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FE D E R A L R ESER VE BANK
O F D A L LA S

Dallas, Texas, January 13, 1936

REGULATIONS L AND R
AS REVISED BY BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM
EFFECTIVE JANUARY 4, 1936

To the Member Bank Addressed:

There are enclosed one copy each of Regulation L, “ Interlocking Bank
Directorates Under the Clayton Act” and Regulation R, “ Relationships
With Dealers in Securities Under Section 32 of the Banking Act of 1933” ,
as revised by the Board of Governors of the Federal Reserve System,
effective January 4, 1936. These regulations supersede all previous editions
thereof.
Yours very truly,

Federal Reserve Agent

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

BOARD OF GOVERNORS

of
THE FEDERAL RESERVE SYSTEM

IN T E R L O C K IN G B A N K

D IR E C T O R A T E S

U N D E R T H E C L A Y T O N ACT
R E G U L A T IO N L

This regulation as printed herewith is in the form, as revised,
effective January 4 , 1 9 3 6

Printed and Distributed by
THE FEDERAL RESERVE BANK OF DALLAS

IN Q U IRIES R E G A R D IN G T H IS R E G U L A T IO N

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Agent at the Federal Reserve bank of the district in
which the inquiry arises.

CONTENTS

Page
ST A T U T O R Y P R O V IS IO N S ........................................................................................................

5

S ec. 1. PROHIBITIONS

..............................................................................................................

5

(a) Directors, officers, and employees of member banks..............................

5

(b) Private bankers ......

5

S ec. 2.

EXCEPTIONS

..................................................................................................................

5

(a) Persons other than private bankers or directors, officers, or em­
ployees of member banks...................................................................................

5

(b) Banks not organized under National Bank Act, State Law, or laws
of District of Columbia.....................................................................................

6

(c) Relationships lawfully existing on August 23, 1935................................

6

(d > Exceptions applicable to directors, officers, and employees of mem­
ber banks ...............................................................................................................
(e) Exceptions applicable to private bankers....................................................
Sec. 3.

6
7

R ELATIONSHIPS PERM ITTED BY BOAR D.....................................................

7

(a) Morris Plan bank or similar institution......................................................

8

(b) Pending consolidation or merger.............

8

(c) Application pending on August 23, 1935....................................................

8

(d) Exceptions applicable to a private banker..................................................

8

Sec.

4. ENFORCEM ENT .............................................................................................................

9

S ec.

5. A M E N D M E N TS ...............................................................................................................

9

A PP E N D IX

10

REGULATION L

Revised Effective January 4, 1936.
(Superseding Regulation L, Series of 1933)

INTERLOCKING BANK DIRECTORATES
UNDER THE CLAYTON ACT
ST A T U T O R Y PROVISIONS

This regulation is based upon and issued pursuant to the provisions
of section 8 of the Clayton Act, the pertinent parts of which are published
in the Appendix hereto.1
SECTION 1.

PROHIBITIONS

Under section 8 of the Clayton Act, except as hereinafter stated in
section 2:
(a) No person who is a director, officer, or employee of a member
bank of the Federal Reserve System can legally be at the same time a
director, officer, or employee of any other bank, banking association,
savings bank, or trust company organized under the National Bank Act or
organized under the laws of any State or of the District of Columbia;
( b ) No private banker1 can legally be at the same time a director,
2
officer, or employee of any hank, banking association, savings bank, or
trust company organized under the National Bank Act or organized under
the laws of any State or of the District of Columbia.
SECTION 2.

EXCEPTIONS

The provisions of section 8 of the Clayton Act:
(a)
do not apply to a person who is neither a private banker nor a
director, officer, or employee of a member bank of the Federal Reserve
System;
1 Section 32 of the Banking Act of 1933 is applicable in certain circumstances to inter­
locking relationships between member banks and underwriters and dealers in securities. See
Regulation R of the Board o f Governors o f the Federal Reserve System.
Section 17 (c) of the Public Utility Act of 1935 is applicable in certain circumstances
to interlocking relationships between banks and public utility companies and public utility
holding companies. Inquiries regarding this section should be addressed to the Securities and
Exchange Commission and not to the Board of Governors of the Federal Reserve System.
Section 305(b) of the Federal Power Act is applicable in certain circumstances to inter­
locking relationships between public utility companies and banks which are authorized by
law to underwrite or participate in the marketing o f securities of a public utilty. Inquiries
l'egardng this section should be addressed to the Federal Power Commission and not to the
Board o f Governors o f the Federal Reserve System.
2 The term "private banker” means an unincorporated individual engaged in the banking
business or a member o f an unincorporated firm engaged in such business.

5

(b) do not prohibit a private banker or a director, officer, or employee
of a member bank of the Federal Reserve System from being at the same
time a director, officer, or employee of any number of other banking in­
stitutions not organized under the National Bank Act or under the laws of
any State or of the District of Columbia"';
(c) do not prohibit, until February 1, 1939, any interlocking relation­
ship involving a member bank, which was in existence on August 23,
1935, the date of the enactment of the Banking Act of 1935, and which,
at that time, was lawful under the Clayton Act, either (a) because it was
authorized by a permit3 then in effect5 or (b) because it was otherwise
4
not subject to the prohibitions of the Clayton Act1
';
(</) do not prohibit a director, officer, or employee of a member bank
of the Federal Reserve System from being at the same time a director,
officer, or employee of any number of the following—
(1) Banks, banking associations, savings banks, or trust com­
panies, more than 90 per cent of the stock of which is owned directly
or indirectly by the United States or by any corporation of which
the United States directly or indirectly owns more than 90 per cent
of the stock;
(2) Banks, banking associations, savings banks, or trust com ­
panies which have been placed formally in liquidation or which
are in the hands of receivers, conservators, or other officials exercis­
ing similar functions;
(3) Corporations principally engaged in international or foreign
banking or banking in a dependency or insular possession of the
United States which have entered into agreements with the Board o f
Governors of the Federal Reserve System pursuant to section 25
of the Federal Reserve Act;
(4) Banks, banking associations, savings banks, or trust com­
panies, more than 50 per cent of the common stock of which is owned
3 In other words, the provisions o f section 8 of the Clayton Act do not prohibit a private
banker or a director, officer, or employee of a member bank of the Federal Reserve System
from being at the same time a director, officer, or employee of any number of the following :
(a) Joint Stock Land banks, Federal Land banks, Federal Reserve banks, Federal
Intermediate Credit banks. The Central Bank for Cooperatives, Federal Home Loan
banks, foreign banking corporations organized under section 25(a) of the Federal Reserve
Act, and other institutions organized under laws of the United States other than the
National Bank A c t ;
(b) Banking institutions organized under the laws of territories, dependencies, or
insular possessions o f the United States, such as the Philippine Islands, Puerto Rico
Hawaii, or the Canal Zone, and not organized under the National Bank A c t ; and
(c) Banking institutions organized under the laws of foreign countries.
Federal Savings and Loan Associations and Federal Credit Unions are not organized
under the National Bank Act or under the laws of any State or of the District of Columbia
and therefore are excepted on that ground irrespective of whether they are “ banks” or
“ banking associations” within the meaning of the statute.
4 Relationships which were lawful on August 23, 1935, because authorized by a permit
then in effect were lawful within the meaning of this exception irrespective of whether the
permittee was then also serving in other relationships which were within the prohibitions o f
the Clayton Act but which were not authorized by such permit.
’’ It is immaterial whether or not such permit contained a provision limiting its duration
provided it was in effect on August 23, 1935.
’
u The provisions of the Clayton Act regarding interlocking bank directorates in effect
prior to August 23, 1935, are analyzed in Regulation L, Series of 1933, which was published
in the Federal Reserve Bulletin for November, 1933, page 711.

6

directly or indirectly7 by persons who own directly or indirectly7
more than 50 per cent of the common stock of such member bank;
(5) Banks, banking associations, savings banks, or trust com­
panies not located and having no branch in the same city, town, or
village as that in which such member bank or any branch thereof
is located, or in any city, town, or village contiguous or adjacent
thereto8;
(6) Banks, banking associations, savings banks, or trust com­
panies not engaged in a class or classes of business1 in which such
1
member bank is engaged;
(7) Mutual savings banks having no capital stock;
(e) do not prohibit a private banker from being at the same time a
member of any number of firms of private bankers, or from being at the
same time a director, officer, or employee of any number of the following:
(1) Banks, banking associations, savings banks, or trust com­
panies, more than 90 per cent of the stock of which is owned directly
or indirectly by the United States or by any corporation of which
the United States directly or indirectly owns more than 90 per cent
of the stock;
(2) Banks, banking associations, savings banks, or trust com­
panies which have been placed formally in liquidation or which are
in the hands of receivers, conservators, or other officials exercising
similar functions;
(3) Corporations principaly engaged in international or foreign
banking or banking in a dependency or insular possession of the
United States which have entered into agreements with the Board of
Governors of the Federal Reserve System pursuant to section 25 of
the Federal Reserve Act;
(4) Mutual savings banks having no capital stock.
SECTION 3.

R ELATIONSH IPS PERM ITTED B Y BOARD

In addition to any relationships covered by the foregoing exceptions,*
3
7 The following are clear illustrations of indirect ownership; (1) where more than 50
per cent of the stock of one bank is owned by the other bank; (2) where more than 50 per
cent of the stock of one bank is held in trust for the shareholders of the other bank ; and
(3) where more than 50 per cent of the stock of one bank is owned bya corporation, all
the stock of which is owned by the shareholders of the other bank.
s The Board has interpreted the term “ contiguous” as referring to cities, towns, and
villages whose corporate limits touch or coincide at some point, and has interpreted the
word _“ adjacent” as referring to cities, towns, and villages which, although not actually
“ contiguous” within the above interpretation of that word, are located in such close proximity
and are so readily accessible to each other as to be in practical effect a single city, town,
or village, as for example, cities, towns, or villages separated only by a water-course, or a
suburb of a city separated from that city by an intervening suburb.
!l The phrase “ class or classes of business” refers to the various types of business engaged
in by such institutions involving relationships with customers, such as (1) receiving com­
mercial deposits, (2) receiving savings deposits, (3) carrying checking accounts, (4) making
commercial loans, (5) making real estate loans, (6) making loans on stock or bond col­
lateral, (7) making “ personal” loans of the character usually made by Morris Plan or
Industrial banks, (8) engaging in corporate trust business, and (9) engaging in individual
trust business.

7

not more than one of the following relationships is hereby permitted1 *by
0
the Board of Governors of the Federal Reserve System in the case of any
one individual:
{a) Any private banker or any director, officer, or employee of a
member bank of the Federal Reserve System, may be at the same time
a director, officer, or employee of not more than one Morris Plan bank,
cooperative bank, credit union or other similar institution;

(b) Any director, officer, or employee of a member bank of the Federal
Reserve System may be at the same time a director, officer, or employee of
not more than one other bank, banking association, savings bank, or trust
company if the records of both institutions show that active consideration
is being given to the consolidation or merger of such member hank and
such other bank, banking association, savings bank, or trust company,
or that active consideration is being given to the purchase of a substantial
portion of the assets and the assumption of a substantial portion of the
liabilities of one such institution by the other; provided that no interlock­
ing relationship permitted pursuant to this paragraph shall continue for
a period or periods aggregating more than six months11;
(c) Any director, officer, or employee of a member hank of the Federal
Reserve System who had filed an application for permission to serve
two or more banks within the prohibitions of section 8 of the Clayton
Act, which had been received at the offices of the Board in Washington,
D. C., or at the offices of a Federal Reserve Agent on or before August
23, 1935, and on which the Board had not taken adverse action prior to
that date, may serve any member bank named in such application and
any other one bank, banking association, savings bank, or trust company
named in such application until the next election of directors of such
institutions or until March 1, 1936, whichever is the earlier;
(d ) Any private banker may be at the same time a director, officer, or
employee of not more than one of the following:
(1) A bank, banking association, savings bank, or trust company
organized under the laws of any State or of the District of Columbia
which is not a member bank of the Federal Reserve System;
(2) A member bank more than 50 per cent of the common stock
of which is owned directly or indirectly by such private banker or
by a firm of private bankers of which he is a member;
(3) A member bank not located and having no branch in the same
city, town, or village as that in which such private banker or a firm
of private bankers of which he is a member maintains a place of
business, or in any city, town, or village contiguous or adjacent
thereto12;
1 The provisions formerly contained in section 8 of the Clayton Act authorizing the
0
issuance of individual permits by the Board were repealed by section 329 of the Banking A ct
o f 1935, and the Act now provides that the Board “ may by regulation permit such service
as a director, officer, or employee of not more than one other such institution or branch
thereof * *
(See first paragraph of section 8, quoted in the Appendix to this Regulation.)
Accordingly, individual permits will no longer be issued.
3 In the case of any relationship existing on the date this regulation becomes effective,
1
such six months period shall begin to run on the effective date o f this regulation.
3 See footnote 8, page 7.
2

8

(4) A member bank not engaged in a class or classes of business18
in which such private banker or a firm of private bankers of which
he is a member is engaged;
(5) A bank, banking association, savings bank, or trust company
within the prohibitions of section 8 of the Clayton Act, which was
included in an application under the Clayton Act filed by such
private banker, which had been received at the offices of the Board
in Washington, D. C., or at the offices of a Federal Reserve Agent
on or before August 23, 1935, and on which the Board had not
taken adverse action prior to that date; provided, that the provisions
of this paragraph (5) shall be effective only until the next annual
election of directors of such institution or until March 1, 1936, which­
ever is the earlier.
SECTION 4.

ENFOR CEM ENT

(a.) Action by Federal Reserve Agent.— Each Federal Reserve Agent
shall cause the information contained in reports of examination of mem­
ber banks and other information available to him from other sources
to be analzed in the light of the provisions of section 8 of the Clayton
Act relating to interlocking relationships involving banks; and, in the
case of any apparent violation of that section, shall communicate with
the banking institutions and with the director, officer or employee in­
volved, with a view of ascertaining whether the relationships involved
are in conformity with the law, and, if not, obtaining compliance with
the law.
( b) Reports to Board.— In each case in which, after taking the steps
outlined above, the Federal Reserve Agent finds that the relationships
involved are in violation of the law and have not been brought into con­
formity with the law within a reasonable time after the matter was
brought to the attention of the banking institutions and the officer, director
or employee involved, the Federal Reserve Agent shall report the facts
to the Board of Governors of the Federal Reserve System with a recom­
mendation as to the action to be taken.
SECTION 5.

AMENDM ENTS

This regulation is subject to amendment or repeal, in whole or in part,
in the discretion of the Board of Governors of the Federal Reserve System.1
5
1 See footnote 9, page 7.
5

9

A P P E N D IX

ST A T U T O R Y PROVISIONS

Section 8 of the Clayton Act (U. S. C., title 15, sec. 19), as amended by
the Banking Act of 1935, reads in part as follows:
SEC. 8. No private banker or director, officer, or employee of any member
bank of tbe Federal Reserve System or any branch thereof shall be at the same
time a director, officer, or employee of any other bank, banking association,
savings bank, or trust company organized under the National Bank Act or or­
ganized under the laws of any State or of the District of Columbia, or any
branch thereof, except that the Board of Governors of the Federal Reserve
System may by regulation permit such service as a director, officer, or employee
of not more than one other such institution or branch thereof; but tbe foregoing
prohibition shall not apply in the case of any one or more of the following or
any branch thereof:
(1)
A bank, banking association, savings bank, or trust company, more
than 90 per centum of the stock of which is owned directly or indirectly
by the United States or by any corporation of which the United States
directly or indirectly owns more than 90 per centum of the stock.
(2)
A bank, banking association, savings bank, or trust company which
has been placed formally in liquidation or which is in the hands of a re­
ceiver, conservator, or other official exercising similar functions.
(3)
A corporation principally engaged in international or foreign bank­
ing or banking in a dependency or insular possession of the United States
which has entered into an agreement with the Board of Governors of the
Federal Reserve System pursuant to section 25 of the Federal Reserve Act.
(4)
A bank, banking association, savings bank, or trust company, more
than 50 per centum of the common stock of which is owned directly or
indirectly by persons who own directly or indirectly more than 50 per
centum of the common stock of such member bank.
(5)
A bank, banking association, savings bank, or trust company not
located and having no branch in the same city, town, or village as that in
which such member bank or any branch thereof is located, or in any city,
town, or village contiguous or adjacent thereto.
(6)
A bank, banking association, savings bank, or trust company not
engaged in a class or classes of business in which such member bank
is engaged.
(7)

A mutual savings bank having no capital stock.

Until February 1, 1939, nothing in this section shall prohibit any director,
officer, or employee of any member bank of the Federal Reserve System, or any
branch thereof, who is lawfully serving at the same time as a private banker or
as a director, officer, or employee of any other bank, banking association, savings
bank, or trust company, or any branch thereof, on the date of enactment of the
Banking Act of 1935, from continuing such service.
The Board of Governors of the Federal Reserve System is authorized and
directed to enforce compliance with this section, and to prescribe such rules and
regulations as it deems necessary for that purpose.

*

*

*

10

*

*

When any person elected or chosen as a director or officer or selected as an
employee of any hank or other corporation subject to the provisions of this Act
is eligible at the time of his election or selection to act for such hank or other
corporation in such capacity his eligibility to act in such, capacity shall not he
affected and he shall not become or he deemed amenable to any of the pro­
visions hereof by reason of any change in the affairs of such bank or other
corporation from whatsoever cause, whether specifically excepted by any of the
provisions hereof or not, until the expiration of one year from the date of his
election or employment.

1
1

BOARD OF GOVERNORS

of
THE FEDERAL RESERVE SYSTEM

R E L A T IO N SH IP S W IT H

D E A L E R S IN

SECURITIES U N D E R SE C TIO N 3 2 O F
T H E B A N K IN G A C T O F 1 9 3 3
R E G U L A T IO N R

This regulation as printed herewith is in the form, as revised,
effective January 4 , 1 9 36

Printed and Distributed by
THE FEDERAL RESERVE BANK OF DALLAS

IN Q U IR IE S R E G A R D IN G T H IS R E G U L A T IO N

Any inquiry relating to this regulation should be addressed to the Federal
Reserve Agent at the Federal Reserve bank of the district in
which the inquiry arises.

REGULATION R
Revised, effective January 4, 1936.
(Superseding Regulation R of 1933)

R E L A T IO N S H IP S WITH DEALERS IN SECURITIES
UNDER SECTION 32 OF THE BANKING ACT OF 1933
ST A T U T O R Y PROVISIONS

This regulation is based upon and issued pursuant to the provisions of
Section 32 of the Banking Act of 1933, which is published in the A p ­
pendix hereto,
SECTION 1.

PROHIBITIONS

Under section 32 of the Banking Act of 1933, except as hereinafter
stated in section 2, no officer, director, or employee of any corporation
or unincorporated association, no partner or employee of any partner­
ship, and no individual, primarily engaged in the issue, flotation, under­
writing, public sale, or distribution, at wholesale or retail, or through
syndicate participation, of stocks, bonds, or other similar securities, can
legally be at the same time an officer, director, or employee of any mem­
ber bank of the Federal Reserve System,1
SECTION 2.

EXCEPTIONS

Pursuant to the authority vested in it by section 32, the Board of
Governors of the Federal Reserve System hereby permits the folio wingrelationships1:
2
Any officer, director, or employee of any corporation or unincorporated
association, any partner or employee of any partnership, or any indi­
vidual, not engaged in the issue, flotation, underwriting, public sale, or
distribution, at wholesale or retail, or through syndicate participation,
of any stocks, bonds, or other similar securities except bonds, notes, cer­
tificates of indebtedness, and Treasury bills of the United States, obliga1 Therefore, by its terms, section 32 does not apply—
(a) To a person who is not an officer, director, or employee of a member bank of the
Federal Reserve System;
(b) To a person (1) who is not an officer, director, or employee of a corporation or
unincorporated association primarily engaged in the issue, flotation, underwriting, public
sale, or distribution, at wholesale or retail, or through syndicate participation, of stocks,
bonds, or other similar securities, (2) who is not a partner or employee of a partnership
primarily so engaged, and (3) who is not, in his individual capacity, primarily so engaged.
A broker who is engaged solely in executing orders for the purchase and sale of securities
on behalf of others in the open market is not engaged in the business referred to in
section 32.
2 Under section 32, as amended effective January 1, 1936, the Board is authorized to
except limited classes of relationships from the prohibitions of the statute, under certain
conditions ; but the Board can make such exceptions only by general regulations and is not
authorized to issue individual permits.

tions fully guaranteed both as to principal and interest by the United
States, debentures issued by Federal Intermediate Credit banks, bonds
issued by Federal Land banks, and general obligations of Territories,
dependencies and insular possessions of the United States, may be at the
same time an officer, director, or employee of any member bank of the
Federal Reserve System, except when otherwise prohibited.3
SECTION 3.

AM E N D M E N T S

The right to alter, amend, or repeal this regulation, in whole or in part,
is expressly reserved.
Section 17(c) of the Public Utility Act of 1935 is applicable in
certain circumstances to interlocking relationships between banks and
private bankers (and corporations owned by banks and private bankers),
and public utility companies and public utility holding companies. In­
quiries regarding this section should be addressed to the Securities and
Exchange Commission and not to the Board of Governors of the Federal
Reserve System.
Section 305(b) of the Federal Power Act is applicable in certain cir­
cumstances to interlocking relationships between public utility companies
and banks and bankers that are authorized by law to underwrite or par­
ticipate in the marketing of securities of a public utility. Inquiries regard­
ing this section should be addressed to the Federal Power Commission
and not to the Board of Governors of the Federal Reserve System.
" Section 8 of the Clayton Act is applicable in certain circumstances to interlocking
relationships between member banks and private bankers, and other banks, banking associa­
tions, savings banks and trust companies. See Regulation L of the Board of Governors o f
the Federal Reserve System.

A P P E N D IX
S T A T U T O R Y PROVISIONS

Section 32 of the Banking Act of 1935 (U. S. C., title 12, sec. 7 8), as
amended by section 307 of the Banking Act of 1935, effective January 1
1936, reads as follows:
Sec. 32.

No officer, director, or employee of any corporation or unincor­

porated association, no partner or employee of any partnership, and no indi­
vidual, primarily engaged in the issue, flotation, underwriting, public sale
or distribution, at wholesale or retail, or through syndicate participation, of
stocks, bonds, or other similar securities, shall serve the same time as an
officer, director, or employee of any member bank except in limited classes
of cases in which the Board of Governors of the Federal Reserve System m ay
allow such service by general regulations when in the judgment of the said
Board it would not unduly influence the investment policies of such member
bank or the advice it gives its customers regarding investments.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102