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1546 A meeting of the Board of Governors of the Federal Reserve sYst was held in Washington on Friday, November 19, 1937, at 12:15 PRESENT: Mr. Eccles, Chairman Mr. Szymczak Mr. McKee Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Consideration was given to each of the matters hereinafter reterred to and the action stated with respect thereto was taken by the ) i Ofird: Telegrams to Mr. Kimball, Secretary of the Federal Reserve 13411k of New York, Mr. Austin, Chairman of the Federal Reserve Bank of Philadelphia, Mr. Clark, Secretary of the Federal Reserve Bank of AtlEtnta, and Mr. Young, Secretary of the Federal Reserve Bank of Chicago, stating that the Board approves the establishment without change by the Ilew York bank on November 18, 1937, and by the Philadelphia, Atlanta arIcl Chicago banks today, of the rates of discount and purchase in their eZisting schedules. Approved unanimously. 441t Letter to Mr. Young, Deputy Chairman of the Federal Reserve Ne , York, reading as follows: 10, : 1 Receipt is acknowledged of your letter of November 37) advising the Board of the results of the con' sid or !,!'lltion given by the auditing committee of your board e ' 411*(3e-tors and by President Harrison to the report of rveY of the Auditing Department of your bank trans- J.547 11/19/37 -2m• itted to you with the Board's letter of Tune 30, 1937. "The Board appreciates the completeness of your re✓ieW of the matters contained in this report of survey nd has noted with considerable interest the steps taken 'Y Your bank for the further improvement of your Auditing De partment." Approved unanimously. Letter to Mr. Schaller, President of the Federal Reserve Bank Or Chi "go) reading as follows: is made to your letter of October 27 in regard "Reference to the waiving of penalties for deficiencies in reserves Of Member banks. c. "The Board appreciates that there may be exceptional rircumstances when it would be desirable to disregard the eserve ber of computation period in which a bank becomes a memthe System insofar as the assessment of a penalty tl° 11 'a deficiency in reserves is concerned and also to waive 6 assessment of a penalty for the first deficiency in reserves occurring subsequent to such reserve computation Period, and accordingly modifies paragraph (b) of its letter X-7411 of April 14, 1933, to read as follows: '(b) When a member bank is deficient in its reserves during the reserve computation period within which it became a member, a penalty for such deficiency may be assessed or not, in the discretion the Federal Reserve bank. When, for the first time subsequent to the reserve computation period within which a bank became a member, there is a deficiencY in its reserves, which is subject to a Penalty, such penalty may be assessed or not as the tione daral Reserve bank may determine upon consideraof the circumstances of the case.'" Approved unanimously. Letter to Mr. Martin, President of the Federal Reserve Bank "St L °ill s) reading as follows: Boa "There is attached a copy of a letter regarding the rd'S margin requirements which the Securities and Ex- 1548 11/19/37 dm. "change Commission has forwarded to the Board from Mr. Carl M. Dubinsky, Dubinsky & Duggan, St. Louis, Missouri, and also R copy of the Board's reply. "It appears that a client of Mr. Dubinsky's is interested ? a Proposed plan by which the client would purchase securities for certain persons through a broker, and would put up with the broker the margin required by Regulation T but would , 1!rmit the ultimate purchasers to deposit lower margins with um. Mr. Dubinsky wishes to know whether the proposed plan ' uld conflict with the Board's regulations under the Securities Exchange Act of 1934, and it will be appreciated if you will advise him with respect to the matter. "Regulation T, as you know, applies to members of a national securities exchange and brokers or dealers who trans17t a business in securities through the medium of any such ernbar- An exact answer to the question which Mr. Dubinsky esents would, of course, depend upon all the facts involved the particular case. It seems likely, however, that if w 8 client engaged in the proposed activities the client (,°111d be a broker or dealer who transacts a business in se;fities through the medium. of a member, and thus would be ;'"iect to the usual requirements of Regulation T which " U require him to obtain the same margins as other per2 on subject to the regulation. 0111"In addition, although at present Regulation T applies Y to members, brokers and dealers, as mentioned above, 11 Regulation U applies only to banks, it may be noted that ad circumstances should make additional regulations seem tjlsable, section 7(d) of the Securities Exchange Act auf r )rizes the Board to prescribe similar regulations for any Other persons." 1 n r 1 Approved unanimously. Thereupon the meeting adjourned. Chairman.
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