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F e d e r a l R e s e r v e Ba n k DALLAS, T E X A S of Dallas 75222 Circular No. 7^-159 June 13, 197*+ NOTICE POSTPONING EFFECTIVE DATE OF AMENDMENT TO REGULATION T (Credit in Connection with Investment Contracts) To All Banks, Brokers/Dealers and Others Concerned in the Eleventh Federal Reserve District: The Board of Governors of the Federal Reserve System on June 7? 197^ postponed until January 2, 1975? the effective date of a regulatory amendment that will withdraw permission for brokers or dealers to sell certain kinds of investment contract securities on credit. The action was taken to provide time for the Securities and Exchange Commission to receive and review comments on a proposal, also announced on June 7? 197^-? to amend its regulations governing the same types of securities. The Board’s amendment, which was to become effective June 21, 197^-? "was announced last December lU, 1973 and provides uniform treat ment of every security, making an extension of credit on any part of a covered investment contract an extension of credit on the entire contract. The amendment relates primarily to the arrangement of credit by brokers or dealers in the sale of investment contract securities such as a program to own and rent a condominium unit or to own and feed cattle. The Board has held that securities brokers and dealers generally are not permitted to arrange credit for the sale of such investment contract securities, but it had made an exception where the property sale and the management contract were separate items and the credit involved was connected only with the property. The amendment removes that exception, and makes the extension of credit on any part of such an investment an extension of credit on the whole. This prevents securities brokers and dealers from arranging for such credit unless collateral is supplied meeting regulatory require ments. Others may continue to sell such investment programs on credit. The attached amendment to Section 220.6 replaces the amend ment dated June 21, 197^-? which was mailed to you under our Circular No. 7U -1 dated January U, 197^-. Yours very truly, P. E. Coldwell, President Attachment This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CREDIT BY BROKERS AND DEALERS A M EN D M EN T TO R E G U L A T IO N T f Effective January 2, 1975, Section 220.6 is amended by adding the following paragraph: SECTION 220.6 — CERTAIN TECHNICAL DETAILS * * * * * (1) Credit related to Portion of a Security. Credit for the purpose of purchasing or carrying any part of an investment contract security (for example, but not limited to, the cattle ownership portion of a program to own and feed cattle, or the condominium ownership part of a program to own and rent a unit through a rental pool or other wise) shall be deemed to be credit on the entire security. t For this Regulation to be complete as amended retain the following: 1) Printed pamphlet containing Regulations G, T, U, and X dated November 1971. 2) Amendment effective September 18, 1972, Section 220.2, Definitions. 3) Amendment effective September 5, 1972, Section 220.4(k), Special Accounts. 4) Amendment effective September 18, 1972, Section 220.3(a), (b)(1), (d)(3) and (g), General Accounts, and Section 220.4(j)(4) and (5), Special Accounts. 5) Amendment effective October 16, 1972, Section 220.4(g), Special Accounts. 6) Amendment effective January 2, 1973, Section 220.4(c)(8). 7) Amendment effective May 23, 1973. 8) Supplement effective January 3, 1974. 9) This slip sheet.
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