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F e d e r a l R e s e r v e b a n k o f D a l l a s D ALLAS, TEXAS November 8, 1956 To the Member Banks of the Eleventh Federal Reserve District: Enclosed is a copy of our operating Bulletin No. 7 relating to the custody of securities, revised as of November 7, 1956. The revised copy should be substituted in your ring binder for Bulletin No. 7 dated January 1, 1945. We shall be pleased to furnish additional copies of this bulletin upon request. Yours very truly, Watrous H. Irons President Enclosure This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE BANK OF DALLAS BULLETIN No. 7 Effective November 7, 1956 (Superseding Bulletin N o. 7 dated January 1, 1945) CUSTODY OF SECURITIES T o the Member Banks o f the Eleventh Federal Reserve District: This bulletin describes the services o f the Federal Reserve Bank o f Dallas relating to the custody o f securities and supersedes Operating Bulletin No. 7, dated January 1, 1945. A n y member bank depositing, either directly or through others, securities with this bank, or its branches, shall, by such action, be understood to have agreed to the terms and conditions set forth herein. For purposes o f this bulletin, and, unless otherwise stated, all references to the Federal Reserve Bank o f Dallas or “ this bank” shall include its branches at El Paso, Houston and San Antonio. SCOPE OF SERVICE 1. The services described herein are maintained primarily for the con venience o f member banks located outside o f Federal Reserve cities. Under special circumstances, however, these services may be extended to member banks located in those cities. 2. Except as hereinafter provided, only securities which are neither assigned nor pledged and which are owned by the depositing bank will be accepted. Securities acceptable for custody by this bank include all bonds, notes, certificates o f indebtedness, and Treasury bills issued or guaranteed by the United States Government, and miscellaneous state, municipal or corporate bonds. Such securities will be held in custody for the account, at the risk and subject only to the order o f the member bank named as owner in the acknowl edgment issued by this bank. 3. Securities belonging to member banks which are pledged to depart ments, agencies, or officials o f the United States Government to be held sub ject to the instructions thereof will be accepted pursuant to any A ct o f Congress or any regulation or request o f the Secretary o f the Treasury providing for the deposit o f securities with a Federal Reserve Bank. 4. Securities belonging to member banks which are pledged to officials o f states, or political subdivisions thereof, as security for public deposits, will be accepted when application is made jointly by the member bank and the public body whose deposit is secured. Special forms are furnished by the Federal Reserve Bank for this purpose. 5. N o charge will be made for holding securities in custody, but charges will be made to cover cost o f transportation and insurance on incoming and outgoing shipments o f securities, for telephone and telegraph expense, and collection charges, if any, made by collecting banks. LIMITATION OF LIABILITY ON SECURITIES HELD IN CUSTODY 6. Each bank or other party depositing securities with this bank either directly or through others shall by such action be deemed to have agreed that the Federal Reserve Bank o f Dallas: — 2— BULLETIN No. 7 a. W ill be responsible only for the exercise o f the same diligence with which it cares for its own property; b. W ill not be liable for any loss o f such securities when a loss is due to any cause other than lack o f such diligence; c. W ill not be responsible for the genuineness, validity, or altera tion o f or any defect in such securities; and d. W ill not be obligated to maintain any form of insurance for the account of the depositor in relation to securities held in custody for it. ACKNOWLEDGMENTS AND RECEIPTS Acknowledgments 7. Nonnegotiable and nontransferable acknowledgments are issued to cover unpledged securities held in custody and for securities pledged as col lateral to secure Treasury T ax and Loan accounts as well as those to be held as security for member bank indebtedness. It will be unnecessary to return these acknowledgments when securities are withdrawn, since the securities covered thereby will be surrendered or otherwise disposed of upon receipt o f appropriate instructions over the authorized signature of an officer o f the member bank named in the acknowledgment as owner. Formal Receipts 8. Formal receipts are issued in letter form for securities pledged as collateral, under the terms o f Treasury Department Circular No. 176, to secure United States Government deposits and for securities pledged to secure deposits o f United States District Court appointed trustees and receivers. Formal receipts must be returned when securities pledged under the foregoing classes are withdrawn. Joint Safekeeping Receipts 9. Joint safekeeping receipts are issued to both depositor and depository fo r securities pledged as collateral to secure deposits o f states a n d /or political subdivisions th ereof; also for securities pledged to secure uninvested funds o f Trust Departments o f member banks on deposit in the commercial banking department o f such banks. Joint safekeeping receipts must be returned when the securities covered by such receipts are withdrawn. SERVICES PERFORMED BY FEDERAL RESERVE BANK 10. In the absence o f specific instructions to the contrary, this bank will endeavor to perform certain services as outlined herein but will assume no liability for failure to perform such services. These services are intended merely as an aid to member banks and do not relieve the member bank o f its own duty to keep itself informed o f maturities, call dates, and other informa tion affecting its own portfolio. Collection o f Maturing United States Government Securities (Unpledged) 11. Unpledged United States Government securities and fully guaranteed obligations o f its agencies which are payable by the Federal Reserve Bank of — 3— BULLETIN N o. 7 Dallas as fiscal agent o f the United States and held by it in custody will, in the absence o f specific instructions from the owner, be withdrawn prior to maturity or redemption call date, and the proceeds credited to the member bank’s account on the due date. Collection o f Maturing Municipal or Corporate Securities (Unpledged) 12. Upon receipt o f written authority furnished by the owning bank, this bank will enter for collection, under the terms and conditions o f the current bulletin o f this bank governing the collection o f noncash items, maturing un pledged municipal or corporate securities payable in a city other than the domicile o f the owning bank. Securities payable in the city or town in which the owning bank is located, or payable outside the continental United States, will be shipped to the owning bank. The shipping charges for collecting munici pal or corporate securities will be charged to the owning bank’s account. Exchange o f Maturing Securities (Unpledged) 13. Under instructions from a member bank, this bank will effect the ex change o f maturing unpledged United States Government securities for available new issues. Upon receipt o f the new securities to be held in custody, a new acknowledgment will be issued therefor. Pledged Securities 14. N o action will be taken by this bank relative to maturing or called securities which are pledged, except upon receipt of appropriate written in structions o f the owning bank and the pledgee. W hen so instructed, maturing securities, other than United States Government securities, will be handled for collection under the terms and conditions o f the current bulletin o f this bank governing the collection o f noncash items, and United States Government securities will be redeemed. Disposition o f the proceeds, when available, will be made upon receipt o f appropriate instructions. Notice of Called or Maturing Securities 15. This bank will notify banks o f the approaching maturity of United States Government securities only if such securities are pledged, or if new issues o f securities are to be offered in exchange therefor. Notice o f maturity o f all municipal or corporate securities will be given in advance o f maturity date. However, this bank does not maintain a called securities record, and, therefore, cannot undertake to advise banks when securities are called for redemption. Municipal or Corporate Securities Received for the Account of Member Banks 16. Under appropriate written instructions from a member bank, this bank will accept for the member bank’s account municipal or corporate securities delivered by brokers and others and make payment therefor at the price stipu lated in the purchasing bank’s letter. In handling these transactions, this bank acts solely as agent for the member bank and assumes no responsibility fo r the genuineness, validity or any alteration o f the securities received. — 4— BULLETIN No. 7 Collection of Maturing Coupons 17. Unless otherwise instructed, this bank w ill: (1 ) credit the owning bank on maturity date for maturing coupons detached from United States Govern ment securities and fully guaranteed obligations of its agencies which are payable by the Federal Reserve Bank o f Dallas as fiscal agent o f the United States and held in custody for its account; and (2 ) enter fo r collection, under terms o f this bank’s current bulletin governing the collection o f noncash items, coupons detached from other securities held in custody and credit the account o f the owning bank upon receipt o f proceeds. Municipal or corporate coupons payable in the city or town in which the owning bank is located, or payable outside the continental United States, will be shipped to the owning bank. Coupons attached to securities which are pledged as collateral to a customer’s note held under rediscount or as collateral to an advance by this bank and held by this bank will not be clipped and handled for collection, unless specific in structions are received in connection therewith. Unpaid Coupons 18. Coupons entered for collection and returned unpaid will be reattached to the securities from which they were detached, and the owning bank will be advised o f the reason for nonpayment. In the absence o f specific instructions from the owning bank, no further effort will be made to collect on these and subsequent coupons attached to such securities. PLEDGING SECURITIES To United States Government 19. U pon written instructions from the owning bank and subject to the approval o f the Treasury Department, this bank will hold securities pledged to departments, agencies and officials of the United States as collateral to secure deposits under the terms o f Treasury Department Circular No. 176. To United States District Courts 20. Under designation as custodian by a United States District Court and at the request o f the Court and a member bank, this bank will hold as collateral, securities pledged to secure court deposits. Securities held as collateral to secure United States District Court deposits can be substituted for, or with drawn, only under order o f the Court. T o United States District Court Appointed Trustees 21. Under designation as custodian by a United States District Court, this bank will hold in custody securities pledged as collateral to secure deposits o f trustees in bankruptcy or receivership. Securities held as collateral to secure deposits o f Court appointed trustees can be substituted for, or withdrawn, only under order o f the Court. — 5— BULLETIN No. 7 Collateral to Treasury Tax and Loan Account 22. This bank will hold securities pledged by a member bank to secure its Treasury T ax and Loan account. Deposit, release, or substitution of pledged securities should be authorized by this bank acting as fiscal agent for the United States. PLEDGING SECURITIES — JOINT SAFEKEEPING W ith State Treasurer — State o f Texas 23. A t the request of a member bank, subject to the approval o f the State Depository Board, this bank will hold in joint safekeeping securities pledged as collateral to secure deposits o f the State Treasurer. Application fo r deposit, withdrawal, or substitution o f such pledged securities should be made on appropriate forms furnished by this bank. W ith Political Subdivisions 24. A t the request o f a member bank and the governing body o f a political subdivision, this bank will hold in joint safekeeping securities pledged as col lateral to secure deposits o f the political subdivision. Requests for deposits, substitutions, or withdrawals should be made on appropriate forms furnished by this bank and executed jointly by the depository bank and the governing body o f the political subdivision. (This paragraph is not applicable in any state where law requires such pledged securities to be deposited within the state.) Trust Departments of Member Banks 25. A t the request o f a member bank and the member bank’s Trust De partment, this bank will hold in joint safekeeping securities pledged as col lateral to secure deposits o f uninvested funds o f the member bank’s Trust Department. Deposits, withdrawals, or substitutions o f the pledged securities should be authorized by the joint execution by the member bank and its Trust Department o f appropriate forms furnished by this bank. INSURANCE ON SECURITIES SHIPPED BY REGISTERED MAIL 26. Regardless o f any other provision of this bulletin, any bank or other party shipping, or causing the shipment of, securities to this bank shall by such action be deemed to have agreed that the risk o f loss on such shipments occur ring prior to the actual delivery thereof to this bank by the post office, express company, or other carrier is not assumed by this bank but is on the sender. Likewise, any bank ordering shipments o f securities from this bank shall by such action he deemed to have agreed that this bank in making such shipments undertakes merely to make delivery to the post office, express company, or other carrier, and that the risk o f loss occurring subsequently to such delivery is not assumed by this bank but is on the party ordering such shipment. 27. The Federal Reserve Bank o f Dallas holds open insurance policies under which registered mail shipments o f securities made to or by this bank may be insured. These policies afford protection against loss from the time of acceptance by the messenger or carrier, whether within or without the premises o f the sender, and end when actual delivery has been made to the office of —6— BULLETIN No. 7 the addressee. They do not, however, cover losses through theft by the em ployees o f the sender or the addressee, or losses by risks generally referred to as “ war risks.” 28. The policies contain the following clause eliminating such coverages: “ T o cover . . . risks o f physical loss of or damage to or destruction o f property insured, except theft on the part o f employees of senders or addressees, but this policy does not insure against: (a ) capture, seizure, arrest, restraint, detainment, confiscation, preemption, requisition or nationalization, and the consequences thereof or o f any attempt thereat, whether in time o f peace or war and whether lawful or otherwise; any consequences o f hos tilities or war-like operations (whether there be a declaration o f war or not) but the foregoing shall not exclude collision, explosion or contact with any fixed or floating object (other than a mine or torpedo), stranding, heavy weather or fire unless caused directly (and independently o f the nature o f the voyage or service which the vessel concerned or, in the case o f a collision any other vessel involved therein, is perform ing) by a hostile act by or against a belligerent power, the term ‘power’ as used herein including any authority maintaining naval, military or air forces in association with a p ow er; or any loss or damage caused by any weapon o f war employing atomic fission or radioactive force whether in time of peace or w ar; (b ) the consequences o f civil war, revolution, re bellion, insurrection, or civil strife arising therefrom, piracy, risks o f contraband or illegal transportation or trade, and seizure or destruction under quarantine or customs regulations.” 29. The liability o f the insurers under these policies is limited to $10,000,000 on property from any one sender to any one addressee on any one day unless dispatched by two or more trains, in which event the limit of liability shall apply to each train separately. 30. Shipments o f securities by this bank, other than shipments made in its capacity as fiscal agent o f the United States at the expense and risk of the United States, will be made by registered mail, and, unless instructed to the contrary, this bank will insure them as provided herein under the registered mail policies referred to at the expense o f the member bank. 31. Shipments o f securities to the Federal Reserve Bank may be insured under the registered mail policies referred to, at the expense and risk o f the sender, provided the following conditions are observed: a. On the day a shipment is made to this bank, an advice must be sent by ordinary mail to the office to which the shipment is addressed, showing the name of the shipper, the number o f sacks or packages comprising the shipment, a description o f the contents, and the amount of insurance to be effected. A copy o f this advice should be placed in the shipment. b. The contents o f all shipments must be verified and enclosed in a strong wrapper, envelope, or cloth or canvas bag, securely sealed with wax, paper seal, or in any manner acceptable to the post office at the place o f mailing. — 7— BULLETIN No. 7 c. The verifying, packaging and sealing must be done by an em ployee o f the sender, and the sealed package must be in charge o f a responsible person until deposited and registered at the post office, or shall be in the custody o f an armored car service in transit from the office o f the sender to the post office. d. In the event o f loss o f a shipment insured under the registered mail policies referred to, claim will be made on behalf o f the member bank for the amount for which the shipment is in sured. Prompt notice o f loss should be given this bank, together with all available details regarding the loss. 32. Shipments o f securities by this bank as fiscal agent o f the United States at the expense and risk o f the United States will be made by registered mail and will be insured under the Government Losses in Shipment Act. This coverage is provided for shipments o f United States securities upon original issue and United States securities in exchange for temporary certificates. Risk o f loss by the United States from such shipments terminates upon delivery by the post office. Stock of unissued United Savings Bonds shipped to issuing agents is the property o f the United States, and hence such shipments are at the expense and risk o f the United States and the interest o f the Government does not cease upon delivery by the post office. REVISION OF THIS BULLETIN 33. The right is reserved to withdraw, add to, or amend at any time, any o f the provisions o f this bulletin. Yours very truly, Watrous H . Irons President
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