The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK
OF NEW YORK
r
L
87201
C irc u lar N o .
J a n u a ry 8 , 1 9 8 0
J
UNIFORM RULES FOR RANK RECORDKEEPING AND PROCEDURES
REGARDING SECURITIES TRANSACTIONS
Amendments to Regulation H
To All State Member Banks in the Second
Federal Reserve District, and Others Concerned:
T h e B o a r d o f G o v e rn o rs o f the F e d e r a l R e se r v e S y ste m h a s am en ded its ru les, e ffe ctiv e J a n u
a ry 1, 1980, fo r b an k recordkeeping-, c o n firm a tio n , an d o th er p ro c ed u re s in m a k in g se c u r itie s t r a n s
a c tio n s fo r tr u s t d e p artm e n ts an d o th er b a n k cu sto m e rs. T h e am en d m en ts, o rig in a lly ad o p ted in
Ju ly 1979, h av e been m odified w ith r e g a r d to tr a n s a c tio n s in U .S . g o v e rn m e n t se c u ritie s, a s in d i
cated in the fo llo w in g e x c e r p t fr o m the B o a r d ’s an n o u n cem en t:
The Board’s revised Regulation H, effective January 1, 1980, includes the following provisions (with
revisions indicated by italics) :
R ecord k eep in g:
The following records of securities transactions must be kept by banks for three years, in a manner
forming an adequate record for audit:
Itemized daily records of purchases and sales; account records for customers and a separate record of
each order to purchase or sell securities.
A lternative confirm ation requirem ents:
-Where the bank uses a broker the bank may send customers the bank’s confirmation, or a copy of the
broker’s confirmation, within five days from the time the bank executes the transaction or receives confirma
tion from the broker. Confirmation may not be required in certain cases where the customer and the bank agree
to a different arrangement.
Where the bank exercises investment discretion as agent for the customer, the bank must provide quar
terly reports to the customer. In such cases the bank must identify separately its fees in transactions in
government securities for customers. Dealer mark-ups need not be disclosed.
Policies and proced ures:
Banks making securities transactions for customers must establish written policies and procedures, including :
— Policies and procedures relating to supervision of officers and employees, the equitable allocation of
securities and equitable matching of buy and sell orders.
— Requirements for bank employees involved in securities transactions for customers to report their own
securities transactions quarterly, with the exception of their transactions in U.S. government securities.
E x em p tio n s:
A bank that is in compliance with the rules of the Municipal Securities Rulemaking Board with respect
to transactions in municipal securities is deemed to be in compliance with the Board’s recordkeeping and con
firmation requirements. In addition, the Board’s rules
— Exempt the securities activities of foreign branches of banks, and
Exempt banks that normally make 200 or fewer securities transactions a year for customers, not count
ing transactions in U.S. government securities, from certain recordkeeping requirements.
The Federal Deposit Insurance Corporation and the Comptroller of the Currency are considering similar
revisions.
E n clo se d is a copy o f the c h a n g e s in the J a n u a r y 1, 1 9 8 0 am en d m en ts to R e g u la tio n H . Q u e s
tio n s on th is m a tte r sh ou ld be d irected to o u r C o n su m e r A f f a ir s an d B a n k R e g u la tio n s D e p a rtm e n t
(T e l. N o . 2 1 2 - 7 9 1 - 5 9 1 4 ).
T
h o m a s
M.
T
im l e n
,
F i r s t V ic e P r e s id e n t.
B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y ste m
MEMBERSHIP OF STATE BANKING INSTITUTIONS
IN THE FEDERAL RESERVE SYSTEM
C H A N G E S IN A M E N D M E N T S T O R E G U L A T IO N H
(effective January i, 19 80 )
FEDERAL RESERVE SYSTEM
12 CFR Part 208
(Docket No. R-0142; Reg. H]
Membership of State Banking
institutions in the Federal Reserve
System; Recordkeeping and
Confirmation Requirements for Certain
Securities Transactions Effected by
State Member Banks
AGENCY: B o a r d o f G o v e rn o r s o f the
F ed eral R e se rv e S y ste m .
a c t io n :
F in al r u l e . ________________ _
June 2 0 ,1 9 7 9 , the B o a r d o f
G o v ern o rs o f the F e d e r a l R e s e r v e
S y ste m a d o p te d a m e n d m e n ts to its
R egu lation H (12 C F R 208) to require
that State member banks th at
certain se c u ritie s tr a n s a c t io n s fo r
cu stom ers p ro v id e c o n firm a tio n o f a n d
m ain tain re c o r d s w ith r e s p e c t to su c h
tra n sa c tio n s. S im ila r re g u la tio n s h a v e
been a d o p te d b y the C o m p tro lle r o f the
C urren cy a n d the F e d e r a l D e p o sit
In su ran ce C o rp o ra tio n . The th ree
b an k in g re g u la to ry agencies h a v e a l s o
re q u e ste d p u b lic co m m e n t o n the
confirmation
a p p ly
to tra n sa c tio n s in U .S. g o v e rn m e n t,
fed eral a g e n c y a n d m u n ic ip al se c u r itie s
an d on the b a n k o ffic e r s a n d e m p lo y e e s
reportin g re q u ire m e n ts a s th ey a p p ly to
tra n sa c tio n s in U .S. g o v e rm n e n t or
fed eral a g e n c y o b lig a tio n s. T h e
SUMMARY: O n
effect
requirements as they
comment period expired Septem ber 24,
1979; ten le tte rs o f co m m e n t w e re
re ceiv e d . Th e B o a r d h a s c o n s id e r e d the
comments and has amended its
regulation in c e rta in respects a s se t forth
below .
EFFECTIVE DATE: Ja n u a r y 1, 1980.
FOR FURTHER INFORMATION CONTACT:
Robert A. Wallgren, Chief, Trust
Activities Program, (202) 452-2717,
or
W alter R. M cE w en , Attorney, (202) 4 5 2 2521, D iv isio n o f B a n k in g S u p e r v isio n
and R egulation , B o a r d o f G o v e rn o r s o f
the F ed eral R e se r v e S y ste m ,
W ashin gton, D .C . 20551.
SUPPLEMENTARY INFORMATION: T h e fin a l
rule a s a d o p te d to d a y is s u b s ta n tia lly
sim ilar to th at a d o p te d on Ju n e 2 0 ,1 9 7 9 .
A lth o u g h co m m e n t w a s s o lic ite d o n ly
w ith r e s p e c t to the c o n firm a tio n
re q u ir e m e n ts a s they a p p ly to
t r a n s a c tio n s in U .S . g o v e rn m e n t, fe d e r a l
a g e n c y a n d m u n icip al se c u r itie s a n d on
th e b a n k o ffic e r s a n d e m p lo y e e s
re p o rtin g re q u ire m e n ts a s th e y a p p ly to
t r a n s a c t io n s in U .S. g o v e rm n e n t or
fe d e r a l a g e n c y o b lig a tio n s, s e v e r a l
c o m m e n te r s co m m e n te d on s e c t io n s o f
the re g u la tio n w h ich h a d b e e n a d o p t e d
p r e v io u sly in fin al form . T h e B o a r d
fo u n d so m e o f the c o m m e n ts to h a v e
m e rit a n d the B o a r d h a s a m e n d e d
c e r ta in p reviou sly a d o p te d se c tio n s in
r e s p o n s e to th e se c o m m e n ts. T h e
fo llo w in g is a su m m a ry o f th e r e v is io n s
w h ic h w e re m a d e .
In r e s p o n s e to a co m m e n t,
s u b p a r a g r a p h (k)(4)(iii) h a s b e e n
m o d ifie d to s ta te th at a b a n k m a y
c h a rg e a c c o u n ts o v e r w h ic h th e b a n k
e x e r c is e s in v e stm e n t d is c re tio n in a n
a g e n c y c a p a c ity fo r c o n firm a tio n s m a d e
on a p e r tr a n s a c tio n b a s i s . T h is c h a n g e
m e re ly r e fle c ts the B o a r d ’s p rio r in ten t
th a t b a n k s c o u ld c h a rg e fo r fu rn ish in g
in d iv id u a l c o n firm a tio n s in a g e n c y
a c c o u n ts w h e re the b a n k e x e r c is e s
in v e stm e n t d isc re tio n .
O n e co tn m e n te r s t a t e d its
u n d e rs ta n d in g th at the in ten t o f the
b a n k in g a g e n c ie s in d ra ftin g (k )(4)(i)
w a s to p erm it a b a n k a n d a c u sto m e r o f
a n o n d is c re tio n a ry a g e n c y a c c o u n t to
a g r e e on a s u ita b le a lte r n a tiv e re p o rtin g
s y s te m . T h e c o m m e n te r n o te d th a t the
p la c e m e n t o f th is a u th o rity u n d e r the
“ T im e o f N o tific a tio n ” se c tio n , (k)(4),
m igh t b e in te rp re te d a s a g ra n t o f
a u th o rity fo r c u sto m e r a n d b a n k to
a g r e e to a d iffe re n t tim e o f n o tific a tio n ,
b u t n o t to a d iffe re n t fo rm o f
n o tific a tio n . T h is w a s n ot the B o a r d ’s
in ten t w h en a d o p tin g the re g u la tio n ;
h o w e v e r, the B o a r d h a s d e te rm in e d th at
it d o e s n ot o b je c t to a d iffe re n t fo rm o f
n o tific a tio n . A c c o rd in g ly , s u b p a r a g r a p h
(k)(4)(i) h a s b e e n a m e n d e d to c la rify
th at a b a n k a n d its a g e n c y c u sto m e r s
m a y m u tu ally a g re e u p o n a lte r n a tiv e
fo rm s o f n o tific a tio n . T h e B o a r d a d v is e s
S t a te m e m b e r b a n k s th at a n y su c h
alternative form of notification for non
d is c r e tio n a r y a g e n c y a c c o u n ts m u st b e
a ffir m a tiv e ly a p p r o v e d b y the c u sto m e r.
A S t a te m e m b e r b a n k w ill n ot b e
considered to b e in compiiance with this
paragraph (k) if it in te rp re ts a
c u s to m e r 's n o n -re sp o n se to a b a n k
c o m m u n ic a tio n a s c o n stitu tin g c u sto m e r
a p p r o v a l.
S e v e ra l commenters suggested
changes to various parts of
s u b p a r a g r a p h (k)(5)(iv). S e c u r itie s
T r a d in g P o lic ie s a n d P r o c e d u re s. M a n y
c o m m e n te r s su g g e ste d th at b a n k o ffic e r s
a n d e m p lo y e e s w h o p u r c h a s e U .S .
g o v e rn m e n t a n d fe d e r a l a g e n c y
se c u r itie s sh o u ld n o t h a v e to re p o rt
tr a n s a c t io n s in th o s e s e c u r itie s. O n e
c o m m e n te r n o te d th at " S in c e the
p u r p o s e o f the d is c lo s u r e is to d e te c t
m is u s e o f in s id e in fo rm a tio n a n d
m a n ip u la tio n o f th e m a rk e t, a n d sin c e
su c h a c tiv ity s e e m s p a r tic u la r ly un likely
in th e m a r k e tp la c e fo r g o v e rn m e n t
se c u r itie s , w e fe e l th at th e se s e c u r itie s
sh o u ld b e e x c e p t e d fro m the d is c lo s u r e
r e q u ir e m e n ts .” T h e B o a r d h a s c o n c lu d e d
th at the b e n e fit th at w o u ld re su lt from
re q u irin g d is c lo s u r e o f tr a n s a c t io n s in
U .S . g o v e rn m e n t a n d fe d e r a l a g e n c y
s e c u r itie s is o u tw e ig h e d b y the
in c r e a s e d re p o rtin g b u rd e n . T h e ru le a s
a d o p t e d w ill e x e m p t t r a n s a c t io n s in U .S .
g o v e rn m e n t a n d fe d e r a l a g e n c y
se cu ritie s from the re p o rtin g
requirements applicable to bank officers
and employees, and will also exempt
b a n k o ffic e r s a n d e m p lo y e e s w h o se
d u tie s d o n ot in v o lv e k n o w le d g e o f or
For this Regulation to be complete, retain:
1) Regulatiin H pamphlet, as amended effective March 18, 1969.
2) Amendments effective December 21, 1973; March 2, 1974; September 16,
1974; December 1, 1975; October 3, 1977; October 31, 1977; December 31,
1977; April 20, 1978; and January 1, 1980.
3) This slip sheet.
P R IN T E D IN N E W
[Enc Cir. No. 8720]
Y O R K , F R O M F E D E R A L R E G I S T E R , V O L . 4 4 , N O . 249
(O V E R )
t r a n s a c t io n s in s e c u r itie s o th e r th an U .S
g o v e rn m e n t a n d fe d e r a l a g e n c y
o b lig a tio n s.
T h e comment letters pointed out the
importance of transactions in U .S .
government and federal agency
securities in determining the scope of
the 200 securities transactions
exemption of subparagraph (k)(6) which
exempts banks effecting fewer than 200
securities transactions per year from
some of the recordkeeping requirements.
One commenter noted that the effect of
the 200 securities transactions
exemption has been rendered less
generous now that transactions in U.S.
government and federal agency
securities are subject to the confirmation
requirements. The Board has concluded
that the intended purpose of the 200
securities transactions exemption can
best be accomplished by excluding
transactions in U .S . government and
federal agency securities from the
securities transactions which are to be
counted for purposes of the 200
securities transactions exemption. A
related comment noted that the
requirements of subparagraphs (k)(5}v’)
through (k)(5)(iii), which require written
supervisory policies and procedures
relating to supervision of officers and
employees, fair and equitable allocation
of securities and fair and equitable
crossing of orders could be triggered by
performance of a single customer
accommodation transaction. The 200
securities transactions exemption set
forth in subparagraph (k)(6)(i) has now
been modified to exempt banks commg
within the exemption from the policy
and procedures requirements of
subparagraphs (k)(5)(i) through
(k)(5)(iii).
T h e B o a r d r e c e iv e d a fe w a d v e r s e
c o m m e n ts c o n c e rn in g the b u rd e n
im p o s e d b y e x te n s io n o f the
c o n firm a tio n re q u ir e m e n ts to
t r a n s a c t io n s in U .S. g o v e rn m e n t a n d
fe d e r a l a g e n c y s e c u r itie s. A fte r d u e
c o n s id e r a tio n o f th e se c o m m e n ts, the
B o a r d h a s d e te rm in e d th a t a p p lic a tio n
o f the c o n firm a tio n re q u ir e m e n ts to
t r a n s a c t io n s in U .S . g o v e rn m e n t a n d
fe d e r a l a g e n c y s e c u r itie s i s a p p r o p r ia te
in th e p u b lic in t e r e s t A c c o rd in g ly , n o
c h a n g e h a s b e e n m a d e in th e se
r e q u ir e m e n ts a s a d o p t e d p re v io u sly .
F in a lly , th e q u e s tio n has been raised
regarding th e a p p lic a b ility o f th is
p a r a g r a p h (k) to e m p lo y e e b e n e fit
a c c o u n t s fo r w h ic h a S t a te m e m b e r
bank acts a s In v e stm e n t M a n a g e r , a s
defined in s e c tio n 3(38) o f th e E m p lo y e e
R e tir e m e n t In c o m e S e c u r ity A c t o f 1974,
with another e n tity a c tin g a s tru ste e
and/or c u s t o d ia n o f the a s s e t s . T h e
Investment M a n a g e r c o n c e p t p e rm its
one b a n k to be s o le tru ste e o f a p e n sio n
plan (“ M a s t e r T r u s te e " ), re n d e rin g to
the plan sponsor u n iform a c c o u n tin g
r e p o r ts in c lu d in g c a s h sta te m e n ts a n d
v a lu a tio n sta te m e n ts , w h ile a c c e p tin g
in v e stm e n t d ire c tio n a s to sp e c ifie d
p a r t s o f the p e n sio n p la n a s s e t s from
In v e stm e n t M a n a g e r s (a n o th e r b a n k , an
in s u r a n c e c o m p a n y , o r a r e g iste re d
in v e stm e n t a d v is o r ). In the c a s e o f a
M a s t e r T r u st, the B o a r d h a s d e te rm in e d
th a t th e re q u ire m e n ts o f th is p a r a g ra p h
will b e s e r v e d if e ith e r the M a s te r
T r u s t e e o r the In v e stm e n t M a n a g e r
maintains the s p e c ifie d r e c o r d s a n d
gives p r e s c r ib e d sta te m e n ts a n d
confirmations in a c c o r d a n c e w ith the
re q u ir e m e n ts o f the re g u la tio n . A n y
S t a t e m e m b e r b a n k se rv in g e ith e r a s
Master T r u s te e or In v e stm e n t M a n a g e r
should In su re th at the re q u ire m e n ts o f
the re g u la tio n a r e b e in g m et. e ith e r
th ro u gh p e rfo rm in g the fu n c tio n s
re q u ir e d b y th e re g u la tio n Its e lf or
c o n tr a c tin g w ith a n o th e r p a r ty th at that
p a r ty s h o u ld d o so .
P u rsu a n t to s e c t io n s 9 a n d 11 o f th e
F e d e r a l R e s e r v e A c t (12 U .S .C . 321. 248
(a ) a n d (1) a n d 3 (b )(1 ) etseq.). the B o ard
a m e n d s R e g u la tio n H (12 C F R 208) b y
a m e n d in g p a r a g r a p h (k) to S 208.8 a s se t
forth b e lo w :
PART 208—MEMBERSHIP O F STATE
BANKING INSTITUTIONS IN THE
FED ER A L R ES ER V E SYSTEM
§ 208 8
*
*
Banking practices.
*
*
*
Recordkeeping and confirmation of
certain securities transactions effected
b y State member banks.
*
*
*
*
*
(4) Time o f N otification: The tim e for
m a ilin g o r o th e r w ise fu rn ish in g the
w ritten n o tificatio n d e s c r ib e d in
p a r a g ra p h (k){3) o f th is se c tio n sh a ll b e 5
b u s in e s s d a y s from the d a t e o f the
tra n sa c tio n , or if a b r o k e r /d e a le r i s
u tilized, w ithin 5 b u s in e s s d a y s from the
re c e ip t b y the b a n k o f the b ro k e r/
d e a le r 's co n firm atio n , b u t the b a n k m a y
e le c t to u se the fo llo w in g a lte rn a tiv e
p ro c e d u re s if the tra n s a c tio n is e ffe c te d
fo r
(i) A c c o u n ts (e x c e p t p e rio d ic p la n s)
w h e re the b a n k d o e s n ot e x e r c is e
in v e stm e n t d isc re tio n a n d the b a n k a n d
the c u sto m er a g re e in w ritin g to a
d iffe re n t a rra n g e m e n t a s to the tim e a n d
co n ten t o f the n o tificatio n ; p r o v id e d ,.
h o w ev er, th at su ch a g re e m e n t m a k e s
c le a r the c u sto m e r’s right to re c e iv e the
w ritten n o tificatio n w ith in the a b o v e
p re s c rib e d tim e p e rio d a t n o a d d itio n a l
c o s t to th e cu sto m er;
(iii) A c c o u n ts, w h ere the b a n k
e x e r c is e s in v e stm e n t d isc re tio n in an
a g e n c y c a p a c ity , in w h ich in s ta n c e (A )
the b a n k sh a ll m ail o r o th e rw ise furn ish
to e a c h cu sto m e r not l e s s frequ en tly
th an o n c e e v e ry three m o n th s a n
ite m ize d sta te m e n t w h ich sh a ll sp e c ify
the fu n d s a n d se c u ritie s in the c u sto d y
or p o s s e s s io n o f the b a n k a t the e n d o f
su ch p e rio d a n d all d e b its , c re d its a n d
tra n s a c tio n s in the c u sto m e r’s a c c o u n ts
d u rin g such p eriod , a n d (B) if re q u e ste d
b y the cu sto m er, the b a n k sh a ll m ail or
o th e rw ise furnish to e a c h su ch cu sto m e r
w ithin a r e a so n a b le tim e the w ritten
n o tificatio n d e sc r ib e d in p a r a g ra p h
(k)(3) o f th is se ctio n . T h e b a n k m ay
c h a rg e a r e a so n a b le fe e for p rovid in g
the in form ation d e sc r ib e d in p a r a g ra p h
(k)(3) o f th is section .
(5)
Securities Trading Policies and
Procedures: E v ery S ta te m em b er b an k
effe ctin g se c u ritie s tr a n s a c tio n s for
c u sto m e rs sh a ll e s ta b lis h w ritten
p o lic ie s a n d p ro c e d u re s providin g:
*
•
*
*
*
(iv ) th at b a n k o ffic e r s a n d e m p lo y e e s
w ho m a k e in vestm en t re c o m m e n d a tio n s
or d e c isio n s fo r the a c c o u n ts o f
cu sto m e rs, w h o p a r tic ip a te in the
d e term in atio n o f su ch re c o m m e n d a tio n s
or d e c isio n s, or w ho, in co n n ection w ith
their d u tie s, o b ta in in form ation
co n cern in g w hich se c u ritie s a re b ein g
p u rc h a se d o r so ld or re c o m m e n d e d for
su ch action , m u st report to the b an k ,
w ithin ten d a y s after the en d o f the
c a le n d a r qu arter, all tra n s a c tio n s in
se c u ritie s m a d e b y them or on their
b eh alf, eith e r a t the b a n k or e lse w h e re
in w hich they, h a v e a b e n e fic ia l in terest.
T h e report sh a ll iden tify the se c u ritie s
p u rc h a se d or so ld a n d in d ic ate the d a te s
o f the tra n sa c tio n s a n d w h eth er the
tra n sa c tio n s w ere p u r c h a se s or s a le s.
E x c lu d e d from this requ irem en t are
tra n sa c tio n s for the b en efit o f the o fficer
o r e m p lo y e e o v e r w h ic h the o ffic e r or
e m p lo y e e h a s n o d ir e c t o r in d ire ct
in flu e n c e o r c o n tro l, tr a n s a c t io n s in
m u tu al fu n d s h a r e s , a n d a ll transactions
in v o lv in g in th e a g g r e g a te $10,000 or l e s s
d u rin g the c a l e n d a r q u a rte r. F o r
p u r p o s e s o f th is p a r a g r a p h (k)(iv) o f this
se c tio n , th e term “ s e c u r itie s ” d o e s not
in c lu d e U .S . g o v e rn m e n t o r fe d e r a l
a g e n c y o b lig a tio n s .
(8) Exceptions: T h e fo llo w in g
e x c e p t io n s to s u b p a r a g r a p h (k) sh a ll
a p p ly :
(i) T h e re q u ir e m e n ts o f p a r a g r a p h
(k )(2)(ii) th ro u g h (k )(2 )(iv ) a n d p a r a g r a p h
(k )(5)(i) th ro u gh (k )(5 )(iii) o f th is se c tio n
s h a ll n ot a p p ly to b a n k s h a v in g an
a v e r a g e o f l e s s th a n 200 s e c u r itie s
t r a n s a c t io n s p e r y e a r fo r customers over
the p rio r th re e c a l e n d a r y e a r period,
e x c lu s iv e o f t r a n s a c t io n s in U.S.
g o v e rn m e n t a n d fe d e r a l agency
o b lig a tio n s;
*
*
*
*
*
Board of Governors of the Federal Reserve
System. Decem ber 19,1979.
Theodore E. Allison,
Secretary of the Board.
|KR D oc. 79-30463 F iled 12 -86-79; 8:46 am )
M U -IttQ C O O € 8 21 0 -01 -«
@FedFRASER