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F ederal Reserve

bank of

DALLAS, TEXAS

Dallas

75222

C i r c u l a r No. 78-78
J u n e 13, 1978

AMENDMENTS TO REGULATIONS G , T , AND U
OTC Listing R e q u ire m e n ts

TO ALL BANKS, BROKERS/DEALERS,
REGULATION G REGISTRANTS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e B oard of G o v e rn o rs of t h e F e d e ra l R e s e r v e System h a s am e n d ed
its r e q u i r e m e n t s fo r in clu sio n of s to ck s on th e B o a r d 's List of O v e r - t h e - C o u n t e r
(OTC) s to c k s t h a t a r e s u b je c t to m a rg in r e q u i r e m e n t s .
T h e a m e n d m en ts to t h e s u p p le m e n ts to R eg u lation s G, T , a n d U will
r e q u i r e th a t d e a l e r s m ust s u b m it b o n a f i d e b i d s a n d offers fo r an OTC stock to
an autom ated qu o tatio n sy stem if th e y a r e to b e c o u n te d a s m a r k e t - m a k e r s in
th a t stock fo r th e p u r p o s e of q u a lify in g fo r th e B o a r d 's List of OTC M argin
S to c k s . T h e minimum m a r k e t- m a k e r r e q u i r e m e n t fo r a stock to b e in c lu d e d on
th e list u n d e r th e p r e s e n t r u l e re c o g n iz e s th ose d e a l e r s who make " r e g u l a r l y
p u b lis h e d b o n a f i d e b i d s a n d o ffers fo r s u c h s t o c k . " When the list w a s f i r s t
p u b l i s h e d b y th e B oard in 1969, th e " p i n k s h e e ts " of th e National Quotation
B u re a u w e r e th e o n ly c o n s i s t e n t s o u r c e of th e r e q u i r e d p r i c e inform ation. S in ce
th a t time a n autom ated quotation sy ste m of th e National A ssociation of S e c u ritie s
D e a le rs (NASDAQ) h a s b e e n d e v e lo p e d to a p o in t w h e r e p r i c e information on all
s to ck s on th e B o a r d 's list c a n now b e o b ta in e d from it. T h e B oard is p r e s e n t l y
u s in g data from bo th th e " p in k s h e e t s " a n d NASDAQ fo r its s u r v e y s .
T h e a m e n d m e n ts will elim inate t h e n e c e s s it y of re v ie w in g da ta from
th e " p i n k s h e e t s , " most of w h ic h is c o n s i d e r e d d u p lic a ti v e , a n d r e d u c e staff
re v ie w a n d c o m p u te r tim e.
C e rta in la n g u a g e r e g a r d i n g s e c u r i t i e s listed on " ex e m p t e x c h a n g e s "
is b e in g rem o v ed from th e r e g u la tio n s a t th is time a s no lo n g e r n e c e s s a r y . T h e
S e c u r i tie s a n d E x c h a n g e Commission h a s notified B oard staff th a t th e last of th e
"ex e m p t e x c h a n g e s , " th e Honolulu Stock E x c h a n g e , r e c e n tly c e a s e d o p e r a tio n s .
Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800 -492 -440 3 (intrastate) and 1-8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus
the extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

-

2

-

T h e p r e s e n t ru le p e rm its r e g i s t r a t i o n of s to ck s on "ex e m p t e x c h a n g e s " a s an
a l te r n a tiv e to meeting th e m a r k e t - m a k e r r e q u i r e m e n t . T h e Board f in d s th a t it
w ould s e r v e no u sefu l p u r p o s e to follow th e r e q u i r e m e n t s for notice a n d p u b lic
p a rtic ip a tio n p r i o r to elim inatin g th e la n g u a g e r e g a r d i n g s e c u r i t i e s listed on
"ex e m p t e x c h a n g e s ."
Member b a n k s a n d o th e r s sh o u ld file t h e e n c lo se d c op ie s of th e s u p ­
p le m e n ts to R eg u latio n s G, T , a n d U in t h e i r R egu latio n s B i n d e r s . Any q u e s ­
tio n s may b e d i r e c t e d to t h e B ank S u p e r v is io n a n d R eg u latio n s D e p artm en t,
C o n su m e r Affairs S e c tio n , a t E x t. 6171 o r 6181. Additional copies will be f u r ­
n is h e d upon r e q u e s t to th e S e c r e t a r y 's Office of th is B a n k , Ext. 6267.
S in c e r e ly y o u r s ,
R o b ert H . Boykin
F i r s t Vice P r e s i d e n t
E n c lo s u re s

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION G
E f c i eJune I , 1978
fetv
S
SECTION 207.5 — SUPPLEM ENT
(a) Maximum loan value of margin s c r t e .
euiis
For the purpose of §207.1, the maximum loan
value of any margin security, except convertible
securities subject to §207.1(d) and any put, call,
or combination thereof, shall be 50 percent of its
current market value, as determined by any rea­
sonable method. No put, call, or combination
thereof shall have any loan value for the purposes
of this part.
(b) Maximum loan v
alue o c n e t b e debt
f ovril
s c r t e s b e t t § 0 . ( ) For the purpose
euiis u j c o 2 7 1 d .
of §207.1, the maximum loan value of any
security against which credit is extended pursuant
to §207.1(d) shall be 50 percent of its current
market value, as determined by any reasonable
method.
(c) Retention requiremen For the purpose of
t.
§207.1, in the case of a loan which would ex­
ceed the maximum loan value of the collateral
following a withdrawal of collateral, th “retention
e
requirement” of a margin security and of a secu­
rity against which credit is extended pursuant
to §207.1(d) shall be 70 percent of its current
market value, as determined by any reasonable
method.

(d) Requirements f r i c u i n on L s of OTC
o nlso
it
Margin S o k . Except as provided in subpara­
tcs
graph (4) of §207.2(f), such stock shall meet the
requirements that:
(1)
The stock is subject to registration under
section 12(g)(1) of the Securities Exchange Act
of 1934 (15 U.S.C. 78/(g)(l)), is issued by an in­
surance company subject to section 12(g)(2)(G)
(15 U.S.C. 78/(g)(2)(G)) that has at least $1
million of capital and surplus, or is issued by a
closed-end investment management company sub­
ject to registration pursuant to section 8 of the
Investment Company Act of 1940 (15 U.S.C.
§80a-8),
9As defined in 15 U.S.C. 78c(a)(16).

(2) Four or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts,
(3) There are 1,200 or more holders of rec­
ord, as defined in SEC Rule 12g5-l (17 CFR
§240.12g5-l, of the stock who are not officers,
directors, or beneficial owners of 10 percent or
more of the stock, or the average daily trading
volume of such stock, as determined by the Board,
is at least 500 shares,
(4) The issuer is organized under the laws of
the United States or a State9 and it, or a pre­
decessor in interest, has been in existence for at
least 3 years,
(5) The stock has been publicly traded for at
least 6 months,
(6) Daily quotations for both bid and asked
prices for the stock are continuously available to
the general public, and
(7) There are 500,000 or more shares of such
stock outstanding in addition to shares held
beneficially by officers, directors, or beneficial
owners of more than 10 percent of the stock;
and shall meet two of the three additional require­
ments that:
(8) The shares described in subparagraph (7)
of this paragraph have a market value of at least
$5 million,
(9) The minimum average bid price of such
stock, as determined by the Board, is at least $5
per share, and
(10) The issuer has at least $5 million of
capital, surplus, and undivided profits.
(e)
Requirements f r continued i c u i n on
o
nlso
L s o OTC Margin S o k . Except as provided in
it f
tcs
subparagraph (4) of §207.2(f), such stock shall
meet the requirements that:

prices for the stock are continuously available
to the general public, and

(1) The stock continues to be subject to regis­
tration under section 12(g)(1) of the Securities
Exchange Act of 1934 (15 U.S.C. 78/(g)(l)),
or if issued by an insurance company such issuer
continues to be subject to section 12(g)(2)(G)
(15 U.S.C. 78/(g)(2)(G)) and to have at least
$1 million of capital and surplus, or if issued by
a closed-end investment management company
such issuer continues to be subject to registration
pursuant to section 8 of the Investment Company
Act of 1940 (15 U.S.C. §80a-8),

(6) There are 300,000 or more shares of such
stock outstanding in addition to shares held
beneficially by officers, directors, or beneficial
owners of more than 10 percent of the stock;
'and shall meet two of the three additonal require­
ments that:

(2) Three or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts,

(8) The minimum average bid price of such
stock, as determined by the Board, is at least
$3 per share, and

(3) There continue to be 800 or more holders
of record, as defined in SEC Rule 12g5-l (17
CFR §240.12g5-l), of the stock who are not
officers, directors, or beneficial owners of 10 per­
cent or more of the stock, or the average daily
trading volume of such stock, as determined by
the Board, is at least 300 shares,
(4) The issuer continues to be a U.S. corpora­
tion,
(5) Daily quotations for both bid and asked

(7) The shares described in subparagraph (6)
of this paragraph continue to have a market value
of at least $2.5 million,

(9) The issuer continues to have at least $2.5
million of capital, surplus, and undivided profits.
(f)
Minimum e u t r t o The minimum equity
q i y ai.
ratio of a credit subject to §207.1 is 30 percent.
For the period November 5, 1974, through No­
vember 2, 1975, all same-day substitutions of
collateral permitted by section 207.1(j)(2) for
credits in which the equity ratio equals or exceeds
the minimum equity ratio shall also be permitted
for all credits in which the equity ratio is less than
the minimum equity ratio.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION T
E f c i eJune 15,1978
fetv
SECTION 220.8 — SUPPLEM ENT
(a) Maximum loan value f r g n r l a c u t .
o eea cons
The maximum loan value of securities in a general
account subject to §220.3 shall be:
(1) Of a registered nonequity security held in
the account on March 11, 1968, and continuously
thereafter, and of a margin equity security (ex­
cept as provided in §220.3(c) and paragraphs (b),
(c), and (f) of this section), 50 percent of the
current market value of such securities.
(2) Of an exempted security held in the ac­
count on March 11, 1968, and continuously
thereafter, the maximum loan value of the security
as determined by the creditor in good faith.
(b) Maximum loan val e f r a s e i l bond
u o
pca
ac u t The maximum loan value of an ex­
co n .
empted security and of a registered non-equity
security pursuant to §220.4(i) shall be the maxi­
mum loan value of the security as determined by
the creditor in good faith.
(c) Maximum loan val e f r s e i l c n e t b e
u o pca ovril
debt s c r t ac u t The maximum loan value
e u i y co n .
of a margin security eligible for a special con­
vertible security account pursuant to §220.4®
shall be 50 percent of the current market value
of the security.
(d) Margin requ r d f rs o ts l s The amount
i e o h r ae.
to be included in the adjusted debit balance of a
general account, pursuant to §220.3(d)(3), as m ar­
gin required for short sales of securities (other
than exempted securities) shall be 50 percent of
the current market value of each security.

() Retention requirement. In the case of an
e
account which would have an excess of the ad­
justed debit balance of the account over the maxi­
mum loan value of the securities in the account
following a withdrawal of cash or securities from
the account, pursuant to §220.3(b)(2):
(1) The “retention requirement” of an ex­
empted security held in the general account on
March 11, 1968, and continuously thereafter,
shall be equal to its maximum loan value as de­
termined by the creditor in good faith, and the
“retention requirement” of a registered non-equity
security held in such account on March 11, 1968,
and continuously thereafter, and of a margin se­
curity, shall be 70 percent of the current market
value of the security.
(2) In the case of a special bond account sub­
ject to §220.4(i), the retention requirement of
an exempted security and of a registered non­
equity security shall be equal to the maximum
loan value of the security.

(3) In the case of a special convertible security
account subject to §220.4(j) which would have
an excess of the adjusted debit balance of the
account over the maximum loan value of the
securities in the account following a withdrawal
of cash or securities from the account, the reten­
tion requirement of a security having loan value
in the account shall be 70 percent of the current
market value of the security.
(4) For the purpose of effecting a transfer from
a general account to a special convertible security
account subject to §220.4®, the retention re­
quirement of a security described in § 220.4®,
shall be 70 percent of its current market value.
(f) S c r t e having no loan v l e i a g n r l
euiis
au n eea
a c unt. No securities other than an exempted
co
security or registered non-equity security held in
the account on March 11, 1968, and continuously
thereafter, and a margin security, shall have any
loan value in a general account except that a
margin security eligible for the special convertible
debt security account pursuant to §220.4® shall
have loan value only if held in the account on
March 11, 1968, and continuously thereafter; and
no put, call, or combination thereof shall have
loan value in a general account.
(g) Account s b e t t s c i n 8 g . For pur­
u j c o e t o ()
poses of the computation described in §220.3(b)
(1)(H).

(1) The maximum loan value of a registered
non-equity security held in the account on March
11, 1968, and continuously thereafter, and of a
margin equity security shall be 70 percent of the
current market value of such security, and the
maximum loan value of an exempted security held
in the account on March 11, 1968, and contin­
uously thereafter, shall be the maximum loan
value of the security as determined by the creditor
in good faith.
(2) The amount to be included in the adjusted
debit balance of the account pursuant to §220.3
(d)(3) as margin required for short sales of secu­
rities (other than exempted securities) shall be
30 percent of the current market value of each
security.
(3) For the period November 5, 1974, through
November 2, 1975, all transactions permitted by
§§220.3(b)(1) and 220.3(g) for accounts not
subject to section 8(g) shall also be permitted in
accounts subject to section 8(g).
(h) Requirements f r i c u i n on L s of OTC
o nlso
it
Margin S o k . Except as provided in subpara­
tcs
graph (4) of §220.2(e), OTC margin stock shall
meet the requirements that:

(1) The stock is subject to registration under
section 12(g)(1) of the Securities Exchange Act
of 1934 (15 U.S.C. 78/(g)(l)), is issued by an
insurance company subject to section 12(g)(2)
(G) 15 U.S.C. 78/(g)(2)(G)) that has at least
$1 million of capital and surplus, or is issued by
a closed-end investment management company
subject to registration pursuant to section 8 of the
Investment Company Act of 1940 (15 U.S.C.
§80a-8),
(2) Four or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts.
(3) There are 1,200 or more holders of record,
as defined in SEC Rule 12g5-l (17 CFR
§240.12g5-l), of the stock who are not officers,
directors, or beneficial owners of 10 percent or
more of the stock, or the average daily trading
volume of such stock, as determined by the Board,
is at least 500 shares,
(4) The issuer is organized under the laws of
the United States or a State6 and it, or a prede­
cessor in interest, has been in existence for at least
3 years,
(5) The stock has been publicly traded for at
least 6 months,
(6) Daily quotations for both bid and asked
prices for the stock are continuously available to
the general public, and

(1) The stock continues to be subject to regis­
tration under section 12(g)(1) of the Securities
Exchange Act of 1934 (15 U.S.C. 78Z(g)(l)), or
if issued by an insurance company such issuer
continues to be subject to section 12(g)(2)(G)
(15 U.S.C. 78/(g)(2)(G)) and to have at least
$1 million of capital and surplus, or if issued by
a closed-end investment management company
such issuer continues to be subject to registration
pursuant to section 8 of the Investment Company
Act of 1940 (15 U.S.C. §80a-8),
(2) Three or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts.
(3) There continue to be 800 or more holders
of record, as defined in SEC rule 12g5-l (17
CFR §240.12g5-l of the stock who are not
officers, directors, or beneficial owners of 10 per­
cent or more of the stock, or the average daily
trading volume of such stock, as determined by
the Board, is at least 300 shares,
(4) The issuer continues to be a U.S. corpora­
tion,
(5) Daily quotations for both bid and asked
prices for the stock are continuously available
to the general public, and
(6) There are 300,000 or more shares of such
stock outstanding in addition to shares held bene­
ficially by officers, directors, or beneficial owners
of more than 10 percent of the stock; and shall
meet two of the three additional requirements
that:

(7) There are 500,000 or more shares of such
stock outstanding in addition to shares held
beneficially by officers, directors, or beneficial
owners of more than 10 percent of the stock;
and shall meet two of the three additional require­
ments that:

(7) The shares described in subparagraph (6)
of this paragraph continues to have a market value
of at least $2.5 million,

(8) The shares described in subparagraph (7)
of this paragraph have a market value of at least
$5 million,

(8) The minimum average bid price of such
stock, as determined by the Board, is at least $3
per share, and

(9) The minimum average bid price of such
stock, as determined by the Board, is at least $5
per share, and

(9) The issuer continues to have at least $2.5
million of capital, surplus, and undivided profits.

() Margin r q ired f r t e w i i g of o t o s
j
eu
o h rtn
pin.

The amount to be included in the adjusted debit
balance of a general account, special bond ac­
count, or special convertible debt security account
(i)
Requirements f r continued i c u i n on pursuant to paragraphs (d)(5) and (1) of section
o
nlso
L s of OTC Margin S o k . Except as provided
it
tcs
220.3, as the margin required for the issuance, en­
in subparagraph (4) of §220.2(e), OTC margin
dorsement, or guarantee of any put or call shall
stock shall meet the requirements that:
be 30 percent of the current market value of the
underlying security with an adjustment for any
applicable increase or reduction.
6As defined in 15 U.S.C. 78c(a)(16).

(10) The issuer has at least $5 million of cap­
ital, surplus, and undivided profits.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENT TO REGULATION U
E f c i eJune 1 , 1978
fetv
5
SECTION 221.4— SUPPLEM ENT
(a) Maximum loan v lu o s o k . For the
a e f tcs
purpose of §221.1, the maximum loan value of
any stock except puts, calls, and combinations
thereof, whether or not registered on a national
securities exchange, shall be 50 percent of its
current market value, as determined by any rea­
sonable method. Puts, calls, and combinations
thereof shall have no loan value.
(b) Maximum loan v l e o c n e t b e d b
au f ovril et
s c r t e s b e t t § 2 . ( ) For the purpose of
euiis u j c o 2 1 3 t .
§221.3(t), the maximum loan value of any secu­
rity against which credit is extended pursuant to
§221.3(t) shall be 50 percent of its current market
value, as determined by any reasonable method.
(c) Retention requirement. F or the purpose of
§221.1, in the case of a credit which would ex­
ceed the maximum loan value of the collateral
following a withdrawal of collateral, the “reten­
tion requirement” of a stock, whether or not
registered on a national securities exchange, and
of a convertible debt security subject to §221.3(t),
shall be 70 percent of its current market value,
as determined by any reasonable method.
(d) Requirements f r i c u i n on L s of OTC
o nlso
it
Margin S o k . Except as provided in subpara­
tcs
graph (4) of §221.3(d), OTC margin stock shall
meet the requirements that:
(1) The stock is subject to registration under
section 12(g)(1) of the Securities Exchange Act
of 1934 (15 U.S.C. 781(g) (1)), is issued by an
insurance company subject to section 12(g) (2)
(G) (15 U.S.C. 78Z(g) (2) (G)) that has at least
$1 million of capital and surplus, or is issued by
a closed-end investment management company
subject to registration pursuant to section 8 of
the Investment Company Act of 1940 (15 U.S.C.
§80a-8),
(2) Four or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts,
9As defined in 15 U.S.C. 78c(a)(16)

(3) There are 1,200 or more holders of rec­
ord, as defined in SEC Rule 12g5-l (17 CFR
§240.12g5-l), of the stock who are not officers,
directors, or beneficial owners of 10 percent or
more of the stock, or the average daily trading
volume of such stock, as determined by the
Board, is at least 500 shares,
(4) The issuer is organized under the laws of
the United States or a State9 and it, or a pre­
decessor in interest, has been in existence for at
least 3 years,
(5) The stock has been publicly traded for at
least 6 months,
(6) Daily quotations for both bid and asked
prices for the stock are continuously available to
the general public, and
(7) There are 500,000 or more shares of such
stock outstanding in addition to shares held
beneficially by officers, directors, or beneficial
owners of more than 10 percent of the stock;
and shall meet two of the three additional require­
ments that:
(8) The shares described in subparagraph (7)
of this paragraph have a market value of at least
$5 million,
(9) The minimum average bid price of such
stock, as determined by the Board, is at least $5
per share, and
(10) The issuer has at least $5 million of capi­
tal, surplus, and undivided profits.
(e)
Requirements f r continued i c u i n on
o
nlso
L s of OTC Margin S o k . Except as provided
it
tcs
in subparagraph (4) of §221.3(d), OTC margin
stock shall meet the requirements that:
(1)
The stock continues to be subject to reg­
istration under section 12(g) (1) of the Securities
Exchange Act of 1934 (15 U.S.C. 78/(g) (1)),
or if issued by an insurance company such issuer
continues to be subject to section 12(g)(2)(G)
(15 U.S.C. 78/(g) (2) (G)) and to have at least
$1 million of capital and surplus, or if issued by
closed-end investment management company such
issuer continues to be subject to registration pur­

suant to section 8 of the Investment Compay Act
of 1940 (15 U.S.C. §80a-8),
(2) Three or more dealers stand willing to, and
do in fact, make a market in such stock and reg­
ularly submit bona fide bids and offers to an
automated quotations system for their own ac­
counts,
(3) There continue to be 800 or more holders
of record, as defined in SEC Rule 12g5-l (17
CFR §240.12g5-l), of the stock who are not
officers, directors, or beneficial owners of 10 per­
cent or more of the stock, or the average daily
trading volume of such stock, as determined by
the Board, is at least 300 shares,
(4) The issuer continues to be a U. S. corpora­
tion,
(5) Daily quotations for both bid and asked
prices for the stock are continuously available to
the general public, and
(6) There are 300,000 or more shares of such
stock outstanding in addition to shares held bene­

ficially by officers, directors, or beneficial owners
of more than 10 percent of the stock; and shall
meet two of the three additional requirements
that:
(7) The shares described in subparagraph (6)
of this paragraph continue to have a market value
of at least $2.5 million,
(8) The minimum average bid price of such
stock, as determined by the Board, is at least $3
per share, and
(9) The issuer continues to have at least $2.5
million of capital, surplus, and undivided profits.
(f)
Minimum equity ratio. The minimum equity
ratio of a credit subject to §221.1 is 30 percent.
For the period November 5, 1974, through N o­
vember 2, 1975, all same-day transactions per­
mitted by section 221.1(c) for credits in which the
equity ratio is equal to or exceeds the minimum
equity ratio shall also be permitted for those
credits in which the equity ratio is less than the
minimum equity ratio.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102