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The proposed definition specifically would exclude from its terms employees whose functions are clerical or ministerial, except that under proposed section 203(f) a person guilty of misconduct could be barred from associating with an investment adviser even in a clerical or ministerial capacity. Under the proposed definition the Commission would have authority to classify for statutory purposes persons, including employees, controlled by an investment adviser.

The proposed amendments to section 203(e) of the Advisers Act would revise slightly the provisions relating to disciplinary proceedings. One of these revisions would make failure to supervise employees a ground for discipline. This conforms to the 1964 amendments to the Securities Exchange Act. Proposed section 203(d)—Requirement for jurisdictional proof

Section 24(c) of the bill would amend section 203 of the Advisers Act to add a new subsection (d). This would specify that any provisions of that act (other than sec. 203(a), the provision that imposes a general requirement of registration on investment advisers), which prohibits any act or conduct if the mails or any means or instrumentality of interstate commerce are used in connection therewith also would prohibit such act or conduct by a registered investment adviser or by a person acting on behalf of such investment adviser whether or not the mails or any instrumentality of interstate commerce are used. (Existing subsec. (d) of sec. 203 would be redesignated as subsec. (e) and existing subsec. (e) through (g) would be redesignated as subsec. (g) through (i).

Various provisions of the act prohibit activities of an investment adviser only if they involve a use of the mails or means or instrumentality of interstate commerce. The effect of the proposed amendment would be to prohibit such activities by a registered investment adviser under the act irrespective of proof that the mails or instrumentalities of interstate commerce were used in connection with the particular activity.

BANKING

REPEAL OF THE GOLD RESERVE REQUIREMENTS FOR

U.S. CURRENCY

[H.R. 14743]

[Public Law 90-269, approved Mar. 18, 1968) To repeal the requirement that certain gold reserves be maintained for Federal

Reserve notes, U.S. notes, and Treasury notes of 1890

HISTORY OF LEGISLATION

Three Senate bills designed to eliminate some, or all, of the gold reserve requirements were referred to the committee. These bills were S. 1307, introduced by Senator Clark on March 16, 1967, S. 2815, introduced by Senator Proxmire on December 15, 1967, and S. 2857, introduced by Senator Sparkman on January 22, 1968. Hearings on these bills were held on January 30, 31, and February 1, 1968. S. 2857 was reported by Senator Sparkman (S. Rept. 1007) on February 20, 1968. No further action was taken on S. 1307 and S. 2815. On March 14, 1968, the Senate passed H.R. 14743, which accomplished the objectives of S. 2857. That bill was approved by the President on March 18, 1968, and became Public Law 90-269.

DIGEST OF STATUTE

Section 1 amended 11(c) of the Federal Reserve Act (12 U.S.C. 248(c)) to repeal the requirement (1) for the establishment by the Board of Governors of the Federal Reserve System of a graduated tax on the deficiency in the gold reserve whenever the reserve held against Federal Reserve notes falls below 25 percent, and (2) for an automatic increase in the rates of interest or discount fixed by the Board in an amount equal to the graduated tax imposed.

Section 2 amended section 15 of the Federal Reserve Act (12 U.S.C. 391) which provided that moneys held in the general fund of the Treasury, except the fund for redemption of outstanding national bank notes and the funds provided for redemption of Federal Reserve notes, may be deposited in Federal Reserve banks, by deleting the reference to funds for the redemption of Federal Reserve notes.

Section 3 amended the third paragraph of section 16 of the Federal Reserve Act (12 U.S.C. 413) to repeal the requirement that each Federal Reserve bank maintain reserves in gold certificates of not less than 25 percent against its Federal Reserve notes in actual circulation; and to eliminate references to redemption by the Treasury of Federal Reserve notes. As revised the paragraph provides that (1) Federal Reserve notes shall bear a distinctive letter and serial num

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ber assigned by the Board of Governors to each Federal Reserve bank, and (2) Federal Reserve notes unfit for circulation shall be canceled and destroyed under procedures prescribed by the Secretary of the Treasury.

Section 4 amended the fourth paragraph of section 16 (12 U.S.C. 414) to repeal the provision that the Board of Governors shall require each Federal Reserve bank to maintain on deposit in the Treasury a sum in gold certificates sufficient, in the judgment of the Secretary of the Treasury, for the redemption of the Federal Reserve notes issued to such bank.

Section 5 repealed the sixth paragraph of section 16 (12 U.S.C. 415) which (1) authorized a Federal Reserve bank to reduce its liability for outstanding Federal Reserve notes by depositing with the Federal Reserve agent its Federal Reserve notes, gold certificates, or lawful money of the United States, (2) provided that the agent shall hold such gold certificates and lawful money for exchange for the outstanding Federal Reserve notes and that upon the request of the Secretary of the Treasury, the Board of Governors shall require the agent to transmit to the Treasurer of the United States as many gold certificates held by him as collateral as may be required for the exclusive purpose of the redemption of such Federal Reserve notes, and (3) authorized the reduction of its liability by any amount paid by the bank to the Secretary of the Treasury on notes of series prior to 1928.

Section 6 repealed that part of the seventh paragraph of the Federal Reserve Act (12 U.S.C. 416) which provided that Federal Reserve banks shall not be required to maintain the reserve or the redemption fund against Federal Reserve notes which have been retired, or as to which payment has been made to the Secretary of the Treasury under 31 U.S.C. 913, on notes of series prior to 1928.

Section 7 repealed the 18th paragraph of section 16 of the Federal Reserve Act (12 U.S.C. 467) which authorized the deposit of gold or of gold certificates with the Treasurer of the United States or any designated depositary when tendered by any Federal Reserve bank or Federal Reserve agent for credit to its or his account with the Board of Governors. Such deposits were held subject to order of the Board of Governors and were payable in gold certificates on the order of the Board to any Federal Reserve bank or agent.

Section 8 amended section 6 of the Gold Reserve Act of 1934 (31 U.S.C. 408a) which prohibited, with certain exceptions, the redemption of currency in gold, by eliminating (1) the requirement that the reserve for U.S. notes and for Treasury notes of 1890 be maintained in gold bullion, and (2) the requirement that the reserve for Federal Reserve notes be maintained in gold certificates or in credits payable in gold certificates maintained with the Treasurer of the United States under the provisions of the fourth paragraph of section 16 of the Federal Reserve Act (12 U.S.C. 414) (which is repealed by section 4 of S. 2857).

Section 9 amended subsection (a) of section 43 of the act of May 12, 1933 (31 U.S.C. 821(a)), to delete reference to the graduated tax and the automatic increase in the interest and discount rates provided in section 11(c) of the Federal Reserve Act (12 U.S.C. 248(c)) (which is repealed by sec. 1 of S. 2857).

Section 10 repealed section 2 of the act of July 14, 1890, and section 2 of the act of March 14, 1900, as amended (31 U.S.C. 408), which

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(1) provide for redemption of U.S. notes and Treasury notes of 1890 in gold coin, and (2) direct the Secretary of the Treasury to establish and maintain a reserve fund of $150 million in gold coin and bullion to be used for the redemption of such U.S. notes and Treasury notes.

Section 11 amended section 7 of the act of January 30, 1934 (31 U.S.C. 408b), which provided for an adjustment in the gold reserve when the weight of the gold dollar is increased or decreased, by deleting references to the reserve for U.S. notes and for Treasury notes of 1890 (which is repealed by sec. 10 of the bill).

Section 12 amended sec. 14(c) of the Gold Reserve Act of 1934 (31 U.S.C. 405b) which authorized the issuance of gold certificates against any gold held by the Treasurer of the United States, except the gold fund held as a reserve for U.S. notes and Treasury notes of 1890, by deleting the reference to the gold fund held as reserve for U.S. notes and Treasury notes of 1890 (which is repealed by sec. 10).

TRUTH IN LENDING

[S. 5) (Public Law 90-321, approved May 29, 1968] To safeguard the consumer in connection with the utilization of credit by requiring

full disclosure of the terms and conditions of finance charges in credit transactions or in offers to extend credit; by restricting the garnishment of wages; and by creating the National Commission on Consumer Finance to study and make recommendations on the need for further regulation of the consumer finance industry, and for other purposes

PURPOSE OF LEGISLATION

The basic purpose of the Truth-in-Lending Act is to provide a full disclosure of credit charges to the American consumer. The act does not regulate the credit industry nor does it prescribe ceilings on credit charges. Instead it requires the full disclosure on credit charges be made so that the consumer can decide for himself if the charge is reasonable. For most credit transactions, creditors would be required to disclose the total cost of credit. The cost would be expressed both in dollars and cents and as an annual percentage rate. The information must be disclosed at the time of each transaction. Moreover, creditors who advertise credit terms will be required to fully disclose all relevant credit information in the advertisement.

In addition, the act places limitations on wage garnishments. It provides new authorities to the Justice Department for the prosecution of loan sharks. And it establishes a National Commission on Consumer Finance to study the credit industry and recommend such additional legislation as may be desirable.

HISTORY OF LEGISLATION

Legislation was first introduced in the Senate on January 7, 1960 (S. 2755), by former Senator Paul H. Douglas. Similar legislation has been introduced in each Congress since that time (S. 1740 (Mr. Douglas), April 27, 1961; S. 750 (Mr. Douglas), February 7, 1963; S. 2275 (Mr. Douglas), July 12, 1965). Hearings were held by the committee on each of these bills, except for S. 2275.

On January 11, 1967, a truth-in-lending bill, S. 5, was introduced by Senator Proxmire. Hearings were held before the Financial Institutions Subcommittee on April 13, 17, 18, 19, 20, 21, and May 10, 1967. The bill was reported from the subcommittee on June 23, 1967, and from the full committee on June 29, 1967 (S. Rept. 392), by Mr. Proxmire. The bill passed the Senate on July 11, 1967.

Hearings were held on various truth-in-lending bills before the House Banking and Currency Committee on August 7, 8, 9, 10, 11, 15, 16, 17, and 18, 1967. H.R. 11601 was reported by the House Banking and Currency Committee on December 13, 1967 (H. Rept. 1040).

The House of Representatives considered H.R. 11601 on January 30, 31, and February 1. After passing H.R. 11601 on February 1, 1968, with several amendments, the House substituted its language for the previously passed Senate bill—S. 5.

A joint Senate-House conference committee met on April 9, 10, and 30, and May 14 and 15, 1968. Agreement was reached on May 15, and on May 20, 1968, the conference report was filed. The report was agreed to by both Houses on May 22. The legislation was signed into law on May 29, 1968.

DIGEST OF STATUTE

TITLE I

Title I is basically the original Truth in Lending Act. It is important to remember that truth in lending is a disclosure law. It does not regulate the amount of interest, credit charges, or other financial practices in the consumer credit industry. It merely requires that all of the costs of credit, with certain exceptions, must be disclosed to the consumer as a single annual percentage rate. It is hoped that this will enable the consumer to shop for the credit most suitable to his needs by providing a uniform standard for credit costs rather than the confusion caused by different methods of computation such as add-ons, discounts, minimum charges, other charges and the like which are sometimes expressed as percentage rates and sometimes expressed as dollar charges.

In general the bill provides that the total cost of credit must be disclosed to the consumer as an annual percentage rate. However, there are several exceptions to, and exemptions from, this requirement. Business and commercial credit transactions are not covered. Transactions in regulated securities and commodities are not covered. Nonreal property transactions in excess of $25,000 are not covered. Finally, public utility tariffs regulated by State agencies are not covered.

Charges and premiums for credit life and accident and health insurance need not be included in the annual percentage rate if this insurance is not a factor in the approval of the credit. Thus, if credit life and health and accident insurance are optional services provided by the lender, then the lender need not include these insurance charges in the annual percentage rate. Automobile and casualty insurance premiums need not be included in the annual rate if the consumer is advised that he may choose to purchase such insurance from persons other than the lender

MORTGAGE TRANSACTIONS The law applies to all real property mortgage transactions. However, the lender need not disclose the full dollar cost of a first mort

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