l i c a t i o n to make an e q u it y investment else w h e r e than in developed c o u n t r ie s o f c o n t i n e n t a l Western Europe, provided th a t i t i s assured t h a t the investment can be made w i t h i n the c e i l i n g e s t a b l i s h e d f o r the a p p lic a n t under the Voluntary Foreign Credit R e s tr a in t Program ad m in istered by the Board, and th at the p r i o r i t i e s e s t a b l i s h e d in t h a t program are b ein g fo llo w e d . Equity investm ents in developed c o u n t r ie s o f c o n t i n e n t a l Western Europe w i l l n o t , w h i le the new p r o v is io n s remain In e f f e c t , be approved by the Board, u n le s s circum stances c l e a r l y demonstrate th at th e t r a n s a c t i o n w i l l not be d e tr im e n ta l to the United S t a t e s b a la n ce o f payments. A l l e q u ity investm ents abroad by banks or Edge or Agreement co rp o ra tio n s w i l l , o f c o u r s e , con tin u e to be co n sid ere d as an e x t e n s io n o f c r e d i t to f o r e i g n e r s fo r purposes o f the Foreign Credit R e s tr a in t Program. -0 -
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