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F ederal Reserve Bank o f Dallas DALLAS, TEXAS 75222 Circular No. 77-130 November 28, 1977 REPRINT OF BULLETIN 7 TO ALL MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Effective December 1, 1977, Bulletin No. 7, entitled "Custody of Securities," is being revised to permit substitution of United States Government and Agency securities for like amounts of equal par value or for greater amounts without the joinder of the political subdivision. Similarly, withdrawals of any pledged securities will be permitted without the joinder of the political subdivision subject to a delay of five bank ing days in order that the political subdivision may be informed of the withdrawal and be given the opportunity to object. Enclosed is a reprint of Bulletin 7. Member banks and others who maintain Regulations Binders should file the bulletin in their binders. The bulletin currently on file should be removed from your binder and destroyed. Any questions concerning this revision should be directed to Jack A. Clymer, Assistant Vice President of this Bank, Ext. 63^+0, or the appropriate officer at our El Paso, Houston, or San Antonio Branch. Additional copies of this bulletin will be furnished upon request to the Bank and Public Information Department of this Bank, Ext. 6267Sincerely yours, Robert H. Boykin First Vice President Enclosure Banks and others are encouraged to use the follow ing incoming WATS numbers in contacting this Bank: 1-800-492-4403 (intrastate) and 1-800-527-4970 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BULLETIN 7 Custody of Securities FEDERAL RESERVE BANK OF DALLAS This bulletin describes our services relating to the custody of securities. Any member bank depositing, either directly or through others, securities with this Bank shall, by such action, be understood to have agreed to the terms and conditions set forth herein. TABLE OF CONTENTS Section 1, GENERAL 1.00 Reference to Bulletin 1 1.05 Availability of service 1.10 Charges Section 2, TYPES OF SECURITIES ACCEPTED 2.00 Generally 2.05 Pledged securities Section 3, BOOK-ENTRY 3.00 3.05 3.10 3.15 Authority Conversion to book-entry form Terms of conversion Application of Subpart O Section 4, LIMITATION OF LIABILITY Section 5, ACKNOWLEDGMENTS AND RECEIPTS Section 6, SERVICES PERFORMED BY US 6.00 General 6.05 Collection of maturing United States Government securities (unpledged] 6.10 Collection of maturing municipal or corporate securities (unpledged) 6.15 Exchange of maturing securities (unpledged) 6.20 Pledged securities 6.25 N otice of called or m atu rin g securities 6.30 M unicipal or corporate securities received for th e account of m em b er b an k s 6.35 C ollection of m atu rin g coupons 6.40 U npaid coupons Section 7, PLEDGING SECURITIES 7.00 To U nited S tates G overnm ent 7.05 To U nited S tates D istrict C ourts 7.10 To U nited S tates D istrict C ourt ap p o in ted trustees 7.15 C ollateral to T re asu ry T a x and Loan ac co u n t Section 8, PLEDGING SECURITIES — JOINT SAFEKEEPING 8.00 State T re a su re r — State of T exas 8.05 Political subdivisions — Texas 8.10 Political subdivisions ■— o th e r states 8.15 T ru st d e p a rtm e n t of m em ber ban k s Section 9, SHIPMENT OF SECURITIES 9.00 9.05 9.10 9.15 9.20 9.25 9:30 R isk of loss R egistered mail in su ran ce E xclusion Limit of liability Ship m ents by us S hipm ents to us S hipm ents by this Bank as fiscal agent BULLETIN 7 FEDERAL RESERVE BANK OF DALLAS Section 1 , GENERAL 1.00 Reference to Bulletin 1 S everal definitions, rules of construction, and o th e r p rov ision s applicable to this bulletin are foun d in our Bulletin 1, G eneral Provisions, and are in co rp o rated h erein b y reference. 1.05 Availability of service The services d esc rib ed h erein are m ain tain ed prim arily for the convenience of m em b er ban k s located outside of F ederal R eserve cities. U nder special circum stances, h ow ever, these services m ay be e x te n d e d to m em b er b an k s lo cated in outlying areas of F ederal R eserve cities. A F ed eral R eserve city b an k m ay contact this B ank for specifics. 1.10 Charges No charge will be m ade fo r holding securities in custody, b u t charges will be m ade to cov er the cost of tra n sp o rta tio n a n d in su ran c e on incom ing an d outgoing sh ipm ents of securities, fo r telephone and telegraph expense, an d collection charges, if any, m ade b y collecting banks. Section 2, TYPES OF SECURITIES ACCEPTED 2.00 Generally Except as provided in section 2.05, only securi ties which are neither assigned nor pledged and which are owned by the depositing bank will be accepted. Securities acceptable for our custody include all bonds, notes, certificates of indebted ness, and Treasury bills issued or guaranteed by the United States Government, and miscella neous state, municipal, or corporate bonds. Such securities will be held in custody for the account, at the risk and subject only to the order of the member bank named as owner in the acknowl edgment issued by us. 2.05 Pledged securities (a) S ecurities belonging to m em b er b a n k s w h ich are pledged to d epartm ents, agencies, or officials of the U nited S tates G overnm ent to be h eld s u b ject to the in stru ctio n s th ere o f w ill b e accepted p u rs u a n t to any A ct of C ongress or any regula tion or re q u e st of the S ecretary of the T re asu ry providing fo r the deposit of securities w ith a F ederal R eserve Bank. (b) S ecurities belonging to m em b er b a n k s w h ich are pledged to officials of states, or political su b divisions thereof, as secu rity for public deposits, will be accepted w h e n application is m ade jointly b y the m e m b e r b a n k a n d th e public b ody w hose d ep o sit is secured. W e fu rn is h special form s fo r this purpose. Section 3, BOOK-ENTRY 3.00 Authority [a] In accordance with Section 306.117(a] of Subpart O of Treasury Departm ent Circular No. 300 and the corresponding section of regula tions issued by those agencies, instrumentalities, and establishments of the United States listed in Appendix B (Agency regulations) to our Bulle tin 14, this Bank as fiscal agent of the United States may m aintain Treasury bonds, notes, cer tificates of indebtedness and bills issued under the Second Liberty Bond Act, and debt obliga tions issued pursuant to Agency regulations by means of entries on the records of this Bank as such fiscal agent (“book-entry securities”) w hen such securities are deposited in accounts m ain tained by this Bank in its individual capacity and as to which securities this Bank in its individual capacity is to continue to maintain such deposits notwithstanding application of the book-entry procedure to such securities. (b) Such acco unts include, b u t are n o t lim ited to, accounts in w h ich T re asu ry or A gency securities are d eposited: (i) as collateral pledged to a R eserve Bank (in its individual capacity) fo r ad v an ces by it; (ii] b y m em b er b a n k s fo r th e ir o w n account; (iii) by a mem ber bank held for the account of its customers; (iv) as collateral to secure deposits in m em ber banks of public funds by a state, municipality, or other political subdivi sion; (v) p u rs u a n t to S ection 61 of th e B ank rup tcy A c t (11 U.S.C. 101) in conn ectio n w ith the deposit of b a n k ru p tc y fu n d s in co m m ercial b an k s; (vi) as collateral in connection w ith the qual ification of member banks to exercise trust powers; or (vii) as collateral to secure deposits of trust funds in commercial banking depart ments of mem ber banks. BULLETIN 7 FEDERAL RESERVE BANK OF DALLAS (c) Section 306.117(a) of Subpart O of Treasury Department Circular No. 300 and the correspond ing section of Agency regulations provides that such application of the book-entry procedure shall not derogate from or adversely affect the relationships that would otherwise exist b e tween this Bank in its individual capacity and its depositors. 3.05 Conversion to book-entry form Any bank or other depositor whose Treasury or Agency securities are on deposit in any account specified in section 3.00(b) above m aintained by this Bank either in its individual capacity or as fiscal agent on April 9, 1973, and any person having an interest in Treasury or Agency securi ties which on or after such date are deposited in any of the aforesaid accounts or any other ac count specified by this Bank for application of the book-entry procedure under Section 306.117(a) of Subpart O of Treasury Department Circular No. 300 or the corresponding section of Agency regulations, will be deemed to have au thorized this Bank to employ the book-entry pro cedure under the provisions of such section with respect to such Treasury or Agency securities and to have consented to the conversion of any such Treasury or Agency securities from defin itive to book-entry form. 3.10 Terms o f conversion In co nnectio n w ith the ap plication of the booken try pro c ed u re to T re a s u ry or A gency secu ri ties u n d e r the pro visions of S ection 306.117(a) of S u b p art O or the co rrespo nding section of A gency regulations, it is u n d e rs to o d that: (a) The terms and conditions of this bulletin and this Bank’s Bulletin 14 entitled “Book-Entry Se curities,” or in the event of a particular agree m ent between this Bank and its depositor, the terms and conditions of such agreement, shall apply to such securities. (b) A dvices of deposit and w ith d ra w a l w ith re spect to such T re asu ry o r A gency securities s hould be re ta in ed in som e circu m stances b y the depositing b an k s or other p artie s in in te re s t for F ederal incom e tax p urposes. (See a ttac h m en t to S u b p a rt O.) apply the book-entry procedure to Treasury or Agency securities deposited with this Bank as collateral for balances in Treasury Tax and Loan Accounts or for deposits of public monies under Treasury Department Circular No. 92 or No. 176, respectively, and may also apply book-entry pro cedure to Treasury securities deposited in other accounts designated by this Bank; and such se curities will be handled pursuant to such terms and conditions as may be agreed upon betw een this Bank and the depositors of such securities. This Bank’s Bulletin 14, entitled “Book-Entry Securities,” applies to such accounts. Section 4, LIMITATION OF LIABILITY Each bank or other party depositing securities with us either directly or through others shall by such action be deemed to have agreed that this Bank: (a) Will be responsible only for the exercise of the same diligence w ith which it cares for its own property; (b) Will not be liable for any loss of such secur ities w hen a loss is due to any cause other than lack of such diligence; (c) Will not be responsible for the genuineness, validity, or alteration of or any defect in such securities; and (d) Will not be obligated to maintain any form of insurance for the account of the depositor in relation to securities held in custody for it. Section 5, ACKNOWLEDGMENTS AND RECEIPTS An acknowledgment form or joint safekeeping receipt describing the securities and indicating the purpose for which they are held, will be issued for each deposit. The acknowledgment form and joint safekeeping receipt are not nego tiable or transferable and their return to us will not be required for the release of the securities. Section 6, SERVICES PERFORMED BY US 3.15 Application of Subpart O 6.00 General Under Section 306.117(b) of Subpart O of Trea sury Department Circular No. 300 and under cor responding sections of Agency regulations, this Bank, as fiscal agent of the United States, shall In the absence of specific instructions to the con trary, we will endeavor to perform certain ser vices as outlined herein but will assume no liability for failure to perform such services. BULLETIN 7 FEDERAL RESERVE BANK OF DALLAS These services are intended merely as an aid to m ember banks and do not relieve the member bank of its own duty to keep itself informed of maturities, call dates, and other information af fecting its own portfolio. 6.05 Collection of maturing United States Gov ernment securities (unpledged) Unpledged United States Government securities and fully guaranteed obligations of its agencies which are payable by this Bank as fiscal agent of the United States and held by it in custody will, in the absence of specific instructions from the owner, be w ithdraw n prior to maturity or re demption call date, and the proceeds credited to the member bank’s account on the due date. 6.10 Collection of maturing municipal or cor porate securities (unpledged) Upon receipt of w ritten authority furnished by the owning bank, we will enter for collection, under the terms and conditions of our current Bulletin 9, Collection of Noncash Items, m atur ing unpledged municipal or corporate securities payable in a city other than the domicile of 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 ship ping charges for collecting municipal or corpo rate securities will be charged to the owning ba n k ’s account. 6.15 Exchange of maturing securities (unpledged) Under instructions from a mem ber bank, we will effect the exchange of maturing unpledged United States Government securities for avail able new issues. Upon receipt of the new securi ties to be held in custody, a new acknowledg ment will be issued therefor. 6.20 Pledged securities No action will be taken by us relative to m atur ing or called securities which are pledged, except upon receipt of appropriate w ritten instructions of the owning bank and the pledgee. W hen so in s tr u c te d , m a tu rin g s e c u ritie s, o th e r th a n United States Government securities, will be handled for collection under the terms and con ditions of our current Bulletin 9, Collection of Noncash Items, and United States Government securities will be redeemed. Disposition of the proceeds, w hen available, will be made upon receipt of appropriate instructions. 6.25 Notice o f called or maturing securities Notice of m aturity of all municipal, corporate, or United States Government securities will be given in advance of maturity date. However, we do not m aintain a called securities record, and, therefore, cannot undertake to advise banks when securities are called for redemption. 6.30 Municipal or corporate securities received for the account of member banks Under appropriate w ritten instructions from a member bank, we will accept for the member bank’s account municipal or corporate securities delivered by brokers and others and make pay ment therefor at the price stipulated in the p u r chasing ba n k ’s letter. In handling these transac tions, this Bank acts solely as agent for the member bank and assumes no responsibility for the genuineness, validity or any alteration of the securities received. 6.35 Collection o f maturing coupons Unless otherwise instructed, we will: (a) Credit the owning bank on maturity date for maturing coupons detached from United States Government securities and fully guaranteed ob ligations of its agencies which are payable by this Bank as fiscal agent of the United States and held in custody for its account; and (b) Enter for collection, under terms of our cur rent Bulletin 9, Collection of Noncash Items, coupons detached from other securities held in custody and credit the account of the owning bank in accordance w ith Bulletin 9. Municipal or corporate coupons payable in the city or town in which the owning bank is lo cated, or payable outside the continental United States, will be shipped to the owning bank. C oupons a tta c h e d to s e c u r itie s w h ic h are pledged as collateral to a custom er’s note held under rediscount or as collateral to an advance by this Bank and held by us will not be clipped and handled for collection, unless specific in structions are received in connection therewith. 6.40 Unpaid coupons Coupons entered for collection and returned un paid will be reattached to the securities from which they were detached, and the owning bank will be advised of the reason for nonpayment. In the absence of specific instructions from the owning bank, no further effort will be made to collect on these and subsequent coupons at tached to such securities. BULLETIN 7 FEDERAL RESERVE BANK OF DALLAS Section 7, PLEDGING SECURITIES 7.00 To United States Government Upon w ritten instructions from the owning bank and subject to the approval of the Treasury De partment, we will hold securities pledged to de partments, agencies and officials of the United States as collateral to secure deposits under the terms of Treasury Department Circular No. 176. 7.05 To United States District Courts Under designation as custodian by a United States District Court and at the request of the Court and a member bank, we will hold as col lateral, securities pledged to secure court depos its. Securities held as collateral to secure United States District Court deposits can be substituted for, or w ithdrawn, only under order of the Court. 7.10 To United States District Court appointed trustees Under designation as custodian by a United States District Court, we will hold in custody securities pledged as collateral to secure depos its of trustees in bankruptcy or receivership. Securities held as collateral to secure deposits of Court appointed trustees can be substituted for, or w ithdrawn, only under order of the Court. 7.15 Collateral to Treasury Tax and Loan ac count We will hold securities pledged by a depositary bank to secure its Treasury Tax and Loan ac co u n t. D eposit, re le a se , or s u b s titu tio n of pledged securities should be authorized by this Bank acting as fiscal agent for the United States. Section 8, PLEDGING SECURITIES — JOINT SAFEKEEPING 8.00 State Treasurer — State of Texas At the request of a mem ber bank, subject to the approval of the State Depository Board, we will hold in joint safekeeping securities pledged as collateral to secure deposits of the State Trea surer. Application for deposit, withdrawal, or substitution of such pledged securities should be made on our appropriate forms. 8.05 Political subdivisions — Texas At the request of a mem ber bank and the govern ing body of a political subdivision, we will hold in joint safekeeping securities pledged as collat eral to secure deposits of the political subdivi sion. Requests for deposits and requests for immediate withdrawals shall be made on our appropriate forms and executed jointly by the depositary bank and the governing body of the political subdivision. Requests for even or greater substitutions of United States Govern m ent and Agency securities and requests for all delayed withdrawals of securities shall be made on our appropriate forms executed by the depos itary bank (or if preferred by the political sub division, on our appropriate forms executed jointly by the depositary bank and the governing body of the political subdivision]. Requests for all other substitutions of securities shall be made on our appropriate forms and executed jointly by the depositary bank and the governing body of the political subdivision. 8.10 Political subdivisions — other states At the request of a mem ber bank and the govern ing body of a political subdivision, we will hold in joint safekeeping securities pledged as collat eral to secure deposits of the political subdivi sion. Requests for deposits, substitutions, or withdrawals should be made on our appropriate forms and executed jointly by the depositary bank and the governing body of the political subdivision. (This paragraph is not applicable in any state where law requires such pledged se curities to be deposited within the state.) 8.15 Trust department of member banks At the request of a member bank and the mem ber ba n k ’s trust department, we will hold in joint safekeeping securities pledged as collateral to secure deposits of uninvested funds of the member b a n k ’s trust department. Deposits, w ith drawals, or substitutions of the pledged securi ties should be authorized by the joint execution by the mem ber bank and its trust departm ent on our appropriate forms. Section 9, SHIPMENT OF SECURITIES 9.00 Risk of loss (a] Regardless of any other provisions 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 of loss on such shipments occurring prior to the actual delivery thereof to us by the post office, express company, or other carrier is not assumed by us but is on the sender. (b] Likewise, any bank ordering shipments of securities from this Bank shall by such action be BULLETIN 7 FEDERAL RESERVE BANK OF DALLAS deemed to have agreed that this Bank in making such shipments undertakes merely to make de livery to the post office, express company, or other carrier, and that the risk of loss occurring subsequent to such delivery is not assumed by us but is on the party ordering such shipment. 9.05 Registered mail insurance We hold open insurance policies under which registered mail shipments of securities made to or by us may be insured. These policies afford protection against loss from the time of accep tance by the messenger or carrier, whether within or w ithout the premises of the sender, and end w hen actual delivery has been made to the office of the addressee. They do not, h o w ever, cover losses through theft by the employ ees of the sender or the addressee, or losses by risks generally referred to as “w ar risks.” 9.15 Limit of liability The liability of 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, boats, or other conveyances, in which event the limit of liability shall apply to each train, boat, or other conveyance separately. 9.20 Shipments by us Shipments of securities by us, other than ship ments made in our capacity as fiscal agent of the United States at the expense and risk of the United States, will be made by registered mail, and, unless instructed to the contrary, we will insure them as provided herein under the regis tered mail policies referred to at the expense of the mem ber bank. 9.10 Exclusion 9.25 Shipments to us The policies contain the following clause elimi nating such coverages: Shipments of securities to us may be insured under the registered mail policies referred to, at the expense and risk of the sender, provided the following conditions are observed: “To cover .. . risks of physical loss of or dam age to or destruction of property insured, except theft on the part of employees of senders or ad dressees, but this policy does not insure against: (a) capture, seizure, arrest, restraint, detainment, confiscation, preemption, requisition or nation alization, and the consequences thereof or of any attempt thereat, w hether in time of peace or w ar and w hether lawful or otherwise; any conse quences of hostilities or war-like operations (whether there be a declaration of w ar or not) but the foregoing shall not exclude collision, ex plosion or contact with any fixed or floating ob ject (other than a mine or torpedo), stranding, heavy w eather or fire unless caused directly (and independently of the nature of the voyage or service which the vessel concerned or, in the case of a collision any other vessel involved therein, is performing) by a hostile act by or against a belligerent power, the term ‘pow er’ as used herein including any authority m a i n t a i n i n g naval, military, or air forces in association with a power; or any loss or damage caused by any weapon of w ar employing atomic fission or radioactive force w hether in time of peace or war; (b) the consequences of civil war, revolu tion, rebellion, insurrection, or civil strife aris ing therefrom, piracy, risks of contraband or il legal transportation or trade, and seizure or destruction under quarantine or customs regu lations.” (a) On the day a shipment is made to us, an ad vice is sent by ordinary mail to the office to which the shipment is addressed, showing the name of the shipper, the num ber of sacks or packages comprising the shipment, a description of the contents, and the amount of insurance to be effected. A copy of this advice should be placed in the shipment. (b) The contents of all shipments are verified and enclosed in a strong wrapper, envelope, or cloth or canvas bag, securely sealed with wax, paper seal, or in any m anner acceptable to the post office at the place of mailing. (c) The verifying, packaging and sealing is done by an employee of the sender, and the sealed package is in charge of a responsible person until deposited and registered at the post office, or is in the custody of an armored car service in transit from the office of the sender to the post office. (d) In the event of loss of a shipm ent insured under the registered mail policies referred to, claim will be made on behalf of the member bank for the amount for which the shipment is insured. Prompt notice of loss should be given us, together with all available details regarding the loss. FEDERAL RESERVE BANK OF DALLAS 9:30 Shipments by this Bank as fiscal agent Ship m ents of securities by this Bank as fiscal agent of the U nited S tates at the expense and risk of the U n ited S tates will be m ad e b y regis tered m ail and will be in su red u n d e r the G ov ern m e n t Losses in S hipm ent Act. This coverage is p ro v id ed fo r sh ipm en ts of U nited S tates s e curities u p o n original issue an d U nited S tates BULLETIN 7 securities in exchange fo r te m p o ra ry certificates. Risk of loss by the U nited S tates from su ch sh ip m ents term in ates u p o n delivery b y the p o s t office. Stock of u n issu ed U nited S tates Savings B onds shipped to issuing agents is the p ro p e rty of the U nited States, a n d hence such shipm ents are at the expense an d risk of the U n ited S tates a n d the in te re st of the G o v ern m en t does no t cease u pon delivery by the p o s t office.
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