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/ S-150 Reg. T—85 BOARD O F G O V E R N O R S 3QQ OF THE FEDERAL RESERVE SYSTEM WASHINGTON A D D R f l l OFFICIAL C O R R E S P O N D E N C E TO THE BOARD March 1 7 , 1959. Dear S i r : There i s a t t a c h e d a copy of a r u l i n g which w i l l be p u b l i s h e d i n the F e d e r a l Reserve B u l l e t i n r e g a r d i n g "Extension o f Time by Committ e e of Exchange a f t e r O r i g i n a l P e r i o d Has Expired". I t w i l l be n o t e d t h a t t h e a t t a c h e d r u l i n g i s i n the form of a statement f o r t h e p r e s s which, however, i s n o t t o be r e l e a s e d u n t i l t h e time s p e c i f i e d on the s t a t e m e n t . Very L. P. Bethea, Assistant Secretary. TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM STATEMENT FOR THE PRESS For r e l e a s e i n morning papers, Tuesday, March 21, 1939. The f o l l o w i n g r u l i n g w i l l appear i n t h e F e d e r a l Reserve B u l l e t i n : E x t e n s i o n of Time by Committee of Exchange a f t e r O r i g i n a l P e r i o d Has Expired. S e c t i o n 3(b) of R e g u l a t i o n T p r o v i d e s t h a t when a customer e f f e c t s c e r t a i n t r a n s a c t i o n s i n a g e n e r a l account t h e c r e d i t o r must o b t a i n t h e d e p o s i t of c e r t a i n cash or s e c u r i t i e s i n t h e a c c o u n t , and must o b t a i n such c a s h or s e c u r i t i e s b e f o r e t h e e x p i r a t i o n of t h r e e f u l l b u s i n e s s days f o l l o w i n g t h e d a t e of t h e t r a n s a c t i o n . S e c t i o n 3 ( e ) p r o v i d e s t h a t i f such cash or s e c u r i t i e s a r e not o b t a i n e d w i t h i n t h e s p e c i f i e d p e r i o d , c e r t a i n l i q u i d a t i o n s must be e f f e c t e d i n t h e account during the period. S e c t i o n 3 ( f ) p r o v i d e s , however, a s f o l l o w s : " E x t e n s i o n s of t i m e . - In e x c e p t i o n a l c a s e s , t h e t h r e e - d a y p e r i o d s p e c i f i e d i n s e c t i o n 3(b) may, on a p p l i c a t i o n of t h e c r e d i t o r , be extended f o r one or more l i m i t e d p e r i o d s commensurate w i t h t h e circums t a n c e s by any r e g u l a r l y c o n s t i t u t e d committee of a n a t i o n a l s e c u r i t i e s exchange having j u r i s d i c t i o n over t h e b u s i n e s s conduct of i t s members, of which exchange t h e c r e d i t o r i s a member or through which h i s t r a n s a c t i o n s are e f f e c t e d , provided such committee i s s a t i s f i e d t h a t t h e c r e d i t o r i s a c t i n g i n good f a i t h i n making t h e a p p l i c a t i o n and t h a t t h e c i r c u m s t a n c e s are i n f a c t e x c e p t i o n a l and warrant such a c t i o n . " S e c t i o n 4 ( c ) r e l a t i n g t o t h e s p e c i a l cash account p r o v i d e s t h a t , i n g e n e r a l , i f a customer does not make f u l l 390 c a s h payment f o r a s e c u r i t y purchased by him i n t h e account w i t h i n seven days a f t e r the d a t e on which t h e s e c u r i t y was purchased, t h e c r e d i t o r s h a l l promptly c a n c e l or o t h e r w i s e l i q u i d a t e the transaction. Another paragraph o f t h e s e c t i o n s p e c i f i e s d i f f e r e n t p e r i o d s of time f o r c e r t a i n s p e c i a l t y p e s of t r a n s a c t i o n s , and t h e s e c t i o n then p r o v i d e s : "If any r e g u l a r l y c o n s t i t u t e d committee of a n a t i o n a l s e c u r i t i e s exchange having j u r i s d i c t i o n over t h e b u s i n e s s conduct of i t s members, of which exchange t h e c r e d i t o r i s a member or through which h i s t r a n s a c t i o n s are e f f e c t e d , i s s a t i s f i e d t h a t t h e c r e d i t o r i s a c t i n g i n good f a i t h i n making t h e a p p l i c a t i o n , that the a p p l i c a t i o n r e l a t e s t o a bona f i d e c a s h t r a n s a c t i o n , and t h a t e x c e p t i o n a l c i r c u m s t a n c e s warrant such a c t i o n , such committee, on a p p l i c a t i o n of t h e c r e d i t o r , may (A) extend any p e r i o d s p e c i f i e d i n t h e two preceding p a r a graphs f o r one or more l i m i t e d p e r i o d s commensurate w i t h t h e c i r c u m s t a n c e s , or (B) i n t h e c a s e of t h e purchase of a r e g i s t e r e d or exempted s e c u r i t y which has been e f f e c t e d by t h e customer i n t h e a c c o u n t , a u t h o r i z e t h e t r a n s f e r of t h e t r a n s a c t i o n t o a g e n e r a l account or s p e c i a l omnibus account and t h e completion of t h e t r a n s a c t i o n pursuant t o t h e p r o v i s i o n s of t h i s r e g u l a t i o n r e l a t i n g t o such a c c o u n t s . " The Board has r e c e n t l y been asked whether an a p p l i c a t i o n f o r such an e x t e n s i o n of time pursuant t o s e c t i o n 3 ( f ) , or f o r an e x t e n s i o n of time or t r a n s f e r of a t r a n s a c t i o n pursuant t o s e c t i o n 4 ( c ) , may be approved by a b u s i n e s s conduct committee a f t e r t h e e x p i r a t i o n of t h e p e r i o d o r i g i n a l l y a p p l i c a b l e t o t h e transaction. I t i s t h e view of t h e Board t h a t such an a p p l i c a t i o n may not be granted a f t e r such p e r i o d has e x p i r e d . 391 Thus an a p p l i c a t i o n f o r an e x t e n s i o n of t h e t h r e e day p e r i o d a p p l i c a b l e t o a t r a n s a c t i o n i n the g e n e r a l account could not be approved by t h e committee a f t e r midnight of t h e t h i r d f u l l b u s i n e s s day f o l l o w i n g t h e d a t e of t h e t r a n s a c t i o n . S i m i l a r l y , i n t h e c a s e of a t r a n s a c t i o n i n t h e s p e c i a l c a s h account t o which t h e standard seven-day p e r i o d i s a p p l i c a b l e , an a p p l i c a t i o n f o r an e x t e n s i o n of time or f o r a t r a n s f e r of t h e t r a n s a c t i o n should be passed upon by t h e committee not l a t e r than midnight of t h e s e v e n t h c a l e n d a r day a f t e r t h e d a t e of t h e t r a n s a c t i o n . In c a s e an e x t e n s i o n of time has been granted f o r a p a r t i c u l a r t r a n s a c t i o n , any a p p l i c a t i o n f o r a f u r t h e r e x t e n s i o n or f o r a t r a n s f e r of the t r a n s a c t i o n should be r e c e i v e d and a c t e d upon b e f o r e t h e e x p i r a t i o n of t h e p r i o r extension. In order t o f a c i l i t a t e i t s c o n s i d e r a t i o n of t h e app l i c a t i o n s , each b u s i n e s s conduct committee may, of c o u r s e , f u r t h e r l i m i t t h e p e r i o d f o l l o w i n g a t r a n s a c t i o n w i t h i n which i t w i l l r e c e i v e any such a p p l i c a t i o n .
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