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F ederal R eserve Bank o f Dallas FISCAL AGENT OF THE UNITED STATES DALLAS, TEXAS 75222 Circular No. 69-110 M ay 2, 1969 PROPOSED EXPANSION OF BOOK-ENTRY PROCEDURE FOR TREASURY SECURITIES To All Banking Institutions and Others Concerned in the Eleventh Federal Reserve District: Enclosed is an excerpt from the Federal Register of April 25, 1969, containing a notice of proposed rule making issued by the Treasury Department that would amend Subpart O of the Treasury’s Circular No. 300, “General Regulations with Respect to United States Securities,” to expand the book-entry procedure for Treasury securities. As explained in our Circular Letter of December 19, 1967, an amendment to Circular No. 300, effective January 1, 1968, provided for the maintenance of Treasury securities in book-entry form on the records of this Bank, as fiscal agent of the United States, whenever Treasury securities are deposited with us for the following purposes: ( 1 ) as collateral for advances by this Bank; ( 2 ) as collateral for Treasury Tax and Loan Accounts or for deposits of public monies under Treasury Department Circulars No. 92 or 176, respec tively; or ( 3 ) for the sole account of a member bank in lieu of the safekeeping of definitive Treasury securities by this Bank. The amendment to Circular No. 300 now proposed would authorize the Federal Reserve Banks, as fiscal agents of the United States, to apply the book-entry procedure to Treasury securities deposited in accounts with such Banks in their individual capacity and as to which securities the Reserve Banks, in their individual capacity, are to continue to maintain deposit accounts notwithstanding application of the book-entry procedure to such accounts. Such accounts include accounts in which Treasury securities are deposited ( 1 ) as collateral to secure deposits of public funds by a State, municipality or other political subdivision in member banks; ( 2 ) pursuant to Section 61 of the Bankruptcy Act in connection with deposits of bankruptcy funds in com mercial banks; ( 3 ) as collateral in connection with the qualification of member banks to exercise trust powers; and ( 4 ) as collateral to secure deposits of trust funds in the commercial banking departments of member banks. In accordance with the proposed amended Subpart O, this Bank will act in a dual capacity (that is, in an individual capacity and as fiscal agent of the United States) with respect to securities in the above accounts. Application of the book-entry procedure to these newly covered accounts will not derogate from or adversely affect the relationships that would otherwise exist between this Bank in its individual capacity and its depositors concerning the deposits involved. The rights of all persons in and with respect to obligations of the United States represented by such Treasury securities, as to which the book-entry procedure is applied, would continue in all respects to be the same as though definitive Treasury securities in bearer form had been at all times held in custody by this Bank in its individual capacity. It is contemplated that this Bank’s Bulletin No. 7, “Custody of Securities” will be amended to provide that any bank or other depositor whose definitive Treasury securities are on deposit in any account newly included under amended Subpart O 30 days after the effective date of that amendment, or which thereafter deposits Treasury securities in any such account, will be deemed to have authorized this Bank to em ploy the book-entry procedure with respect to such securities. The book-entry procedure will not be applied by this Bank to Treasury securities in which third parties have an interest, such as securities deposited as collateral by member banks to secure deposits of public funds in such banks and securities deposited as collateral in connection with the qualifications of member banks to exercise trust powers, without the consent of such third parties. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) The Treasury Department has advised that the Appendix to Subpart O, which contains Federal income tax rules concerning book-entry Treasury securities, will be revised to cover Treasury securities in accounts added under the amended book-entry procedure. It is understood that under the income tax rules to be set forth in that Appendix, the tax identification requirements now applied to book-entry Treasury securities will, in effect, be continued in regard to securities in accounts newly included under the amended Subpart O. The notice of proposed rule making states that prior to final adoption consideration will be given to any data, views, or arguments pertaining to the proposed amendment that are submitted in writing, in duplicate, to the Commissioner of the Public Debt, Washington, D. C. 20220, within the period specified in the notice. Additional copies of this letter and its enclosure will be furnished upon request. We will, of course, be glad to discuss any questions that you may have with respect to the proposed expansion of the book-entry procedure. Yours very truly, P. E. Coldwell President Enclosure 6930 Proposed Rule Making made as prescribed in DEPARTMENT OF THE TREASURY records of a Reserve this subpart on the Bank. Fiscal Service [ 31 CFR P art 3 0 6 ] UNITED STATES SECURITIES Book-Entry P rocedure Notice is hereby given, pursuant to the Administrative Procedure Act, 5 U.S.C. 553, that Subpart O of the regulations set forth in Treasury Department Circu lar No. 300, Third Revision, dated Decem ber 23, 1964, as amended (31 CFR Part 306), are to be further amended as tenta tively shown below. However, prior to their final adoption, consideration will be given to any data, views, or arguments pertaining thereto which are submitted by interested persons in writing, in dupli cate, to the Commissioner of the Public Debt, Washington, D.C. 20220, on or be fore 12 noon, May 22, 1969. All sugges tions for changes should be accompanied by drafts of the language thought neces sary to accomplish the desired change and by statements in support thereof. Dated: April 21,1969. [ seal] J ohn K . Carlock, Fiscal Assistant Secretary. Subpart O 1 of Treasury Department Circular No. 300, Third Revision, dated >December 23, 1964, as amended (31 CFR Part 306), is hereby further amended and revised as follows: S u b p a r t O — Book-Entry P rocedure § 306.1 15 D efinition o f terms. In this subpart, unless the context otherwise requires or indicates: (a) "Reserve Bank” means a Federal Reserve Bank and its branches acting as Fiscal Agent of the United States. (b) “Treasury security” means a transferable Treasury bond, note, cer tificate of indebtedness, or bill issued under the Second Liberty Bond Act, as amended, in the form of a definitive Treasury security or a book-entry Treasury security. (c) “Definitive Treasury security” means a transferable Treasury bond, note, certificate of indebtedness, or bill issued under the Second Liberty Bond Act, as amended, in the form of an entry form. (d) “Book-entry Treasury security” means a transferable Treasury bond, note, certificate of indebtedness, or bill issued under the Second Liberty Bond Act, as amended, in the form of an entry 1 The Second Amendment to the Third Re vision, dated Nov. 7, 1967, redesignated the then-current Subpart O, “Miscellaneous Pro visions,” as Subpart P and renumbered §§306.115 through 306.118 as SS 306.123 through 306.126, respectively, and inserted a new Subpart O on book-entry procedure. rities pursuant to the provisions of this subpart, and in the manner and under (e) “Serially-numbered advice of the procedures prescribed by the Reserve transaction” means the confirmation Bank. (prescribed in § 306.116) issued by a Re (b) (1) A Reserve Bank as Fiscal serve Bank which is identifiable by a Agent of the United States may also ap unique number and indicates that a par ply the book-entry procedure provided ticular written instruction to the Re for in this subpart to any Treasury secu serve Bank with respect to the deposit or rities which have been or are hereafter withdrawal of a specified book-entry deposited for any purpose in accounts Treasury security (or securities) has with it in its individual capacity under been executed. terms and conditions which indicate that (f) “Pledge” includes a pledge of, or the Reserve Bank will continue to main any other security interest in, Treasury tain such deposit accounts in its individ securities held as collateral for loans or ual capacity, notwithstanding applica advances or to secure deposits of public tion of the book-entry procedure to such monies or the performance of an securities. This paragraph is applicable, obligation. but not limited, to securities deposited: (g) “Date of call” (see I 306.2) is “the (1) In connection with deposits in date fixed in the official notice of call member banks of funds of States, mu published in the F ederal R e g ist e r • • * nicipalities, or other political subdivi on which the obligor will make payment sions; or of the security before maturity in ac (ii) In connection with the perform cordance with its terms.” ance of an obligation or duty under § 306.116 A u thority o f Reserve Banks. Federal, State, municipal or local law, Each Reserve Bank is hereby author or judgments or decrees of courts. ized and directed, in accordance with the The application of the book-entry pro provisions of this subpart, to (a) issue cedure under this paragraph shall not book-entry Treasury securities by means derogate from or adversely affect the of entries on its records which shall in relationships that would otherwise exist clude the name of the depositor, the between a Reserve Bank in its individual amount, the title of the loan (or the capacity and its depositors concerning series) and the maturity date; (b) effect any deposits under this paragraph. conversions between book-entry Treas Whenever the book-entry procedure is ury securities and definitive Treasury applied to such Treasury securities, the securities; (c) otherwise service and Reserve Bank is authorized to take all maintain book-entry Treasury securi action necessary in respect of the bookties; and (d) issue serially-numbered ad entry procedure to enable such Reserve vices of transactions with respect to Bank in its individual capacity to per each instruction relating to the deposit form its obligations as depositary with or withdrawal of a book-entry Treasury respect to such Treasury securities. security (or securities) which has been (2) The rights of all persons in all executed. Each such advice shall confirm Treasury securities (whether pledged or that book-entry Treasury securities of otherwise) referred to in subparagraph the amount, loan title (or series) and (1) of this paragraph shall in all respects maturity date specified in the depositor’s be the same when those securities are in instruction have been deposited or book-entry form as if definitive Treasury withdrawn. securites in bearer form in the same § 306.1 1 7 Scope and effect o f book- amount and of the same loan (or series) and maturity date had at all times been entry procedure. held in custody by the Reserve Bank in (a) The book-entry procedure shallits individual capacity in accordance with apply to Treasury securities deposited the agreement between such bank and its with any Reserve Bank (1) as collateral depositors. pledged to a Reserve Bank (in its indi (c) to applying vidual capacity) for advances by it, (2) entry In additionto Treasury the bookprocedure as collateral pledged to the United States deposited under paragraphs (a)securities and under Treasury Department Circulars of this section, the procedure may be (b) No. 92 or 176, both as revised and plied by any Reserve Bank, with the ap ap amended, and (3) by a member bank of proval the the Treasury, the Federal Reserve System for its sole to anyofotherSecretary of securities de Treasury account and in lieu of the safekeeping of definitive Treasury securities by a Re posited with the Reserve Bank. (d) No deposits shall be accepted un serve Bank in its individual capacity. Any depositor which has definitive Treas der this section on or after the date of ury securities on deposit with a Reserve maturity or call of the securities. Bank (in either its individual capacity § 3 06.11 8 Pledges. or as Fiscal Agent) for any purpose speci A pledge of book-entry Treasury secu fied above or which hereafter deposits such securities for any such purpose shall rities maintained under § 306.117 is ef be deemed to have consented to their fected, notwithstanding any provision of conversion to book-entry Treasury secu law to the contrary, by a Reserve Bank’s FEDERAL REGISTER, VOL. 34, NO. 79— FRIDAY, APRIL 25, 1969 PROPOSED RULE MAKING making an appropriate entry in its rec ords of the amount of the securities pledged. The making of such entry (a) shall have the effect of a delivery of de finitive Treasury securities in bearer form in the amount of the obligations pledged; (b) shall have the effect of a taking of delivery by the pledgee; (c) shall effect a perfected security interest therein in favor of the pledgee; and (d) shall con stitute such pledgee a holder. No filing or recording with a public recording office or officer shall be necessary to perfect any pledge in any book-entry Treasury secu rities under this subpart. Any pledge of definitive Treasury securities existing at the time of the conversion hereunder of such securities to book-entry form shall continue to be fully effective not withstanding such conversion. A Reserve Bank shall, upon receipt of appropriate instructions, convert book-entry Treas ury securities into definitive Treasury securities and deliver them to the pledgee or other appropriate party for disposi tion under the applicable pledge arrange ment; and the pledge interest of the pledgee in such book-entry Treasury se curities prior to conversion to definitive securities shall continue without inter ruption to be fully effective with respect to such definitive securities. Agent) on the effective date of this sub part for any purpose specified in § 306.117(a). Registered Treasury securities deposited thereafter with a Reserve Bank for any purpose specified in § 306.117 shall be assigned for conversion to bookentry Treasury securities. The assign ment, which shall be executed in accord ance with the provisions of Subpart F of the regulations in this part, so far as applicable, shall be to “Federal Reserve Bank o f ___________ _ as Fiscal Agent of the United States, for conversion to bookentry Treasury securities.” § 3 0 6 .1 2 2 Servicing book-entry Treasury securities; paym ent o f interest, pay m ent at m aturity or u pon call. Interest becoming due on book-entry Treasury securities shall be charged in the Treasurer’s account on the interest due date and remitted or credited in ac cordance with the depositor’s instruc tions. Such securities shall be redeemed and charged in the Treasurer’s account on the date of maturity, call or advance refunding, and the redemption proceeds, principal and interest, shall be disposed of in accordance with the depositor’s Instructions. [F.R. Doc. 69-4956; Filed, Apr. 24, 1969; 8:46 a.m.] § 3 0 6 .1 1 9 Lim itations on transfers or pledges. Except as provided in this subpart, book-entry Treasury securities may not be assigned, transferred, hypothecated, pledged as collateral, or used as security for the performance of an obligation, and the Treasury Department will not recognize any such assignment, transfer, hypothecation, pledge or use. § 3 0 6 .1 2 0 Withdrawals and transfers. Withdrawals and transfers of bookentry Treasury securities may be made upon a depositor requesting (a) delivery of like definitive Treasury securities to itself or on its order to a transferee, or (b) transfer to any transferee eligible under § 306.117. The making of any book-entry transfer by a Reserve Bank shall have the same effect as a delivery to the transferee of definitive Treasury securities in bearer form. The transfer of book-entry Treasury securities within a Reserve Bank will be made in accord ance with procedures established by the latter not inconsistent with this subpart. The transfer of book-entry Treasury securities between Reserve Banks will be made through a telegraphic transfer procedure. All requests for withdrawal or for transfer must be made prior to the maturity or date of call of the secu rities. Treasury bonds and notes which are actually to be delivered upon with drawal or transfer may be issued either in registered or in bearer form, except that EA and EO series of Treasury notes will be Issued in bearer form only. § 306.121 Registered bonds and notes. No formal assignment shall be required for the conversion to book-entry Treas ury securities of registered Treasury securities held by a Reserve Bank (in either its individual capacity or as Fiscal FEDERAL REGISTER, VOL. 34 , NO. 79— FRIDAY, APRIL 25 , 1969
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