business interests of the individual and his immediate family, including the amounts and values involved, and including beneficial interests in trusts. With such information at hand, collected under perjury-type penalty, the regulator can effectively detect improper affiliated transactions and take appropriate corrective action. Bank management and boards of directors will be better able, at the same time, to identify and to prevent overreaching credit extensions to the affiliated interests of one or more of their own number. For any bank or any other corporation with five hundred or more shareholders, information concerning insider interests and transactions with respect to that organization is already required to be publicly disclosed under Section 12(g) of the Securities Exchange Act of 1934. However, this information does not outline the entire spectrum of an individual's personal business associations, as does the information to be filed under our proposed regulation. That information would seem to be of a much more personal and intimate nature, which Congress has not as yet seen fit to require to be filed and disclosed with respect to the corporations subject to the Securities Exchange Act of 1934, nor in any other situation with which we are acquainted. Congress has made no personal disclosure requirements, of which we are aware, applicable to officials of corporations with fewer than five hundred shareholders. Under these circumstances, we would not feel it appropriate to undertake such an intensive intrusion into the financial privacy of individuals as would be represented by the disclosure of the information to be collected under the proposed regulation. This, again, would appear to be such a fundamental political decision that it would seem to be necessarily legislative rather than regulatory in nature. I have appreciated this opportunity to continue our dialogue on these matters. Sincerely, Hon. LEE METCALF, JAMES E. SMITH, Comptroller of the Currency. DEPARTMENT OF THE TREASURY, THE ADMINISTRATOR OF NATIONAL BANKS, Washington, D.C., August 1, 1974. Chairman of the Subcommittee on Budgeting, Management, and Expenditure, Committee on Government Operations, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: I thought you might be interested in the enclosed release by the Comptroller in view of the recent hearings held by your Subcommittee on the subject of corporate disclosure. Best regards. Sincerely, Enclosure. DONALD A. MELBYE, Special Assistant for Congressional Affairs. Department of the TREASURY NEWS THE COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS WASH, D.C. 20220 W04-2186 For Release July 31, 1974 Trust departments of the larger national banks throughout the country must open to public scrutiny their stock transactions and holdings under regulations announced today by Comptroller of the Currency James E. Smith. Individual beneficiaries would not be identified. The disclosure requirements, which become effective October These banks, Mr. Smith said, would have to report the value of their equity securities at the end of each year. In addition, they would make quarterly reports on purchases and sales of stock for their trust accounts for each transaction exceeding 10,000 shares or $500,000. Both types of reports would be open to public inspection. Year-end reports would disclose the issuer, the title and class of stock purchased for trust accounts, the number of shares bought, and their market value. In a further break-down, each reporting bank would distinguish between stock for which it exercises sole investment authority, that for which it shares investment authority with others, and that for which it exercises no investment authority. In addition, the report would show the number of shares of each issue for which the bank holds voting rights. The quarterly transaction reports, Mr. Smith said, would identify the stock bought or sold, the date and price at which the trade was made, the number of shares involved, the market in which the transaction was executed and the broker or dealer who handled the order. Where requested to do so by a reporting bank, Mr. Smith said, he would reserve the right to treat some portions of the reports as confidential. He said this discretion would be used only to protect the identity (more) of the owner or to prevent the revelation of an investment plan where public knowledge would adversely affect the account for which the investment strategy was undertaken. Even in these cases, he said, the data would be withheld from the public record only for a limited and reasonable period of time. The regulation announced today was open for comment from April 24 to June 24. Mr. Smith said a number of modifications had been made as a result of questions raised, suggestions offered and litigation in process. A copy of the new regulations, together with a description of the changes, is attached. ### This amendment is issued pursuant to the authority conferred in Section 1(j) of Public Law 87-722, 76 Stat. 668, 12 U.S.C. 92a. Notice of the proposed rule making was published in the Federal Register on April 24, 1974. A number of comments were received following publication and have been given consideration. This amendment differs from the published proposed amendment in that it does not include one of the proposals which was published for comment. The amendment of Section 9.7 is being given further study. That proposal would have required national banks to establish procedures to ensure that investment decisions of trust departments are not based upon non-public information, regardless of how that information may be obtained. The proposal was intended to do no more than put into banking regulations the existing prohibitions of the anti-fraud provisions of the federal securities laws. However, it is interrelated to the question of the extent to which the knowledge of a given officer, employee, or director of a bank is imputed to the entire institution. Recent decisions and pending litigation have raised much uncertainty on this point. Because compliance with the requirement to establish policies relating to the use of non-public information will be extremely difficult until such time as more clarity exists as to the imputation question, it was decided not to -2 promulgate this amendment at this time. The other differences between this amendment and the published proposal reflect comments received. The circumstances under which the Comptroller will designate a report, or a portion thereof, as confidential have been clarified. There must be a prior request by the reporting entity in every case. If the information would identify the holdings of assets of natural persons, trusts or estates, or an investment strategy, the Comptroller may designate it as confidential. However, where the basis for confidential treatment is to protect against disclosure of an investment strategy, such confidential treatment will only be granted on a temporary basis. In the proposal the market value as of December 31 of all assets other than equity securities held by trust departments would have been reported to this Office by asset category. This would largely have been duplicative of the material presently required of all national bank trust departments in the Trust Department Annual Report (Form CC-7510-03), and unduly burdensome. Accordingly, the additional report required by this regulation will only be required as to equity securities. In a related change, once again as a result of comments received, the report required by this amendment will only apply to banks having equity securities in excess of $75 million in market value. The proposed cutoff was based upon the total market value of all assets held, and would have required a detailed filing by some banks which had a relatively small amount of equity securities, |