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F ederal Reserve bank o f Dallas DALLAS, TEXAS 75222 C i r c u l a r No. 75-73 J u n e 5, 1975 PROPOSED AMENDMENT TO REGULATION T (C red it by B r o k e r s an d Dealers) TO ALL BANKS, BROKERS/DEALERS, REGULATION G-REGISTRANTS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e Board of G o v e rn o rs of the F e d e ra l R e s e rv e System has p ro p o s e d a r e g u la to r y am endm ent th a t would p erm it b r o k e r s and d e a l e r s to a s s i s t in the p r iv a te placem ent of s e c u r i t i e s . T h e prop o sal would amend Regulation T w hich a p p lie s to c r e d it by b r o k e r s a n d d e a l e r s for the p u r p o s e of p u r c h a s i n g o r c a r r y i n g m arg in securities. Inte re sted p e r s o n s a r e invited to subm it r e le v a n t d a ta , v ie w s , o r a r g u m e n ts c o n c e rn in g th e p ro p o s e d am endm ent in w ritin g to the S e c r e t a r y , Board of G o v e rn o rs of th e Federal R e s e r v e System , W ashington, D .C . 20551, to be re c e iv e d not later th a n J u n e 30, 1975. A copy of the p ro p o s e d am endm ent as it a p p e a r e d in the FEDERAL REGISTER on J u n e 2, 1975, w hich specifies the conditions u n d e r w hich the e x p a n d e d activ ity may o c c u r , is p r in t e d on the r e v e r s e of th is c i r c u l a r . Sincerely y o u rs, T . W. P l a n t F i r s t V ic e P r e s i d e n t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) E x tra ct From FEDERAL REGISTER VOL. 40, NO. 106, Monday, J u n e 2, 1975, p . 23768 FEDERAL RESERVE SYSTEM [ 12 CFR 220 ] [Beg. T] CREDIT BY BROKERS AND DEALERS Notice of Proposed Rulemaking Notice Is hereby given th at the Board of Governors proposes to amend, pursu an t to authority of sections 7 and 23 of th e Securities Exchange Act of 1934 (15 UJ3.C. 78 g and w ), paragraph (a) of § 220.7 of R egulation T “Credit by Brok ers and Dealers” (12 CFR 220) so th at the lim itations that ordinarily apply to the “arranging” of credit by a broker or dealer for a customer will not apply when the credit is extended or m aintained through the medium of the private place m ent of a security and th e credit also m eets certain other tests. A broker or dealer when arranging credit for a custo m er is a t present generally lim ited by § 220.7(a) to those terms and conditions which he is allowed to give when extend ing or m aintaining credit to th at custo mer. The Board has had an increasing number of requests for advice as to whether a broker or dealer m ay arrange for credit in circum stances which do not appear contrary to the purposes of the Act although they m ay be contrary to the literal application of § 220.7(a). This proposed amendment codifies earlier Board interpretations and sets forth cer tain circum stances under which a broker or dealer m ay arrange for credit which he cannot extend, but which the Board views as consistent with the purposes of the Act. This amendment is intended to cover two basic types of transactions in which a broker or dealer assists in pri vately placing securities. In one, the se curity privately-placed is a debt security and the proceeds are used to purchase stock which is not publicly-held. In the other, the security privately-placed is an investm ent contract with built-in in stal m ent or other credit features. PART 220— CREDIT BY BROKERS AND DEALERS It is proposed to revise § 220.7(a) as follow s: § 2 2 0 .7 M iscellan eou s p rovisions. (a) A r r a n g i n g f o r l o a n s b y o t h e r s . A creditor may arrange for the extension or m aintenance of credit to or for any customer of such creditor by any person upon the same terms and conditions as those upon which the creditor, under the provisions of this Part, may him self ex tend or m aintain such credit to such customer, but only upon such terms and conditions, except that this lim itation shall not apply to arranging by a creditor: (1) for a bank subject to Part 221 of this Chapter (Regulation U) to extend or m aintain credit on margin securities or exem pted securities, or (2) for any person to extend or m ain tain credit for th e purpose of purchasing or carrying a security (including sale of a security with installm ent payments or other credit features) in a transaction which is exem pt from the registration requirements of the Securities Act of 1933 by virtue of section 4(2) of th at Act (15 U.S.C. 77d (2)) P r o v i d e d , that: (i) The credit extended or m aintained will not violate the provisions of Parts 207 or 221 of this chapter; and (ii) The credit w ill n ot be used to pur chase or carry a security that is publiclyheld, or, In the case of the refinancing of an existing debt, will not be used to carry a security that was publicly-held at any tim e during the past two years. For the purpose of this paragraph, a security shall be deemed to be “publicly-held” if it is either (a) a security of a class that is registered, or is required to be regis tered at the close of the current fiscal year of the issuer, under section 12 of th e Act or would be required to be regis tered except for the exemptions provided by paragraphs (2) (B) and (G) of sub section 12 (g), or ( b ) a security of a class any portion of which was registered un der section 5 of the Securities Act of 1933 (15 U.S.C. 77e) and in connection with which the issuer is required to file periodic reports under section 15(d) of the Act. To aid in consideration of this m atter by the Board, interested persons are in vited to subm it relevant data, views, or arguments concerning the proposed amendment. Any such material should be submitted in writing to the Secretary, Board of Governors of the Federal R e serve System, W ashington, D.C. 20551, to be received not later than June 30, 1975. Such m aterial will be made avail able for inspection and copying upon re quest, except as provided in § 261.6(a) of the Board’s rules regarding availability of inform ation (12 CFR 261.6(a)). * * • * * By order of the Board of Governors, May 27,1975. [ seal ] G r i f f i t h L. G arwood , A s s is ta n t S e c re ta ry o f th e B o a r d . [FR Doc.75— 14259 Filed 5-30-75;8:45 am ]