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188 X•9862 Reg. U-15 INTI<~HPRETATI.PN OF LAW nR REGULA TIOU (Copies to be sent to all feueral reserve banks) April 5, 1.937 Mr. , Vice President and Secretary, Federal Reserve Bank of _______, ·---· ·----' Dear Mr. Tlus refer~ to your letter of february 18, 1937, regard- ing the question whether a certain loan which the - · - - Bank of ____ , ____ , ______ , wishes to 'raako to a certain dealer should be consiaered to be a loan for tl~ purpose of pur- chasing or carrying stocks registered on a national securities exchhnge and therefore subject to F.egulation U. In tho copy of the bD.nk 1 s letter which you forwarded., the bank asks wheth~r the lonn value of stocks securing the loan should be limited to GO per ceut. Howe;ver, since there is notlung to indicate that the loan would come within the requiremt':lnts specified in the supplement to the re§;ulu:tion for such a special loan value, the quer-;tion, r:.s you indicute, would seem to be Hhether or not the stocks securing such a loan should be limited. to a loan value of 45 per cent. It is understood thD.t tho proceeds oi' the loan are not to be employed immodiately but would be kept o.vailable fer use in 189 X-9862 Reg. U-13 -2- acquiring registered or unregistered securities. The securities are only ucquired when a quick sale is in prospect and they are dispos~d of promptly. The securities purch~sed are often unregis- tared, but some registored stocks are so purclv.:.sed and the ___ Bank of ____ wishes to know, in cffoct, whether such purchases of registered stocks cause the loan to be subject to the re~llation. It seems clear from the borrower's business as a dealer that one purpose of the loan is to purchase or carry registered stocks. Therefore, while the loan may also have certu.in other purposes, it is the opinion of the Board that the loan should be considered to · be a loan for the purpose of purchasing or currying registered stocks. In advising the _ _ _ Bank of _ _ _ of the Board 1 s views with respect to this matter, you may wish to consider mentioning the possibility that this dealer might separate certain transnc- ·' tions and obtain loans from time to time for particular purposes, so that cortuin loans to the doaler would not be for the purpose of purchasing or carrying registered stocks or would come within exemp- ... tions specified in the regulation, and would thus be excluded from the operation of the regulation. Very truly yours, (Signed) Chester Morrill Chester Morrill, Secretary.
@FedFRASER