Investment securities regulations. National banks acting as insurance agents and as brokers or agents in mak- ing or procuring loans on real estate. National bank loans secured or covered by governmental guaranties. Description of office, procedures, public information. Loans made by national banks secured by liens upon leaseholds. Loans made by national banks secured by obligations of the United States. Assessment of fees; national banks; District of Columbia banks. Fiduciary powers of national banks and collective investment funds. Annual report to stockholders. Proxy statements and other solicitations under section 14 of the Securities Ownership reports by certain persons. Employee stock option and stock purchase plans. Reports of change in controlling ownership. Registration statements and offering circulars. Required notification to nominate bank directors. Form and content of financial statements. Rules of practice and procedures applicable to proceedings relating to cease International operations regulation. 20 NOTE: Other regulations issued by the Department of the Treasury appear in Title 19, SUPPLEMENTAL PUBLICATIONS: Digest of decisions relating to national banks, Comptroller of the Currency. Irregular. Vol. 1, 1864–1912. Vol. 2, 1913–1926. Vol. 3— 1927–1931. Voi. PART INVESTMENT SECURITIES REGULATION chase and sale of a public security. chase of an investment security. ing investment securities. chase, sale and holding of specified obligations. formation required. ELIGIBILITY OF SPECIFIC BOND ISSUES FOR 1.106 Texas Turnpike Authority. 1.109 Commonwealth of Kentucky, Depart- 1.110 City of Kansas City, Missouri. Angeles, California. tion. 1.115 Dormitory authority of the State of 1.116 Massachusetts Turnpike Authority. 1.117 City of London, Kentucky. 1.118 Inter-American Development Bank. 1.119 Savings Banks Trust Company, New 1.121 City or Opelika, Alabama. 1.122 Public Building Commission of Chi- 1.123 Alaska State Development Corpora- tion. monwealth of Pennsylvania. 1.126 Wanapum Hydroelectric Refunding 1.127 Washington State Public School Plant Facility Bonds and Public Building 1.128 Commonwealth of Pennsylvania Tax 1.129 State Highway and Bridge Authority of the Commonwealth of Pennsyl- vania Bonds. Land Agency Urban Renewal Bonds. monwealth of Pennsylvania Serial Bonds, 19th Series. Sec. New York State Housing Finance Agency. ity of the Commonwealth of Penn- sylvania Series N Bonds. Revenue Bonds. isiana, General Obligation Bonds, Series 1964. ment issue. Bonds. County, Florida. 1.142 City of Atlanta and Fulton County Recreation Authority (Georgia) 1.143 Revised ruling on the Music Center 1.144 Fresno City-County Community and Convention Center Authority Rev- 1.145 Columbia Storage Power Exchange 1.146 School Building Revenue Bonds Series of 1964, of the Corry Area Schools, ties, Pennsylvania. Bonds. 1.149 Bonds of the Woods Hole, Martha's Vineyard, and Nantucket Steamship 1.150 Dormitory Bonds of 1962 of the Wis- consin University Building Corpo- 1.151 Wisconsin State Agencies Building 1.152 Chicago Transit Authority Equipment Trust Certificates. Georgia. 1.155 Federal National Mortgage Association 1.156 Water Revenue Bonds of the City of 1.157 Elkhart High School Building Corpo- 1.158 Mobile County, Alabama, Board of School Commissioners Capital Out- lay School Warrants. the State of New York. Participation Certificate. dium, Inc. Lease-Rental Bonds. 1.162 Massachusetts Port Authority Reve- nue Refunding and Improvement Bonds. Revenue Bonds. 1.164 Federal National Mortgage Association Participation Certificates. 1.165 Illinois Building Authority Bonds. 1.166 New York State Housing Finance Agency General Housing Loan Bonds. 1.167 The Port of New York Authority, Con solidated Bonds. 1.168 Commodity Credit Corporation cer tificates of interest in pools of price support loans. 1.169 San Diego Stadium Authority Bonds. 1.170 City of Santa Monica Parking Au thority Bonds. 1.171 State of Israel Bonds, Development Investment Issue. 1.172 Federal National Mortgage Associa tion Participation Certificates. 1.173 Alaska State Housing Authority Reve nue Bonds. 1.174 Louisiana Capital Construction and Improvement Commission Public Improvement Bonds. 1.175 Florida State Board of Education Higher Education Bonds. 1.176 Export-Import Bank Portfolio Fund Participation Certificates. 1.177 State of Ohio Highway Improvement Bonds. 1.178 Memphis TVA Lease Rental Revenue Bonds. 1.179 General State Authority of the Com monwealth of Pennsylvania; State Highway and Bridge Authority of the Commonwealth of Pennsylvania. 1.180 Orange County Juvenile Hall Lease Corporation Leasehold Mortgage Bonds. 1.181 New York State Housing Finance Agency. 1.182 Orange County-Westminster Civic Center Authority City Building Fa cilities Revenue Bonds. 1.183 Indiana School Building Corporations. 1.184 Tennessee State School Bond Author ity Higher Educational Facilities Bonds. 1.185 Salamanca Hospital District Authority (New York) Hospital Construction Bonds. 1.186 Desert Hospital Authority Revenue Bonds. 1.187 Santa Clara County Building Author ity 1967 Revenue Bonds, Series A. 1.188 Alaska State Housing Authority State Lease Revenue Bonds. 1.189 Los Angeles County-West Covina Civic Center Authority, West Covina Administrative and Police Buildings Revenue Bonds. 1.190 Redevelopment Agency of the City of Vallejo Marina Vista Project Area Parking Lease Revenue Bonds. 1.191 Thomaston-Upson County Office Building Revenue Bonds. 1.192 San Carlos Civic Center Authority Lease Revenue Bonds. Sec. 1.193 Los Angeles County-West Covina Civic Center Authority, Citrus District Courthouse Revenue Bonds. 1.194 City of Downey Community Hospital Authority. 1.195 Cudahy Civic Center Authority Rev enue Bonds. 1.196 Campbell County Utilities and Service Authority. 1.197 Urban Redevelopment Authority of Pittsburgh, Residential Land Re serve Fund Bonds. 1.198 Visalia Area Hospital Authority Rev enue Bonds (California). 1.199 Upland Civic Center Building Au thority Revenue Bonds (California). 1.200 Parking Authority of the City of Up land (California) Parking Revenue Bonds. 1.201 Bergen County Sewer Authority (New Jersey). 1.202 Carlsbad Building Authority Revenue Bonds (California). 1.203 Water and Sewer Improvement Bonds, Series 1967, of the Northwest Hous ton Water Supply Corp. 1.204 Wisconsin University Building Corpo ration and the Wisconsin State Agencies Building Corporation. 1.205 Los Angeles Convention and Exhibi tion Center Authority. 1.206 Louisiana State Bond and Building Commission. 1.207 Duval County Hospital Authority, Fla. 1.208 Parking Authority, Beverly Hills, Calif. 1.209 Port Authority of Allegheny County, Pa. 1.210 Export-Import Bank promissory notes. 1.211 County of Palm Beach, Fla., Court house and Jail Certificates of In debtedness. 1.212 Los Angeles County Southeast Gen eral Hospital Authority. 1.213 Los Angeles County-San Dimas Civic Center Authority. 1.214 Virginia Public School Authority. 1.215 San Diego City-County Camp Author ity. 1.216 Hillsborough County Aviation Au thority, Florida (Post Office Facil ity). 1.217 Fountain Valley Improvement Au thority Revenue Bonds. 1.218 San Bernardino Public Safety Au thority Revenue Bonds. 1.219 Merced County-Atwater Civic Center Authority, City Building Facilities 1968, Revenue Bonds. 1.220 Santa Barbara County Public Safety Authority Revenue Bonds. 1.221 Redevelopment Agency of the City of Vallejo Library Lease Revenue Bonds. 1.222 Los Angeles County-Lawndale Build ing Authority. 1.223 Southeastern Pennsylvania Trans portation Authority, Rental Revenue Bonds (Philadelphia lease). Sec. 1.224 Export-Import Bank debentures. 1.225 Merced County-Los Banos Public Safety Authority. 1.226 Seal Beach Administration Building Authority. SECURITIES ELIGIBLE FOR UNDERWRITING AND UNLIMITED HOLDING 1.227 Orange County-La Palma Civic Center Authority (California). 1.228 Parking Authority, Huntington Beach, Calif. 1.229 Montclair Fire Authority. 1.230 Los Angeles Convention and Exhibi tion Center Authority. 1.231 Kansas State Board of Regents, Sta dium Addition Revenue Bonds, Wichita State University. 1.232 San Bernardino Public Safety Au thority. 1.233 Alaska State Housing Authority State Lease Revenue Bonds. 1.234 San Jose Civic Improvement Au thority. 1.235 Northwest Bergen County Sewer Authority. 1.236 Los Angeles County-La Mirada Public Facilities Authority. 1.237 Lake Texarkana Water Supply Cor poration. 1.238 Riverside General Hospital Authority. 1.239 Parking Authority, Carlsbad, Calif. 1.240 Parking Authority, Oakdale, Calif. 1.241 Ventura County Airport Authority (California). 1.242 Riverside County Law Library (Call fornia). 1.243 Commonwealth of Pennsylvania Tax Anticipation Notes (General Fund). 1.244 Orange County-Westminster Civic Center Authority Courthouse Reve nue Bonds (California). 1.245 City of Long Beach-Los Angeles County Civic Center Authority. AUTHORITY: The provisions of this part 1 Issued under R.S. 324 et seq., as amended, Paragraph Seventh of R.S. 5136 as amended; 12 U.S.C. 1 et seq., 24, unless otherwise noted. $ 1.1 Authority. This part is issued by the Comptroller of the Currency under the general authority of the national banking laws, 12 U.S.C. 1 et seq., and under specific authority contained in paragraph Seventh of 12 U.S.C. 24. The Comptroller of the Currency is charged by the national banking laws with the execution of all laws of the United States relating to the organization, operation, regulation and supervision of national banks and in particular with the execution of 12 U.S.C. 24 which sets forth the corporate powers of national banks. This part interprets and applies paragraph Seventh of 12 U.S.C. 24 to provide for its due execution and for the proper regulation and supervision of the operations of national banks. Paragraph Seventh of 12 U.S.C. 24 also specifically provides for the Comptroller of the Currency to prescribe by regulation (a) limitations and restrictions on the purchase of investment securities by a national bank for its own account and (b) further definition of the term "investment securities." (28 F.R. 9916, Sept. 12, 1963) § 1.2 Scope and application. This part applies to the purchase, sale, dealing in, underwriting, and holding of investment securities by national banks, banks located in the District of Columbia, and by state banks which are members of the Federal Reserve System. It may also apply to a limited extent to others engaged in the banking business. The Comptroller of the Currency is charged by various provisions contained in Chapter 1 of Title 26 of the District of Columbia Code with the supervision of banks located in the District of Columbia. State banks which are members of the Federal Reserve System are, under 12 U.S.C. 335, subject to the same limitations and conditions with respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under paragraph Seventh of 12 U.S.C. 24. Dealers in securities are prohibited by 12 U.S.C. 378 from engaging in banking business. Section 378 specifically provides, however, that it does not prohibit national banks or state banks or trust companies (whether or not members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing and selling investment securities to the extent permitted to national banking associations by the provisions of 12 U.S.C. 24. [28 F.R. 9916, Sept. 12, 1963) Definitions. (a) The term “bank” includes national banks, banks located in the District of Columbia, and state banks which are members of the Federal Reserve System. (b) The term "investment security” means a marketable obligation in the form of a bond, note or debenture which is commonly regarded as an investment security. It does not include invest § 1.3 ments which are predominantly speculative in nature. (c) The term "public security" means an obligation described in 12 U.S.C. 24 as not subject to the limitations and restrictions contained therein "as to dealing in, underwriting and purchasing for its own account, investment securities”. Public securities include: (1) Obligations of the United States; (2) General obligations of any State of the United States or of any political subdivision thereof; (3) Other obligations listed in paragraph Seventh of 12 U.S.C. 24. (d) The term “political subdivision of any state" includes a county, city, town or other municipal corporation, a public authority, and generally any publicly owned entity which is an instrumentality of the State or of a municipal corporation. (e) The phrase "general obligation of any State or of any political subdivision thereof” means an obligation supported by the full faith and credit of the obligor. It includes an obligation payable from a special fund when the full faith and credit of a State or any political subdivision thereof is obligated for payments into the fund of amounts which will be sufficient to provide for all required payments in connection with the obligation. It implies an obligor possessing resources sufficient to justify faith and credit. [28 F.R. 9916, Sept. 12, 1963) $ 1.4 Limitations and restrictions purchase and sale of a public security. A bank may deal in, underwrite, purchase and sell for its own account a public security subject only to the exercise of prudent banking judgment. Prudence will require such determinations as are appropriate for the type of transaction involved. For the purpose of underwriting or investment, prudence will also require a consideration of the resources and obligations of the obligor and a determination that the obligor possesses resources sufficient to provide for all required payments in connection with the obligation. (28 F.R. 9916, Sept. 12, 1963) $ 1.5 Limitations and restrictions purchase of an investment security. (a) Evidence of obligor's ability to perform. A bank may purchase an in vestment security for its own account when in its prudent banking judgment (which may be based in part upon estimates which it believes to be reliable), it determines that there is adequate evidence that the obligor will be able to perform all that it undertakes to perform in connection with the security, including all debt service requirements, and that the security may be sold with reasonable promptness at a price which corresponds reasonably to its fair value. (b) Judgment based predominantly upon reliable estimates. A bank may, subject to limitations set forth in § 1.6 (b), purchase an investment security for its own account although its judgment with respect to the obligor's ability to perform is based predominantly upon estimates which it believes to be reliable. Although the appraisal of the prospects of any obligor will usually be based in part upon estimates, it is the purpose of this paragraph to permit a bank to exercise a somewhat broader range of judgment with respect to a more restricted portion of its investment portfolio. It is expected that this authority may be exercised not only in the absence of a record of performance but also when there are prospects for improved performance. It is also expected that an investment security purchased pursuant to this paragraph may by the establishment of a satisfactory financial record become eligible for purchase under paragraph (a) of this section. (c) Securities ruled eligible by the Comptroller of the Currency. A bank may consider as a factor in reaching its prudent banking judgment with respect to an investment security a ruling published by the Comptroller of the Currency on the eligibility of such security for purchase. Consideration must also be given, however, to the possibility that circumstances on which the ruling was based may have changed since the time of the ruling. [28 F.R. 9916, Sept. 12, 1963) $ 1.6 Limitations and restrictions holding investment securities. (a) Obligations of any one obligor. A bank may not hold at any time investment securities of any one obligor in a total amount in excess of 10 percent of the bank's capital and surplus. For this purpose the amount of an investment security is to be determined on the basis of the par or face value of the security. on on on |