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•# », ! *, 'i f hJ ,r ,» X-8026 STATEMENT FOR THE PRESS For r e l e a s e i n morning papers, Friday, September 28, 1934. September 27, 1934. MARGIN REQUIREMENTS. The Federal Reserve Board, a c ting i n accordance vdth t h e requirements of t h e S e c u r i t i e s Exchange Act of 1934, has prescribed the margins t o be required by brokers and d e a l e r s from customers borrowing f o r t h e purpose of purchasing or c a r r y i n g s e c u r i t i e s . The margin requirements which t h e Board has p r e s c r i b e d are those l a i d down as a standard i n the a c t , which gives t h e Board a u t h o r i t y t o impose lower or higher margins i n accordance with p r e v a i l i n g c o n d i t i o n s . Under t h e standard adopted a broker or dealer may lend t o a customer on many s e c u r i t i e s as much as 75 per cent of t h e i r c u r r e n t market value, while on other s e c u r i t i e s , in p a r t i c u l a r on those t h a t have had a r a p i d r i s e i n value since J u l y 1, 1933, the percentage t h a t may be l e n t i s smaller, but i n no case l e s s than 55 per c e n t . Rules p r e s c r i b e d f o r margin requirements c o n s t i t u t e a p a r t of Regulation T issued by t h e Federal Reserve Board, which a l s o deals with other m a t t e r s r e l a t i n g t o the extension or maintenance of c r e d i t by brokers, d e a l e r s and members of s e c u r i t i e s exchanges f o r t h e purpose of purchasing or c a r r y i n g s e c u r i t i e s . Most of t h e r u l e s i n t h i s r e g u l a - t i o n are f o r the purpose of preventing the circumvention of t h e margin requirements, and no r e s t r i c t i o n s are placed on loans f o r i n d u s t r i a l , X-8026 -2- a g r i c u l t u r a l , or commercial purposes» The r e g u l a t i o n becomes e f f e c t i v e October 1, 1934* I n o r d e r , how- e v e r , t h a t p e r s o n s a f f e c t e d might have a d d i t i o n a l t i m e t o f a m i l i a r i z e t h e m s e l v e s w i t h i t s p r o v i s i o n s , t h e S e c u r i t i e s and Exchange Commission a t t h e r e q u e s t of t h e F e d e r a l Reserve Board has made b r o a d use of i t s power t o exempt s e c u r i t i e s f r o m t h e p e r t i n e n t s e c t i o n s of t h e S e c u r i t i e s Exchange Act# The exemption g r a n t e d i s f o r t h e p e r i o d f r o m October 1 t o October 15• R e g u l a t i o n T does n o t p r e s c r i b e a s p e c i f i c margin t h a t must be m a i n t a i n e d a f t e r a locm h a s been g r a n t e d , b u t imposes r e s t r i c t i o n s on t h e o p e r a t i o n s "which t h e customer may c a r r y on i n h i s a c c o u n t i f h i s margin f a l l s below t h e s t a n d a r d p r e s c r i b e d f o r i n i t i a l e x t e n s i o n of credit. Under t h e law t h e Board has a u t h o r i t y t o p r e s c r i b e r e g u l a t i o n s , i n c l u d i n g margin r e q u i r e m e n t s , a p p l i c a b l e t o l o a n s made by banks f o r t h e purpose of p u r c h a s i n g or c a r r y i n g s e c u r i t i e s • This a u t h o r i t y i s a d d i - t i o n a l to other s t a t u t e s f o r credit supervision# The Board i s s t u d y i n g t h e p r e s e n t s t a t u t e i n c o n n e c t i o n w i t h t h e s e o t h e r s t a t u t e s and i n due time w i l l i s s u e t h e r e q u i r e d r e g u l a t i o n as t o bank l o a n s made t o pur chase or c a r r y s e c u r i t i e s .
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