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CHAPTER I-BUREAU OF THE COMPTROLLER

OF THE CURRENCY

DEPARTMENT OF THE TREASURY

Part

1 Investment securities regulation.

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National banks acting as insurance agents and as brokers or agents in making
or procuring loans on real estate.

National bank loans secured or covered by governmental guaranties.
Procedures.

Loans made by National banks secured by liens upon leaseholds.

Loans made by National banks secured by direct obligations of the United
States.

Interpretations.

Assessment of fees; National banks, District banks.

Trust powers of National banks.

Annual report to stockholders.

Solicitation of proxies.

12 Ownership reports of capital stock.

13

Employee stock option and stock purchase plans.

14 Changes in capital structure.

NOTE: Other regulations issued by the Department of the Treasury appear in Title 19, Chapter I, Title 21, Chapter II, Title 26, Chapter I, Title 27, Chapter I, Title 31, Title 33, Chapter I, Title 46, Chapter I.

SUPPLEMENTAL PUBLICATIONS: Digest of decisions relating to national banks, Comptroller of the Currency. Irregular. Vol. 1—, 1864–1912. Vol. 2, 1913-1926. Vol. 3, 19271931. Vol. 4, 1932-1934. Vol. 5, 1933-1936. Federal laws affecting national banks as of January 1, 1950, compiled by Comptroller of the Currency.

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§ 1.1 Scope and application.

(a) This part is issued by the Comptroller of the Currency under authority of paragraph Seventh of section 5136 of the Revised Statutes, as amended (12 U.S.C. 24);

(b) This part applies to the purchase for its own account of investment securities by a national bank or a State member bank of the Federal Reserve System.

[22 F.R. 5627, July 17, 1957]

§ 1.2 Definition of the term "investment securities".

(a) An obligation of indebtedness which may be purchased for its own account by a national bank or State member bank of the Federal Reserve System in order to constitute an "investment security" within the meaning of paragraph Seventh of section 5136 of the Revised Statutes, must be a marketable obligation, i. e., it must be salable under ordinary circumstances with reasonable promptness at a fair value; and except

as provided in paragraphs (b) and (c) of this section there must be present one or both of the following characteristics:

(1) A public distribution of the securities must have been provided for or made in a manner to protect or insure the marketability of the issue; or,

(2) Other existing securities of the obligor must have such a public distribution as to protect or insure the marketability of the issue under consideration.

(b) In the case of investment securities for which a public distribution as set forth in paragraph (a) (1) or (2) of this section cannot be so provided, or so made, and which are issued by established commercial or industrial businesses or enterprises, that can demonstrate the ability to service such securities, the debt evidenced thereby must mature not later than ten years after the date of issuance of the security and must be of such sound value or so secured as reasonably to assure its payment; and such securities must, by their terms, provide for the amortization of the debt evidenced thereby so that at least 75 percent of the principal will be extinguished by the maturity date by substantial periodic payments: Provided, That no amortization need be required for the period of the first year after the date of issuance of such securities.

(c) Special revenue obligations of States or local governments or of duly constituted public authorities thereof which possess a high degree of credit soundness, so as to assure sale under ordinary circumstances with reasonable promptness at a fair value, but which do not meet the distribution standards of paragraph (a) (1) or (2) of this section, may be considered to constitute "investment securities."

(d) Where the security is issued under a trust agreement, the agreement must provide for a trustee independent of the obligor, and such trustee must be a bank or trust company.

(e) All purchases of investment securities by national and State member banks for their own account must be securities "in the form of bonds, notes, and/or debentures, commonly known as investment securities"; and every transaction which is in fact such a purchase must, regardless of its form, comply with this part.

[22 F.R. 5627, July 17, 1957]

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