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FEDERAL RESERVE BANK
OF NEW YORK
r Circular No. 1276T
L September 6, 1933J
Regulation Issued by Federal Reserve Board Relating to
Holding Company Affiliates—Voting Permits
To all Member Banks in the
Second Federal Reserve District:
For your information we transmit herewith copy of the Federal
Reserve Board's Regulation P, Series of 1933, which relates to votingpermits of holding company affiliates. The regulation was approved
by the Board on August 4, 1933, and became effective immediately.
GEORGE L. HARRISON,
Governor.
FEDERAL RESERVE BOARD
HOLDING COMPANY AFFILIATES
VOTING PERMITS
REGULATION P
This Regulation was approved August 4, 1933,
and became effective immediately
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1933
REGULATION P, SERIES OF 1933
HOLDING COMPANY AFFILIATES—VOTING
PERMITS
SECTION I. STATUTORY PROVISIONS
Section 2 of the Banking Act of 1933 provides, in part, as follows:
(c) The term "holding company affiliate" shall include any corporation,
business trust, association, or other similar organization—
(1) Which owns or controls, directly or indirectly, either a majority of the
shares of capital stock of a member bank or more than 50 per centum of the
number of shares voted for the election of directors of any one bank at the
preceding election, or controls in any manner the election of a majority of the
directors of any one bank; or
(2) For the benefit of whose shareholders or members all or substantially
all the capital stock of a member bank is held by trustees.
Section 9 of the Federal Reserve Act, as amended by section 5 (c)
of the Banking Act of 1933, reads, in part, as follows:
Each State member bank affiliated with a holding company affiliate shall
obtain from such holding company affiliate, within such time as the Federal
Reserve Board shall prescribe, an agreement that such holding company affiliate shall be subject to the same conditions and limitations as are applicable
under section 5144 of the Revised Statutes, as amended, in the case of holding
company affiliates of national banks. A copy of each such agreement
shall be filed with the Federal Reserve Board. Upon the failure of a
State member bank affiliated with a holding company affiliate to obtain such
an agreement within the time so prescribed, the Federal Reserve Board shall
require such bank to surrender its stock in the Federal reserve bank and to
forfeit all rights and privileges of membership in the Federal Reserve System
as provided in this section. Whenever the Federal Reserve Board shall have
revoked the voting permit of any such holding company affiliate, the Federal
Reserve Board may, in its discretion, require any or all State member banks
affiliated with such holding company affiliate to surrender their stock in the
Federal reserve bank and to forfeit all rights and privileges of membership
in the Federal Reserve System as provided in this section.
Section 5144 of the Revised Statutes of the United States, as
amended by section 19 of the Banking Act of 1933, reads as follows:
SEC. 5144. In all elections of directors, each shareholder shall have the right
to vote the number of shares owned by him for as many persons as there are
directors to be elected, or to cumulate such shares and give one candidate as
many votes as the number of directors multiplied by the number of his shares
shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and in deciding all other questions at meetings of
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REGULATIONS OF THE FEDERAL RESERVE BOARD
3
shareholders, each shareholder shall be entitled to one vote on each share of
stock held by him; except (1) that shares of its own stock held by a national
bank as sole trustee shall not be voted, and shares of its own stock held
by a national bank and one or more persons as trustees may be voted by
such other person or persons, as trustees, in the same manner as if he or they
were the sole trustee, and (2) shares controlled by any holding company
affiliate of a national bank shall not be voted unless such holding company
affiliate shall have first obtained a voting permit as hereinafter provided, which
permit is in force at the time such shares are voted. Shareholders may vote
by proxies duly authorized in writing; but no officer, clerk, teller, or bookkeeper of such bank shall act as proxy; and no shareholder whose liability
is past due and unpaid shall be allowed to vote.
For the purposes of this section shares shall be deemed to be controlled by
a holding company affiliate if they are owned or controlled directly or indirectly
by such holding company affiliate, or held by any trustee for the benefit of the
shareholders or members thereof.
Any such holding company affiliate may make application to the Federal
Reserve Board for a voting permit entitling it to cast one vote at all elections
of directors and in deciding all questions at meetings of shareholders of such
bank on each share of stock controlled by it or authorizing the trustee or
trustees holding the stock for its benefit or for the benefit of its shareholders
so to vote the same. The Federal Reserve Board may, in its discretion, grant or
withhold such permit as the public interest may require. In acting upon such
application, the Board shall consider the financial condition of the applicant,
the general character of its management, and the probable effect of the granting
of such permit upon the affairs of such bank, but no such permit shall be
granted except upon the following conditions:
(a) Every such holding company affiliate shall, in making the application
for such permit, agree (1) to receive, on dates identical with those fixed for
the examination of banks with which it is affiliated, examiners duly authorized
to examine such banks, who shall make such examinations of such holding
company affiliate as shall be necessary to disclose fully the relations between
such banks and such holding company affiliate and the effect of such relations
upon the affairs of such banks, such examinations to be at the expense of the
holding company affiliate so examined; (2) that the reports of such examiners
shall contain such information as shall be necessary to disclose fully the relations between such affiliate and such banks and the effect of such relations upon
the affairs of such banks; (3) that such examiners may examine each bank
owned or controlled by the holding company affiliate, both individually and in
conjunction with other banks owned or controlled by such holding company
affiliate; and (4) that publication of individual or consolidated statements of
condition of such banks may be required;
(b) After five years after the enactment of the Banking Act of 1933, every
such holding company affiliate (1) shall possess, and shall continue to possess
during the life of such permit, free and clear of any lien, pledge, or hypothecation of any nature, readily marketable assets other than bank stock in an
amount not less than 12 per centum of the aggregate par value of all bank
stocks controlled by such holding company affiliate, which amount shall be
increased by not less than 2 per centum per annum of such aggregate par value
until such assets shall amount to 25 per centum of the aggregate par value
of such bank stocks; and (2) shall reinvest in readily marketable assets other
than bank stock all net earnings over and above 6 per centum per annum on
the book value of its own shares outstanding until such assets shall amount
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REGULATIONS OF THE FEDERAL RESERVE BOARD
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to such 25 per centum of the aggregate par value of all bank stocks controlled
by it;
(c) Notwithstanding the foregoing provisions of this section, after five years
after the enactment of the Banking Act of 1933, (1) any such holding company affiliate the shareholders or members of which shall be individually and
severally liable in proportion to the number of shares of such holding company affiliate held by them respectively, in addition to amounts invested therein,
for all statutory liability imposed on such holding company affiliate by reason
of its control of shares of stock of banks, shall be required only to establish
and maintain out of net earnings over and above 6 per centum per annum
on the book value of its own shares outstanding a reserve of readily marketable assets in an amount of not less than 12 per centum of the aggregate par
value of bank stocks controlled by it, and (2) the assets required by this section to be possessed by such holding company affiliate may be used by it for
replacement of capital in banks affiliated with it and for losses incurred in
such banks, but any deficiency in such assets resulting from such use shall
be made up within such period as the Federal Reserve Board may by regulation prescribe;
(d) Every officer, director, agent, and employee of every such holding company affiliate shall be subject to the same penalties for false entries in any
book, report, or statement of such holding company affiliate as are applicable
to officers, directors, agents, and employees of member banks under section
5209 of the Revised Statutes, as amended (U.S.C., title 12, sec. 592) ; and
(e) Every such holding company affiliate shall, in its application for such
voting permit, (1) show that it does not own, control, or have any interest
in, and is not participating in the management or direction of, any corporation,
business trust, association, or other similar organization formed for the purpose
of, or engaged principally in, the issue, flotation, underwriting, public sale, or
distribution, at wholesale or retail or through syndicate participation, of
stocks, bonds, debentures, notes, or other securities of any sort (hereinafter
referred to as "securities company"); (2) agree that during the period
that the permit remains in force it will not acquire any ownership, control, or
interest in any such securities company or participate in the management or
direction thereof; (3) agree that if, at the time of filing the application for
such permit, it owns, controls, or has an interest in, or is participating in
the management or direction of, any such securities company, it will, within
five years after the filing of such application, divest itself of its ownership,
control, and interest in such securities company and will cease participating
in the management or direction thereof, and will not thereafter, during the
period that the permit remains in force, acquire any further ownership, control,
or interest in any such securities company or participate in the management
or direction thereof; and (4) agree that thenceforth it will declare dividends
only out of actual net earnings.
If at any time it shall appear to the Federal Reserve Board that any holding
company affiliate has violated any of the provisions of the Banking Act of
1933 or of any agreement made pursuant to this section, the Federal Reserve
Board may, in its discretion, revoke any such voting permit after giving sixty
days' notice by registered mail of its intention to the holding company affiliate
and affording it an opportunity to be heard. Whenever the Federal Reserve
Board shall have revoked any such voting permit, no national bank whose
stock is controlled by the holding company affiliate whose permit is so revoked
shall receive deposits of public moneys of the United States, nor shall any such
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REGULATION'S OF THE FEDERAL RESERVE BOARD
5
national bank pay any further dividend to such holding company affiliate
upon any shares of such bank controlled by such holding company affiliate.
Whenever the Federal Reserve Board shall have revoked any voting permit
as hereinbefore provided, the rights, privileges, and franchises of any or all
national banks the stock of which is controlled by such holding company
affiliate shall, in the discretion of the Federal Reserve Board, be subject to
forfeiture in accordance with section 2 of the Federal Reserve Act, as amended.
SECTION II. DEFINITIONS
(a) Holding company affiliate.—The term "holding company affiliate" includes any corporation, business trust, association, or other
similar organization—
(1) which owns or controls, directly or indirectly, a majority
of the shares of capital stock of a member bank; or
(2) which owns or controls, directly or indirectly, more than
50 per centum of the number of shares voted for the election
of directors of any member bank at the preceding election; or
(3) which controls in any manner the election of a majority
of the directors of any member bank; or
(4) for the benefit of whose shareholders or members all or
substantially all the capital stock of a member bank is held by
trustees.
(6) Member bank.—The term "member bank'', unless otherwise
qualified, means any national bank, or any State bank, savings bank,
trust company, Morris Plan bank, mutual savings bank or other
banking institution which is a member of the Federal Reserve
System.
(c) Nonmember bank.—The term " nonmember bank " includes any
banking institution which is not a member of the Federal Reserve
System.
(d) Shares controlled.—Shares shall be deemed to be controlled by
a holding company affiliate if they are owned or controlled directly
or indirectly by such holding company affiliate, or if they are held
by any trustee for the benefit of the shareholders or members of such
holding company affiliate.
(e) Subsidiary.—The term " subsidiary " includes any national
bank, or any State bank, savings bank, trust company, Morris Plan
bank, mutual savings bank, private bank, mortgage loan company,
title company, safe deposit company, insurance company, or any
other organization of any kind whatsoever engaged in any kind of
business whatsoever—
(1) Of which any corporation, business trust, association, or
other similar organization owns or controls, directly or indirectly, a majority of the shares of capital stock; or
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REGULATIONS OF THE FEDERAL RESERVE BOARD
REG. P
(2) Of which any corporation, business trust, association, or
other similar organization owns or controls, directly or indirectly, more than 50 per centum of the number of shares voted
for the election of the directors, trustees, or other persons exercising similar functions at the preceding election; or
(3) Of which any corporation, business trust, association, or
other similar organization controls in any manner the election
of a majority of the directors, trustees, or other persons exercising similar functions; or
(4) Of which all or substantially all the capital stock is held
by trustees for the benefit of the shareholders or members of any
corporation, business trust, association, or other similar organization.
(/) Subsidiary member bank.—The term " subsidiary member
bank " includes any member bank which is affiliated with a holding
company affiliate in any manner set forth in subdivision (e) of this
section.
{g) Subsidiary nonmember bank.—The term " subsidiary nonmember bank " includes any banking institution, other than a member
bank, which is affiliated with any corporation, business trust, association, or other similar organization in any manner set forth in
subdivision (e) of this section.
(h) Affiliate.—The term " affiliate " includes any corporation, business trust, association, or other similar organization—
(1) Of which a member bank, directly or indirectly, owns or
controls a majority of the voting shares; or
(2) Of which a member bank, directly or indirectly, owns or
controls more than 50 per centum of the number of shares voted
for the election of any such organization's directors, trustees,
or other persons exercising similar functions at the preceding
election; or
(3) Of which a member bank controls in any manner the
election of a majority of any such organization's directors,
trustees, or other persons exercising similar functions; or
(4) Of which control is held, directly or indirectly, through
stock ownership or in any other manner, by the shareholders of a
member bank who own or control a majority of the shares of
such bank; or
(5) Of which control is held, directly or indirectly, through
stock ownership or in any other manner, by the shareholders of
a member bank who own or control more than 50 per centum of
the number of shares voted for the election of directors of such
bank at the preceding election; or
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REGULATIONS OF THE FEDERAL RESERVE BOARD
7
(6) Of which control is held, directly or indirectly, through
stock ownership or in any other manner, by trustees for the
benefit of the shareholders of any member bank; or
(7) Of which a majority of its directors, trustees, or other
persons exercising similar functions are directors of any one
member bank.
(i) When deemed affiliated.—A corporation, business trust, association, partnership or other organization of any kind whatsoever, shalL
be " deemed to be affiliated " with another such organization if it.
is affiliated with such other organization in any manner set forth in
subdivision (e) or subdivision (A) of this section.
(j) Securities company.—The term " securities company" means
any corporation, business trust, association, or other similar organization formed for the purpose of, or engaged principally in, the
issue, flotation, underwriting, public sale, or distribution, at wholesale or retail or through syndicate participation, of stocks, bonds,
debentures, notes, or other securities of any sort.
(&) Board.—The term " Board " means the Federal Reserve Board.
SECTION III. REQUIREMENTS IN RESPECT TO STATE MEMBER BANK'S
OBTAINING AND FILING WITH BOARD AGREEMENT BY HOLDING COMPANY
AFFILIATE, AND EFFECT OF FAILURE TO OBTAIN SUCH AGREEMENT
On or before October 1, 1933, each State member bank which is
a subsidiary of a holding company affiliate shall obtain from such
holding company affiliate an agreement, on F.R.B. Form P-5, which
is hereby made a part of this regulation, that such holding company
affiliate will be subject to the same conditions and limitations as are
applicable under section 5144 of the Revised Statutes, as amended,
in the case of holding company affiliates of national banks. Every
State member bank which hereafter becomes a subsidiary of any
holding company affiliate shall obtain from such holding company
affiliate a like agreement within 90 days after such member bank
shall have become a subsidiary thereof.
Upon the failure of a State member bank which is now or becomes
hereafter a subsidiary of a holding company affiliate to obtain the
requisite agreement within the time prescribed, the Board will require such bank to surrender its stock in the Federal Reserve bank
and to forfeit all rights and privileges of membership in the Federal
Reserve System.
Any State banking institution applying for membership in the
Federal Reserve System which is a subsidiary of any corporation,
business trust, association, or other similar organization, will be required to obtain an agreement from each such organization with
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REGULATIONS OF THE FEDERAL RESERVE BOARD
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which it is so affiliated on F.R.B. Form P-6, which is hereby made
a part of this regulation, and the application of such organization
for a voting permit must be approved by the Board before such
banking institution will be admitted to membership.
The original and one copy of each such agreement must be filed
promptly with the Federal Reserve Agent of the district in which
the applicant's principal office is located, and the original of such
agreement shall be sent by such Federal Reserve Agent to the Board.
SECTION IV. NECESSITY FOR OBTAINING VOTING PERMITS
No holding company affiliate of a national bank, and no holding
company affiliate of a State member bank which has executed an
agreement such as that required by section III of this regulation,
may lawfully vote any share of stock in any such bank with which
it is so affiliated unless such holding company affiliate shall have
first obtained a voting permit which is in force at the time such
shares are voted, and before voting any such stock, each such holding company affiliate must obtain a voting permit pursuant to the
provisions of section 5144, Revised Statutes, as amended, and of this
regulation.
No State banking institution applying for membership in the Federal Reserve System which is a subsidiary of any corporation, business trust, association, or other similar organization, will be admitted to membership in the Federal Reserve System until the application for a voting permit of each organization of which such
banking institution is a subsidiary has been approved by the Board.
SECTION V. APPLICATION FOR VOTING PERMIT
Any holding company affiliate of a member bank, and any organization affiliated in any manner described in subdivision (a) of section II of this regulation with a nonmember bank applying for membership in the Federal Reserve System, may make application for a
voting permit entitling it to cast one vote on each share of stock controlled by it at all elections of directors and in deciding all questions
at meetings of shareholders of each of its subsidiary member banks.
In the event that the stock is held by a trustee, or trustees, for the
benefit of a holding company affiliate or of its shareholders or members, the permit may authorize such trustee or trustees so to vote the
same, except that no such permit to vote shares of stock of a national banking association held by it as sole trustee will be granted.
Each application must be submitted on F.R.B. Form P-l, which is
made a part of this regulation. It is necessary for an applicant
hereunder to file only one application, notwithstanding that such ap-
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REGULATIONS OF THE FEDEKAL RESERVE BOARD
9
plicant may own or control more than one subsidiary member bank.
However, a separate agreement on F.R.B. Form P-3 to permit examinations and furnish reports of condition must be filed by each organization (other than a member bank) with which the applicant or
any of its subsidiaries is affiliated (including a similar and separate
agreement by each of applicant's subsidiary nonmember banks, notwithstanding that any or all of such subsidiary nonmember banks
may also be applying for membership in the System).
In preparing the application, all forms (except signatures of persons executing same) should be filled out by typewriter. The original
and two executed counterparts of the application must be sent
to the Federal Reserve Agent of the district in which the applicant's
principal office is located, and if any subsidiary member bank or
subsidiary nonmember bank applying for membership is situated
in any district other than that in which the applicant's principal
office is located, a copy of the application must be filed with the
Federal Reserve Agent of each such other district.
The Federal Reserve Agent of the district in which the applicant's
principal office is located will forward the original and one executed
counterpart of such application to the Board with his recommendation and that of the executive committee of the Federal Reserve bank
of such district. The Federal Reserve Agent of any other district
in which a subsidiary member bank or a subsidiary nonmember bank
applying for membership is located will forward to the Board his
recommendation and that of the executive committee of the Federal
Reserve bank in his district.
SECTION VI. INFORMATION AND DOCUMENTS TO BE FILED WITH
APPLICATION
The statute vests in the Board discretionary authority to grant
or withhold any voting permit applied for as the public interest
may require. In acting upon each application for a voting permit,
the Board is required to consider the financial condition of the applicant, the general character of its management, and the probable
effect of the granting of such permit upon the affairs of each subsidiary member bank. In order that the Board niay give adequate
consideration to these subjects, each applicant for a voting permit
must furnish with its application the following information and
documents:
(1) Names and addresses of all subsidiary member banks.
(2) Certified copy of charter or articles of association and
by-laws of applicant, with all amendments to date.
(3) Statement of financial condition of applicant, as of date
of application, including detailed list of investments.
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REGULATIONS OF THE FEDERAL RESERVE BOARD
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(4) Copy of report of last audit of applicant by an independent auditor or auditors, if any.
(5) Detailed statement in regard to management and personnel of applicant, including list of directors and principal officers
and stockholders, and their principal business interests.
(6) List of all of applicant's subsidiaries and all other corporations, business trusts, associations, or other similar organizations with which applicant or any of its subsidiaries is affiliated, with description of their functions, and detailed statement
of relations of applicant with each such organization.
(7) Statement of financial condition of each subsidiary member bank, as of a date not in excess of 60 days prior to date of
application.
(8) Copy of report of last examination, if any, by State
authorities of each of applicant's subsidiaries and of each other
corporation, business trust, association, or other similar organization with which applicant or any of its subsidiaries is affiliated (other than a member bank).
(9) Copy of report of last examination, if any, by applicant
of each of its subsidiaries and of each other corporation, business trust, association, or other similar organization with which
applicant or any of its subsidiaries is affiliated.
(10) Detailed statement of any plan of reorganization involving any subsidiary or any other corporation, business trust,
association, or other similar organization with which applicant
or any of its subsidiaries is affiliated, effected since last examination of any such organization, and of any such reorganization
proposed or pending.
(11) Agreements by subsidiary nonmember banks and affiliated organizations (other than member banks) to submit to examination and furnish reports of condition (F.R.B. Form P-3).
(12) Statement as to whether any certificate representing
stock of applicant represents stock of any other corporation,
and whether ownership, sale, or transfer of any certificate
representing the stock of applicant is conditioned in any manner
whatsoever upon the ownership, sale, or transfer of a certificate
representing the stock of any other corporation. If so, information as to manner in which the ownership, sale, or transfer of
a certificate representing stock in applicant affects the ownership,
sale, or transfer of a certificate representing stock in such other
corporation.
(13) Statement as to whether applicant owns, controls, or
has any interest in, and whether it is participating in the management or direction of, any securities company.
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REGULATIONS OF THE FEDERAL RESERVE BOARD
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SECTION VII. REQUIREMENTS REGARDING EXHIBITS D, G, AND H
(a) Statement of financial condition of applicant.—There must be
attached to each application for a voting permit, as exhibit D, a
statement of the financial condition of the applicant as of the date
of the application. This statement must be taken from the books
of the applicant, must show each control account separately, and
must give detailed information in respect to the following:
(1) Loans, extensions of credit, and advances in any form
(including repurchase agreements and securities loaned) by
each subsidiary bank to applicant, the amounts, forms, and maturity dates thereof, the interest rates thereon, and the collateral
pledged therefor.
(2) Investments of applicant in capital stock of each subsidiary bank and each other organization with which applicant
or any of its subsidiaries is affiliated, the number of shares of
stock of each such affiliated organization authorized and outstanding, the par and book value thereof, and the number of
shares pledged, if any.
(3) Other investments—
(i) Bonds—Names of obligors, par value, book value,
interest rate, maturity, and bonds pledged, if any.
(ii) Stocks—Number of shares, par value, book value,
class of stock, and stocks pledged, if any.
(4) Capital stock of applicant, classes of such stock, number
of shares authorized and outstanding in each class, the par
value thereof, and any options or stock purchase warrants
outstanding.
(5) Accounts due to and from each subsidiary and each
affiliate of applicant or of any of its subsidiaries.
(6) Detailed list of any and all contingent liabilities of
applicant.
(5) Statement of relationship of applicant to subsidiaries and affiliated
organizations.—There must also be attached to each application for
a voting permit, as exhibit G, a list of all of the applicant's subsidiaries and all other organizations with which the applicant or
any of its subsidiaries is affiliated, with a description of their functions, and a detailed statement of the relationship of the applicant
to its subsidiaries and to any and all other organizations with
which the applicant or any of its subsidiaries is affiliated. Among
other things, this statement must set forth:
(1) The total number of shares of capital stock of each subsidiary and each other affiliated organization authorized and
outstanding;
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(2) The number of shares owned or controlled by applicant,
or held by any trustee for the benefit of the shareholders or
members thereof;
(3) The form of control, whether sole or joint;
(4) The manner in which, and object for which, control was
established and is maintained;
(5) The extent of control;
(6) Whether control is direct or indirect; and
(7) The names of the intermediaries through which control,
if indirect, was established and is maintained.
If control is held through any trustee, there should be attached
to exhibit G a copy of the agreement creating the trust and a copy
of each other instrument directly affecting the trust; and the exhibit
must set forth, in addition to the information required above:
(1) The name of such trustee or trustees;
(2) The names of the beneficiaries for whom the trust is
maintained; and
(3) The purpose of the trust.
(c) Statement offinancialcondition of each subsidiary member bank.—
There must be attached to the application, as exhibit H, a statement
of the financial condition of each subsidiary member bank as of a
date not in excess of 60 days prior to the date of application. Such
statement must be taken from the books of the bank, and must be
supplemented by full and complete information in respect to:
(1) Funds of each subsidiary member bank invested in capital stock, bonds, debentures, or other such obligations of applicant, or of any subsidiary of applicant, or of any other organization with which applicant or any of its subsidiaries is
affiliated.
(2) Loans, advances, or extensions of credit made to any
person, partnership, association, business trust, corporation, or
other organization against the capital stock, bonds, debentures,
or other obligations of applicant, or of any subsidiary of applicant, or of any other organization with which applicant or any
of the subsidiaries is affiliated.
(3) Balances " due to " and " due from " each subsidiary of
applicant and each other organization with which applicant or
any of its subsidiaries is affiliated.
If a subsidiary member bank of the applicant is exercising fiduciary powers, a supplementary statement must be attached to exhibit
H, which statement must set forth the amount of capital stock, bonds,
debentures or other obligations of, or guaranteed by, the applicant
or any subsidiary or other organization with which the applicant
or any of its subsidiaries is affiliated, which have been purchased for
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REGULATIONS OF THE FEDERAL, RESERVE BOARD
13
account of any of the trusts held in the trust department of such
subsidiary member bank. This supplementary statement must set
forth the name of the trust, the amount of the corpus thereof, and
the amount invested in such capital stock or other obligations.
SECTION VIII. CONDITIONS WITH RESPECT TO ISSUANCE OF PERMIT
No voting permit will be granted unless the applicant agrees,
among other things:
(1) To permit at its expense such examinations of its affairs
by examiners duly authorized to examine banks with which it
is affiliated as may be necessary to disclose fully the relations
between applicant and such banks, and any other subsidiaries
and other organizations with which applicant or any of its subsidiaries is affiliated, and the effect of such relations upon the
affairs of such banks and other organizations.
(2) That the reports of such examiners may contain such information as may be necessary to disclose fully the relations
between applicant and banks with which it is affiliated, and
any other subsidiaries and other organizations with which applicant or any of its subsidiaries is affiliated, and the effect
of such relations upon the affairs of such banks and other
organizations.
(3) That such examiners may examine each banking institution or other organization owned or controlled by applicant
either individually or in conjunction with other banks or other
organizations owned or controlled by applicant.
(4) That publication of individual or consolidated statements
of the condition of the subsidiaries of applicant and other organizations with which applicant or any of its subsidiaries is
affiliated may be required by the Board.
(5) That during the period that any permit granted to applicant remains in force it will not acquire any ownership, control, or interest in any securities company, and will not participate in the management or direction of any such company
other than one in the management or direction of which applicant is participating at the time of the filing of the application,
and will not engage principally in the business of a securities
company in any manner or by any device whatsoever.
(6) That thenceforth it will declare dividends only out of
actual net earnings.
(7) That it will maintain the required reserves of readily
marketable assets, as set forth in section IX hereof.
(8) That it will furnish such information to the Board as
it may require.
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REGULATIONS OF THE FEDERAL RESERVE BOARD
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(9) That copies of reports of examinations by constituted
authorities, and any other information they may have relating
to applicant or its subsidiaries or the other organizations with
which applicant or any of its subsidiaries is affiliated, may be
furnished to the Federal Reserve Board, the Federal Reserve
Agent, the Comptroller of the Currency, or other duly constituted authority, upon request therefor.
(10) That any permit for which application is made may be
granted for a temporary period in the discretion of the Board.
(11) That, if so requested by the Board, applicant will require
any subsidiary nonmember bank to apply for membership in
the Federal Reserve System, or will surrender any voting permit
granted hereunder upon failure of any such bank to make such
application and become a member of the Federal Reserve System, or will divest itself of its ownership or control of such bank.
In the event that the applicant, at the time of filing the application for such permit, owns, controls, or has an interest in, or is participating in the management or direction of, any securities company, it must agree that, within 5 years after the filing of such
application, (i) it will divest itself of its ownership, control, and
interest in such securities company, (ii) will cease participating in
the management or direction thereof, and (in) will not thereafter,
during the period that the permit remains in force, acquire any
further ownership, control, or interest in any such securities company
or participate in the management or direction thereof.1
SECTION IX. RESERVE REQUIREMENTS
(a) Holding company affiliate whose shareholders are not personally
liable.—Beginning June 16, 1938, every holding company affiliate, the
shareholders or members of which are not individually and severally
liable in proportion to the number of shares of such holding company affiliate held by them respectively, in addition to the amounts
invested therein, for all statutory liability imposed on such holding
company affiliate by reason of its control of shares of stock of banks,
must, during the life of any voting permit granted by the Board to
such holding company affiliate:
1
Section 20 of the Banking Act of 1933 provides that, after June 15, 1934, no member
bank may be affiliated in any manner described in subdivision (h) of section II of this
regulation with any securities company, and for every violation thereof the member
bank involved is subject to a penalty not exceeding $1,000 per day for each day during
which such violation continues. If any such violation continues for 6 calendar months
after the member bank shall have been warned by the Board to discontinue the same
the rights, privileges and franchises of the national bank, or the rights and privileges
of membership of the State bank, as the case may be, may be forfeited as provided in
the Federal Reserve Act, as amended.
RKO. P
REGULATIONS OF THE FEDERAL RESERVE BOARD
15
(1) Own, and continue to own, free and clear of any lien, pledge,
or hypothecation of any nature, readily marketable assets other
than bank stock in an amount not less than 12 per centum of the
aggregate par value of all bank stocks controlled by such holding
company affiliate; and
(2) Increase such amount by not less than 2 per centum per
annum of such aggregate par value until such assets amount to 25
per centum of the aggregate par value of such bank stocks; and
(3) Reinvest in readily marketable assets other than bank stock
all net earnings over and above 6 per centum per annum on the
book value of its own shares outstanding until such assets shall
amount to such 25 per centum of the aggregate par value of all
bank stocks controlled by it.
(b) Holding company affiliate whose shareholders are personally
liable.—Beginning June 16, 1938, a holding company affiliate, the
shareholders or members of which are individually and severally
liable in proportion to the number of shares of such holding company affiliate held by them respectively, in addition to the amounts
invested therein, for all statutory liability imposed on such holding
company affiliate by reason of its control of shares of stock of
banks, is required only to establish and maintain out of net earnings over and above 6 per centum per annum on the book value of
its own shares outstanding a reserve of readily marketable assets
in an amount of not less than 12 per centum of the aggregate par
value of bank stocks controlled by it.
(c) Use of reserves.—Beginning June 16, 1938, the assets required
to be maintained as reserves may be used by the holding company
affiliate for replacement of capital in banks affiliated with it and
for losses incurred in such banks; but any deficiency in such assets
resulting from such use must be made up within a period of 2 years
after the date such assets were so depleted, unless the Federal
Reserve Board, in its discretion, extends such period for cause.
SECTION X. PENAL PROVISIONS
Under subparagraph (d) of section 5144 of the Revised Statutes,
as amended, every officer, director, agent, and employee of every
holding company affiliate of a national bank, or of a State member
bank which has entered into an agreement such as that required by
section III hereof, is made subject to the same penalties for false
entries in any book, report, or statement of such holding company
affiliate as are applicable to officers, directors, agents, and employees
of member banks under section 5209 of the Revised Statutes, as
amended (U.S.C., title 12, sec. 592).
16
REGULATIONS OF THE FEDERAL RESERVE BOARD
REG. P
SECTION XI. REVOCATION OF PERMIT
(a) Grounds and method of revocation.—If it appears to the Board
that any holding company affiliate has violated any of the provisions
of the Banking Act of 1933 or of any agreement made pursuant
thereto, the Board may, in its discretion, revoke any such voting
permit after giving 60 days' notice by registered mail of its intention to the holding company affiliate and affording it an opportunity
to be heard.
(b) Effect on national banks.—Whenever a voting permit of a holding company affiliate of a national bank shall have been revoked, no
national bank, whose stock is controlled by the holding company
affiliate whose permit is so revoked, may receive deposits of public
moneys of the United States, or pay any further dividend to such
holding company affiliate upon any shares of such bank controlled
by such holding company affiliate; and, in the discretion of the
Board, the rights, privileges, and franchises of any or all such banks,
the stock of which is controlled by such holding company affiliate,
are subject to forfeiture in accordance with section 2 of the Federal
Reserve Act, as amended.
(c) Effect on State member banks.—Whenever the Board shall have
revoked the voting permit of a holding company affiliate of a State
member bank, the Board may, in its discretion, require any or all
State member banks affiliated with such holding company affiliate to
surrender their stock in the Federal Reserve bank and to forfeit all
rights and privileges of membership in the Federal Reserve System,
as provided in section 9 of the Federal Reserve Act, as amended.
SECTION XII. PARTICIPATION BY SUBSIDIARY MEMBER BANKS OF SAME
HOLDING COMPANY AFFILIATE WITHIN THE SAME FEDERAL RESERVE
DISTRICT IN NOMINATION OR ELECTION OF DIRECTORS OF FEDERAL
RESERVE BANKS
Whenever two or more member banks within the same Federal
Reserve district are subsidiaries of the same holding company affiliate, only one such bank may participate in any nomination or election of directors of the Federal Reserve bank for such district, and
the holding company affiliate of such subsidiary member banks may
designate the particular subsidiary member bank which is to participate in such nomination or election.
SECTION XIII. RIGHT TO AMEND
The right to alter, amend, or repeal this regulation, in whole or
in part, is expressly reserved.
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