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federal Reserve Ba n k of Dallas F IS C A L A G E N T O F T H E U N IT E D S T A T E S DALLAS. TEXAS 7 5 2 2 2 Circular No. 73-25 January 31, 1973 SHIPMENTS OF VALUABLES AND THE USE OF RESTRICTIVE ENDORSEMENTS To All Banks and Others Concerned in the Eleventh Federal Reserve District: For some time, this Bank has been concerned over the extent to which valuables, including in particular bearer Government and Agency secu rities, are received here in ordinary mail shipments from member banks and other financial institutions. The use of such facilities for the shipment of valuables serves to increase greatly the risk of loss or theft. Inasmuch as such risk can be minimized by the use of alternative methods of shipment, including the use of registered mail facilities, we would urge all banking institutions in this District to avoid the use of ordinary mail facilities when shipping items of intrinsic value. With respect to shipments of bearer United States Treasury secu rities to a Reserve Bank office, banks may, in certain circumstances, effect savings in insurance costs and further reduce the risk of loss or theft through the use of restrictive endorsements. Treasury Department Circular No. 853? "Regulations Governing Restrictive Endorsements of United States Bearer Securities," contains the provisions under which banks may use restric tiveendorsements. A copy of Treasury Circular No. 853 is enclosed. We urge all banks in this District to make use of such endorsements in allcircum stances in which such use has been authorized by the Treasury Department. In this connection, Treasury Circular No. 853 has recently been revised, effective September 21, 1972, to authorize member banks of the Federal Reserve System to place restrictive endorsements on bearer Treasury securities for the purpose of presenting such securities to a Reserve Bank for conversion into book-entry form. The revision is intended to ensure that the ongoing conversion of physical securities into book-entry form can be accomplished at minimal risk and expense. In addition, the regula tions continue to provide that all banks are authorized to place restrictive endorsements on bearer Treasury securities presented to a Reserve Bank for the following purposes: (a) For payment or redemption— at any time within one calendar month prior to the maturity date, or the date on which the securities become payable prior This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) to a call for redemption, or at any time after the maturity or call date of the securities; (b) For exchange— during any period for the presenta tion of the securities pursuant to an exchange offering; (c) For redemption at par in payment of Federal estate taxes, where eligible— at any time prior to the maturity or call redemption date of the securities. In accordance with the provisions of Treasury Circular No. 8533 securities restrictively endorsed in the manner prescribed will thereafter be nonnegotiable, and payment, redemption or exchange will be made only as provided in such endorsements. Moreover, bearer securities so endorsed may be declared to be of "no value" for purposes of registered mail shipments, thus reducing significantly the cost of mail shipments of such securities. In this connection, it should be noted that Treasury regulations provide that restrictively endorsed securities may be shipped by registered mail, messenger, armored car service or express to a Reserve Bank. Ordinary mail facilities may not be used for such shipments. Information and instructions on such matters as the authorized form of the endorsement, the requirements for endorsement and the procedures for the granting of relief on account of restrictively endorsed securities proven to have been lost, stolen or destroyed are set forth in Treasury Circular No. 853. Instructions on the procedures to be followed in sub mitting such securities to a Reserve Bank and forms for that purpose will be available in the next few weeks. At the present time, several Federal Agencies are reviewing their procedures with a view to authorizing the use of restrictive endorsements on their securities under the same conditions applicable to bearer Treasury securities. We expect that such reviews will be completed by the time we send you instructions on the new procedures, and at that time we will furnish you full information on the restrictive endorsement procedures of the Federal Agencies. The officers in charge of Fiscal Agency activities at each of our offices will be pleased to discuss any questions you may have concerning methods and procedures for the shipment of valuables and the use of restric tive endorsements. Yours very truly, P. E. Coldwell President Enclosure REGULATIONS GOVERNING RESTRICTIVE ENDORSEMENTS OF UNITED STATES BEARER SECURITIES 1964 D epartm ent C ircu lar N o . 853 R e v is e d and am ended * T reasury O f f ic e D epartm ent, of , t h e S ecretary, Washington December h 196If. F i s c a l S e r v ic e B ureau of the P u b lic D ebt Department Circular No. 853, dated October 5 , 1 9 4 9 , i s hereby amended and i s s u e d as Department Circular No. 853, R e v is e d . A UT HOR IT Y : S e c s . 328.1 to 328.9 is s u e d under R.S. 161, as amended (5 U.S.C . 22); Second Liberty Bond Act, as amended (31 U .S.C . 752, 753, 754, 754b). CONTENTS Scope of regulations. D efin itio n s. Authorization for restrictive endorsem ents. E ffect of restrictive endorsements. Forms of endorsement. Requirements for endorsement. Shipment of s e c u r it ie s . L o s s , theft or destruction of se c u r it ie s bear ing restrictiv e endorsements. S ec. 328.9 M isce lla n eo u s. S ec. S ec. S ec. S ec. S ec. S ec. S ec. Sec. 328.1 328.2 328.3 328.4 328.5 328.6 328.7 328.8 S ec. 328.1 Scope o f regulations. — The regulations in th is part are ap plicab le only to United S tates bearer s e c u r i t i e s 1 presented (a) by or through banks for pay ment at or after their maturity or c a ll date, or in exchange for any s e c u r it ie s under any exchan ge offering, (b) by member banks of the F ed eral R ese rv e System for con version to book-entry s e c u r it ie s , ( c ) b y or through banks at any time prior to their maturity or c a ll date for re demption at par and application of the entire p roceed s in payment of Fed eral e s ta t e t a x e s , provided said s e c u r it ie s by the terms of their i s s u e are e lig ib le for such redemption, and (d) by D istrict Directors, Internal R evenue Service, for redemption, with the p roceed s to be applied in payment of t a x e s (other than s e c u r it ie s presented under (c) above). T h e s e regulations do not apply to bearer s e c u r it ie s presented for any other tran sactio n s, or to registered se c u r it ie s a s s ig n e d in blank, or to bearer, or so a ssig n e d as to becom e, in e ffe c t, payable to bearer. S ec. 3 2 8 .2 Definitions. — Certain words and terms, as used in t h e s e regulations, are defined as fo llo w s : (a) “ B a n k s ” refer to, and in clud e, incorporated banks ( i . e . , banks doing a general commercial banking b u s in e s s ) , incorporated trust com panies ( i . e . , trust com panies doing either a general banking b u s in e s s or general trust b u s in e s s ) , and sa v in g s banks (whether or not mutual). (b) “ Bearer s e c u r it ie s " or “ s e c u r it ie s " are th o se which are payable on their face to “ bearer," the owner ship of which i s not recorded. T h ey include “ Treasury b o n d s," “ Treasury n o t e s ," “ Treasury c e r t if ic a te s of in d e b t e d n e s s ," and “ Treasury b i l l s . " I n c l u d e s a m e n d m e n t o f S e p te m b e r 21, 1972. C e r ta in a g e n c i e s o f th e U n ite d S t a t e s a nd c e r t a i n G o v e rn m e n t an d G o v e r n m e n t- s p o n s o r e d c o r p o r a tio n s a l s o a u t h o r i z e th e r e s t r i c t i v e e n d o r s e m e n t of b e a r e r s e c u r i t i e s . S ec. 328.3. Authorization for restrictive endorse ments. — (a) B y banks. B a n k s are au th o r iz e d , under th e c o n d i t i o n s and in th e form h ereinafter p rovid ed , to p l a c e r e s t r i c t i v e e n d o r s e m e n t s upon th e f a c e of bearer s e c u r i t i e s ow n e d by t h e m s e l v e s or th eir c u s t o m e r s for th e p u rp o se o f p r e s e n t a t io n to F e d e r a l R e s e r v e B a n k s or B r a n c h e s , or t o th e T re a su r e r o f th e U nited S t a t e s , a s fo llo w s : (1) For payment or redemption — at any tim e w ith in o n e c a le n d a r month prior to th e ir maturity d a t e , or th e d a t e on w h ic h t h e y b e c o m e p a y a b le pursu ant to a c a l l for red em p tion, or at any tim e after their maturity or c a l l date; ( 2 ) For exchange - during a n y period for their p r e s e n t a t i o n pursuant to an e x c h a n g e offerin g; and (3 ) For redemption at par in payment of Federal e s ta te taxes (only eligible se c u r itie s ) — at any tim e prior to their maturity or c a l l redem p tion d a t e . (4) For conversion to book-entry se c u ritie s, but only by member banks of the Federal R eserve System as defined in Sec. 306.115(g) o f this chapter — at any tim e prior to their maturity or c a l l red em p tion date. (b) B y D istrict Directors, Internal Revenue Service. D i s t r i c t D ir e c t o r s , Inte rnal R e v e n u e S e r v i c e , are autho r i z e d , under th e c o n d it io n s and in th e form herein after p r o v id e d , t o p l a c e r e s t r i c t i v e e n d o r s e m e n t s upon th e f a c e o f b earer s e c u r i t i e s for th e p u rp o se o f p r e s e n t a t io n to F e d e r a l R e s e r v e B a n k s or B r a n c h e s , or to th e T r e a s urer of th e U n ite d S t a t e s , for redem p tion and a p p li c a t i o n o f the p r o c e e d s in paym ent of t a x e s (other th an s e c u r i t i e s p r e s e n t e d for redem ptio n at par and a p p li c a t i o n of t h e p r o c e e d s in p aym ent of F e d e r a l e s t a t e t a x e s ) . (c ) Instructions from Federal R ese rv e Banks. F e d e r a l R e s e r v e B a n k s w i l l inform e l i g i b l e b a n k s and D i s t r i c t D ir e c t o r s of th e Internal R e v e n u e S e r v i c e in th eir r e s p e c t i v e d i s t r i c t s a s to the procedu re to be f o l l o w e d under th e auth ority granted by t h e s e re g u la t i o n s . N o bank or D is t r i c t D ir ector s h o u ld imprint re s t r i c t i v e e n d o r s e m e n t s on s e c u r i t i e s u n til s u c h infor m ation i s r e c e i v e d from th e F e d e r a l R e s e r v e B a n k s . S ec. 328.4. Effect o f restrictive endorsements. — B e a rer s e c u r i t i e s bea ring r e s t r i c t i v e e n d o r s e m e n t s as h erein p rovided w i l l th erea fter b e n o n n e g o t i a b l e and p aym en t, red em p tion , or e x c h a n g e w i l l b e made o n ly as p ro vided in s u c h e n d o r s e m e n t s . S ec. 328.5. Forms o f endorsement. — (a) When pre sen ted by banks — (1) For payment or exchange. T h e e n d o rsem en t p la c e d on a bearer s e c u r i t y p r e s e n t e d for p aym en t or e x c h a n g e by a bank s h o u ld be in th e f o l l o w i n g form: F o r p r e s e n t a t io n t o th e F e d e r a l R e s e r v e Bank o f _______________, F i s c a l A g e n t of th e U nited S t a t e s , for redem ptio n or in e x c h a n g e for s e - United S t a t e s ." No subsequent endorsement w ill be permitted and no other form of endorsement may be made. (In sert nam e of p r e se n tin g bank) (b) On coupons. Unmatured coupons attached to re stric tively endorsed s e c u r it ie s should be c a n ce lle d ABA N o________________ (2) For redemption at par. The endorsement by imprinting the prescribed endorsement in su ch manner that a su bstantial portion of the endorsement w ill appear placed on a bearer security presented for redemption on each su ch coupon. Where such endorsements are at par in payment of F ed eral esta te t a x e s should be made by a bank, it s ABA code number should not be in the follow ing form : perforated on the coupons. If any such coupons are For presentation to the Federal R ese r v e Bank m issin g , deduction of their fa ce amount w ill be made in of______________ , F i s c a l Agent of the United c a s e s of redemption, and in c a s e s of exchan ge, remit S tates, for redemption at par in payment of tance equal to the fa ce amount of the m issin g coupons F ed eral e s ta te t a x e s , in accordance with writ must accompany the s e c u r it ie s. All matured coupons, ten instructions submitted by________________ . (In sert nam e of p r e se n tin g bank) including coupons which w ill mature on or before the date of redemption or exchange (except as otherwise ABA N o________________ (b) For conversion to book-entry securities. The s p e c if i c a ll y provided in an announcement of an exchange endorsement placed on a bearer secu rity presented by a offering), should be detached from se c u r it ie s upon which member bank of the F ed eral R ese rve System for con restrictive endorsements are to be imprinted. version to abook-entry se cu rity sh a ll be in the following S ec. 3 2 8 .7 . Shipment o f secu rities. — Secu rities form : bearing restrictive endorsements may be sh ipped, at the For presentation to the F ed eral R ese rv e Bank risk and e x p en se of the shipper, by registered mail, o f ---------------------, F i s c a l Agent of the United S tates, m essenger, armored car s e r v ic e , or ex p re ss to the F e d for conversion to book-entry s e c u r itie s b y ________ eral R ese rv e Bank of the district in which the presenting bank or D istrict Director, Internal Revenue S ervice, i s (In sert nam e o f p r e se n tin g bank) located, or to the appropriate branch of su ch Federal ABA N o________________ R eserve Bank. Shipments to the Treasurer of the United (c) When presented by District Directors, Internal S ta tes, Washington, D. C ., should be made by m essenger Revenue Service. The endorsement placed on a bearer or armored car. security by a District Director, Internal Revenue Service, should be in the following form : S ec. 328.8. L o ss, theft or destruction o f securities bearing restrictive endorsements. — (a) General. R e lie f For presentation to the Federal R eserve Bank w ill be provided on account of se c u r it ie s bearing re o f _____________ , F i s c a l Agent of the United S tates, stric tiv e endorsements proved to have b een lo s t , stolen for redemption, the proceed s to be credited to the or destroyed, upon the owner’s application, in the same account of the District Director, Internal Revenue manner as registered s e c u r itie s which have not been Service a t _____________ , for credit on the F ederal _________________ta x e s due from__________________. a ssig n e d . (See Subpart N of the current revision of De (Incom e, g ift or other) (Name and a d d r e s s) partment Circular No. 300, the general regulations with S ec. 3 2 8 .6 . Requirements for endorsement, — (a) Gn resp ect to United States s e c u r it ie s .) Except for bearer bearer securities. The endorsement must be imprinted in s e c u r itie s submitted for redemption at par in payment of the left-hand portion of the fa ce of each security with Federal e s ta t e t a x e s , a bank w ill be considered the the first line thereof parallel to the left edge of the owner of s e c u r it ie s handled on behalf of customers security and in such manner as to be clearly le g ib le and u n le s s it otherwise requ ests. The application for relief in such position that it w ill not obscure the se ria l num (Form PD 2211) and instructions w ill be furnished by ber, s e r ie s d esignation or other identifying data, and the F ed eral R ese rv e Banks. cover the sm a llest p o s s ib le portion of the text on the (b) Bond of indemnity. Where s e c u r it ie s bearing face of the security. The dim ensions of the endorsement restrictive endorsements shipped by a bank have been should be approximately four in ch es in width and one lo st, sto len , or destroyed, a bond of indemnity with and one-half in ch es in height, and must be imprinted by surety sa tisfa cto ry to the Secretary of the Treasury w ill stamp or plate of such character, with a carbon pigment be required from the owner. If such bond i s executed ink, and by such means, as will render the endorsement by a bank or other corporation, the execution must be substantially ineradicable. In c a s e s where the endorse authorized by general or s p e c ia l resolution of the board ment i s being made by a bank, immediately below and of directors, or other body exercising.,sim ilar functions as part of the endorsement the ABA code number of the under it s bylaw s. Ordinarily, no surety, w ill be required presenting bank must be perforated in figures approxi on a bond executed by a presenting bafok. The Secretary mately one-fourth to one-half inch in height. The per of the Treasury rese rv e s the right, however, to require forations should be placed as nearly as p o s s ib le beneath a surety in any c a s e in which he co n sid er s su ch action the endorsement without obliterating any of the identi n e c e s s a r y for the protection of the United S ta tes. fying data. The name of the Federal R eserve Bank Qf S ec. 3 2 8 .9 . Miscellaneous . - The prov isions of th is the district must appear on the plate or stamp used for circular are subject to the current revision of Department the imprinting of the endorsement, and presentation to Circular No. 300. The Secretary of the Treasury reserves the appropriate branch of the Federal R eserve Bank the right at any time to amend, supplement, or withdraw named w ill be considered as presentation to the bank. any or all of the provisions of t h e s e regulations. When s e cu ritie s are to be presented to the Treasurer of the United S ta tes, the words “ Treasurer of the United John K. Carlock, S ta te s " should be used in lieu of the words “ Federal F iscal A s s is ta n t Secretary. R eserve Bank o f _____________ , F i s c a l Agent of the curities of a new i s s u e , in accordance with written in structions submitted by____________ .
