8.—5

64

Liability on Collateral Trust Debentures. 9. The Board issuing debentures or other such obligations under Parts II and 111 of this Act shall be primarily liable therefor, and shall also be liable, upon presentation of the coupons for interest payments due upon any such debentures or obligations issued by the Board and remaining unpaid. Limitation of Interest charged Borrowers. 10. The rate of interest charged against loans made by the Board shall not exceed the rate of interest paid on the last issue of collateral trust debentures by more than one per centum. Examinations and Reports. 11. Every registered co-operative society doing business with the Board shall make to the Board quarterly reports during each year as requested by the Board and in the form which may be prescribed by the Board, verified by the secretary and treasurer, and attested by the signatures of at least three of the directors. Each report shall disclose in detail and under appropriate heads the resources and the liabilities of the society at the close of business on any past day specified by the Board, within seven days from the receipt of a request or requisition for the same from the Board. The Board shall also have power to call for special reports from any particular society whenever in its judgment the same are necessary for a full and complete knowledge of its condition. Trust Securities. 12. The provisions regarding farm-loan mortgage-bonds issued under the provisions -of this Act shall also apply to collateral trust debentures. Miscellaneous. 13. Any Inspector appointed under this Act may search the books and records of any registered co-operative society which is indebted to the Board.

B.—FORMATION OF CO-OPERATIVE RURAL INTERMEDIATE-CREDIT ASSOCIATIONS. (Suggested for inclusion in rules.) 1. Membership should *be confined to bona fide farmers who are known to be honest and industrious and whose solvency is beyond question. 2. The Farm Loan Board must be satisfied with the individual standing of applicants before granting applications for registration. 3. Financial institutions who agree to do business with Co-operative Rural Intermediate-credit Associations to be supplied with the names of directors, list of members, and copies of the association's rules and regulations. 4. The local association must interest itself in the use and repayment of advances, aad also see that the security is not deteriorated. 5. When the real security tendered is considered in any way lacking or inadequate, personal securities or additional collateral must be demanded. 6. The provision of a reserve fund against bad debts is essential to protect members against their contingent liability, and if after the first year a suitable sum is not being placed to reserve the Farm Loan Board must check the activities of the association concerned. The following procedure should be followed when the method prescribed in clause 2 (c) is adopted : — The borrower will make application to the directors of the local association on which, as previously stated, the Farm Loan Board is to be represented. The form of application will be prescribed by the Farm Loan Board, and must include a complete statement of assets and liabilities and all necessary information. The directors of the local association will consider all the matters usually taken into consideration by prudent financial institutions before making such loans —e.g., the reports of their appraisers and that of the Farm Loan Board's supervisor, the financial position of applicant, personal character, nature of security, prospects of success, and the like. If considered satisfactory and loan granted, borrower must lodge his note of hand, together with such collateral as is deemed necessary to fully and adequately secure the advance, with the secretarytreasurer of the local association. The local association may obtain the amount of the advance from one or other of the financial institutions doing business in the district, on a bill signed by the chairman of the local board of directors and endorsed by the Farm Loan Board's district representative. The Farm Loan Board Supervisor must, inter alia, satisfy himself that the securities deposited with the local association are in order, take possession of the bills and deposit them with the bank with which the account of the local association is kept for collection on due date, or until such time as the issue of relative collateral trust debentures becomes necessary, when the Farm Loan Board may instruct the course to be pursued.