Full text of District Notices (Federal Reserve Bank of Dallas) : Amendments to Regulations G, T, and U (Changes in Listing Criteria for OTC Margin Stocks), Circular No. 74-183

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F ederal R eserve Ban k
DALLAS, TEXAS

of

Dallas

75222
Circular No. 7^-183
July 9, 197U

AMENDMENTS TO REGULATIONS G, T, AND U
(Changes in Listing Criteria for OTC Margin Stocks)

To All Banks, Brokers/Dealers, Regulation G-Registrants and
Others Concerned in the Eleventh Federal Reserve District:

Following is the text of a statement issued June 2b, 197^-? by
the Board of Governors of the Federal Reserve System:
The Board of Governors of the Federal Reserve System
amended, effective July 25 5 197^5 the criteria that over-thecounter (OTC) stocks must meet and continue to meet to be in­
cluded on its List of OTC Margin Stocks. The amendments
adopted today are substantially the same as those which were
published for comment on April l6, 197^-*
The criteria employed in selecting OTC stocks for inclusion
on the List of OTC Margin Stocks were announced on July 8, 19^9*
More than 600 stocks are now on the list and subject to the
Board’s margin requirements.
The Board's action, which makes the criteria somewhat
less restrictive, reflects the many changes that have occurred
in the OTC market since 19^9? particularly the impact of the
National Association of Securities Dealers Automated Quota­
tion System (NASDAQ).
Enclosed are copies of the amendments and supplements to margin
Regulations G, T, and U, effective July 25, 197b, which reflect the Board
of Governors' action. Additional copies of the enclosures will be furnished
upon request.
Yours very truly,
P. E. Coldwell,
President

Enclosures

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

SECURITIES CREDIT TRANSACTIONS

AMENDMENTS TO REGULATIONS G, T, AND U
Effective July 25, 1974, subparagraph (4)
of section 207.2(f) [Regulation G], of section
220.2(e) [Regulation T], and of section
221.3(d) [Regulation U], is amended to read
as follows:
(4)
The foregoing notwithstanding, the
Board may omit or remove any stock that is not
traded on a national securities exchange from
or add any such stock to such list of OTC mar­
gin stocks, if in the judgment of the Board,
such action is necessary or appropriate in the
public interest.

Board of Governors of the Federal Reserve System

SUPPLEMENTS TO REGULATIONS G, T, AND U
SUPPLEMENT TO REGULATION G
Effective July 25, 1974
SECTION 207.5—SUPPLEMENT
(a) Maximum loan value of margin se­
curities. For the purpose of § 207.1, the maxi­
mum loan value of any margin security, except
convertible securities subject to § 207.1(d) and
any put, call or combination thereof, shall be
50 per cent of its current market value, as
determined by any reasonable method. No put,
call or combination thereof shall have any loan
value for the purposes of this part.
(b) Maximum loan value of convertible
debt securities subject to § 207.1(d). For the
purpose of § 207.1, the maximum loan value
of any security against which credit is extended
pursuant to § 207.1(d) shall be 50 per cent
of its current market value, as determined by
any reasonable method.
(c) Retention requirement. For the pur­
pose of § 207.1, in the case of a loan which
would exceed the maximum loan value of the
collateral following a withdrawal of collateral,
the “retention requirement” of a margin se­
curity and of a security against which credit
is extended pursuant to § 207.1(d) shall be
70 per cent of its current market value, as
determined by any reasonable method.
(d) Requirements for inclusion on list of
OTC margin stock. Except as provided in
subparagraph (4) of § 207.2(f), such stock
shall meet the requirements that:
(1) The stock is subject to registration un­
der section 12(g)(1) of the Securities Ex­
change Act of 1934 (15 U.S.C. 781(g)(1)), is
issued by an insurance company subject to sec­
tion 12(g)(2)(G ) (15 U.S.C. 78/(g) (2) (G ))
that has at least $1 million of capital and sur­
plus, or is issued by a closed-end investment
management company subject to registration
pursuant to section 8 of the Investment Com­
pany Act of 1940 (15 U.S.C. §80a-8),
(2) Five or more dealers stand willing to,
and do in fact, make a market in such stock
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­
ties exchange that is exempted by the Securities
and Exchange Commission from registration as

a national securities exchange pursuant to sec­
tion 5 of the Securities Exchange Act of 1934
(15 U.S.C. 78e),
(3) There are 1,200 or more holders of rec­
ord, as defined in SEC Rule 12g5-l (17 C.F.R.
§ 240.12g5-l), of the stock who are not officers,
directors, or beneficial owners of 10 per cent
or more of the stock,
(4) The issuer is organized under the laws
of the United States or a State9 and it, or a
predecessor 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 bene­
ficial owners of more than 10 per cent of the
stock; and shall meet two of the three addi­
tional requirements 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
$10 per share, and
(10) The issuer had at least $5 million of
capital, surplus, and undivided profits.
(e)
Requirements for continued inclusion
on list of OTC margin stock. Except as pro­
vided in subparagraph (4) of § 207.2(f), such
stock shall meet the requirements that:
(1)
The stock continues to be subject to
registration under section 12(g)(1) of the Se­
curities Exchange Act of 1934 (15 U.S.C.
781(g) (1 )), or if issued by an insurance com­
pany such issuer continues to be subject to sec­
tion 12(g) (2) (G) (15 U.S.C. 781(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
• As defined in IS U.S.C. 78c(a)(16).

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
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­
ties exchange that is exempted by the Securities
and Exchange Commission from registration as
a national securities exchange pursuant to sec­
tion 5 of the Securities Exchange Act of 1934
(15 U.S.C. 78e),
(3) There continue to be 800 or more hold­
ers of record, as defined in SEC Rule 12g5-l
(17 C.F.R. § 240.12g5-l), of the stock who are
not officers, directors, or beneficial owners of
10 per cent or more of the stock,
(4) The issuer continues to be a U. S. cor­
poration,
(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 beneficially by officers, directors, or bene­
ficial owners of more than 10 per cent 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 mar­
ket value of at least $2.5 million,
(8) 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.
(f)
Minimum equity ratio. The minimum
equity ratio of a credit subject to § 207.1 is
40 per cent.

SUPPLEMENT TO REGULATION T
Effective July 25, 1974
SECTION 220.8—SUPPLEMENT
(a) Maximum loan value for general ac­
counts. The maximum loan value of securities
in a general account subject to § 220.3 shall be:
(1) of a registered non-equity security held
in the account on March 11, 1968, and con­
tinuously thereafter, and of a margin equity
security (except as provided in § 220.3(c) and
paragraphs (b), (c) and (f) of this section),
50 per cent 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 se­
curity as determined by the creditor in good
faith.

(e)
Retention requirement. In the case of
an account 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, pursuant to
§ 220.3(b)(2):

(b) Maximum loan value for a special
bond account. The maximum loan value of an
exempted security and of a registered non­
equity security pursuant to § 220.4(i) shall be
the maximum loan value of the security as
determined by the creditor in good faith.

(2) In the case of a special bond account
subject to § 220.4(i), the retention requirement
of an exempted security and of a registered
non-equity security shall be equal to the maxi­
mum loan value of the security.

(c) Maximum loan value for special con­
vertible debt security account. The maximum
loan value of a margin security eligible for a
special convertible security account pursuant
to § 220.4(j) shall be 50 per cent of the current
market value of the security.
(d) Margin required for short sales. The
amount to be included in the adjusted debit
balance of a general account, pursuant to
§ 220.3(d)(3), as margin required for short
sales of securities (other than exempted securi­
ties) shall be 50 per cent of the current market
value of each security.

(1) The “retention requirement” of an ex­
empted security held in the general account
on March 11, 1968, and continuously there­
after, shall be equal to its maximum loan value
as determined 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 security, shall be 70 per cent
of the current market value of the security.

(3) In the case of a special convertible se­
curity 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 retention requirement of a security
having loan value in the account shall be
70 per cent 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(j), the re­
tention requirement of a security described in

§220.4(j), shall be 70 per cent of its current
market value.
(f) Securities having no loan value in a
general account. No securities other than an
exempted security or registered non-equity se­
curity held in the account on March 11, 1968,
and continuously thereafter, and a margin se­
curity, 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(j) 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 subject to section 8(g). For
purposes of the computation described in
§ 220.3(b) (1) (ii),
(1) The maximum loan value of a regis­
tered non-equity security held in the account
on March 11, 1968, and continuously there­
after, and of a margin equity security shall
be 60 per cent 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 continuously 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 ad­
justed debit balance of the account pursuant
to § 220.3(d)(3) as margin required for short
sales of securities (other than exempted securi­
ties) shall be 40 per cent of the current market
value of each security.
(h) Requirements for inclusion on list of
OTC margin stock. Except as provided in
subparagraph (4) of § 220.2(e), OTC margin
stock shall meet the requirements that:
(1) The stock is subject to registration un­
der section 12(g)(1) of the Securities Ex­
change Act of 1934 (15 U.S.C. 7 8 /(g )(l)), is
issued by an insurance company subject to sec­
tion 12(g) (2) (G) (15 U.S.C. 781(g) (2) (G ))
that has at least $1 million of capital and sur­
plus, or is issued by a closed-end investment
management company subject to registration
pursuant to section 8 of the Investment Com­
pany Act of 1940 (15 U.S.C. §80a-8),
(2) Five or more dealers stand willing to,
and do in fact, make a market in such stock
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­
ties exchange .that is exempted by the Securities
and Exchange Commission from registration as
a national securities exchange pursuant to sec­
tion 5 of the Securities Exchange Act of 1934
(15 U.S.C. 78e),
(3) There are 1,200 or more holders of rec­
ord, as defined in SEC Rule 12g5-l (17 C.F.R.
§ 240.12g5-l), of the stock who are not officers,

directors, or beneficial owners of 10 per cent
or more of the stock,
(4) The issuer is organized under the laws
of the United States or a State6 and it, or a
predecessor 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 bene­
ficial owners of more than 10 per cent of the
stock; and shall meet two of the three addi­
tional requirements 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
$10 per share, and
(10) The issuer had at least $5 million of
capital, surplus, and undivided profits.
(i)
Requirements for continued inclusion
on listof OTC margin stock. Except as pro­
vided in subparagraph (4) of § 220.2(e), OTC
margin stock shall meet the requirements that:
(1) The stock continues to be subject to
registration under section 12(g)(1) of the
Securities Exchange Act of 1934 (15 U.S.C.
7 8 /(g )(l)), or if issued by an insurance com­
pany such issuer continues to be subject to sec­
tion 12(g) (2) (G) (15 U.S.C. 781(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
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­
ties exchange that is exempted by the Securi­
ties and Exchange Commission from registra­
tion as a national securities exchange pursuant
to section 5 of the Securities Exchange Act of
1934 (15 U.S.C. 78e),
(3) There continue to be 800 or more hold­
ers of record, as defined in SEC Rule 12g5-l
(17 C.F.R. § 240.12g5-l), of the stock who
are not officers, directors, or beneficial owners
of 10 per cent or more of the stock,
(4) The issuer continues to be a U. S. cor­
poration,
(5) Daily quotations for both bid and asked
8 As defined in 15 U.S.C. 78c(a)(16).

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 beneficially by officers, directors, or bene­
ficial owners of more than 10 per cent of the
stock; and shall meet two of the three addi­
tional requirements that:
(7) The shares described in subparagraph

(6) of this paragraph continue to have a mar­
ket value of at least $2.5 million,
(8) 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.

SUPPLEMENT TO REGULATION U
Effective July 25, 1974
ties exchange that is exempted by the Securities
and Exchange Commission from registration as
a national securities exchange pursuant to sec­
tion 5 of the Securities Exchange Act of 1934
(15 U.S.C. 78e),
(3) There are 1,200 or more holders of rec­
ord, as defined in SEC Rule 12g5-l (17 C.F.R.
§ 240.12g5-l), of the stock who are not officers,
directors, or beneficial owners of 10 per cent
or more of the stock,
(4) The issuer is organized under the laws
of the United States or a State9 and it, or a
predecessor 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 bene­
ficial owners of more than 10 per cent of the
stock; and shall meet two of the three addi­
tional requirements 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
$10 per share, and
(10) The issuer had at least $5 million of
capital, surplus, and undivided profits.

SECTION 221.4—SUPPLEMENT
(a) Maximum loan value of stocks. For
the purpose of § 221.1, the maximum loan
value of any stock except puts, calls and com­
binations thereof, whether or not registered on
a national securities exchange, shall be 50 per
cent of its current market value, as determined
by any reasonable method. Puts, calls and
combinations thereof shall have no loan value.
(b) Maximum loan value of convertible
debt securities subject to § 221.3 (t). For the
purpose of § 221.3 (t), the maximum loan
value of any security against which credit is
extended pursuant to §221.3 (t) shall be 50
per cent of its current market value, as deter­
mined by any reasonable method.
(c) Retention requirement. For the pur­
pose of §221.1, in the case of a credit which
would exceed the maximum loan value of the
collateral following a withdrawal of collateral,
the “retention requirement” of a stock, whether
or not registered on a national securities ex­
change, and of a convertible debt security sub­
ject to § 221.3 ( t ) , shall be 70 per cent of its
current market value, as determined by any
reasonable method.
(d) Requirements for inclusion on list of
OTC margin stock. Except as provided in
subparagraph (4) of § 221.3(d), OTC margin
stock shall meet the requirements that:
(1) The stock is subject to registration un­
der section 12(g)(1) of the Securities Ex­
change Act of 1934 (15 U.S.C. 781(g)(1)), is
issued by an insurance company subject to sec­
tion 12(g) (2) (G) (15 U.S.C. 781(g) (2) ( G ) )
that has at least $1 million of capital and sur­
plus, or is issued by a closed-end investment
management company subject to registration
pursuant to section 8 of the Investment Com­
pany Act of 1940 (15 U.S.C. § 80a-8),
(2) Five or more dealers stand willing to,
and do in fact, make a market in such stock
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­

(e)
Requirements for continued inclusion
on list of OTC margin stock. Except as pro­
vided in subparagraph (4) of § 221.3(d), OTC
margin stock shall meet the requirements that:
(1)
The stock continues to be subject to
registration under section 12(g)(1) of the Se­
curities Exchange Act of 1934 (15 U.S.C.
78/(g) (1)), or if issued by an insurance com­
pany such issuer continues to be subject to sec­
tion 12(g) (2) (G) (15 U.S.C. 781(g) (2) ( G ) )
• As defined in 15 U.S.C. 78c(a)(16).

4

(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 beneficially by officers, directors, or bene­
ficial owners of more than 10 per cent of the
stock; and shall meet two of the three additional
requirements that:

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
including making regularly published bona fide
bids and offers for such stock for their own
accounts, or the stock is registered on a securi­
ties exchange that is exempted by the Securities
and Exchange Commission from registration as
a national securities exchange pursuant to sec­
tion 5 of the Securities Exchange Act of 1934
(15 U.S.C 78e),
(3) There continue to be 800 or more hold­
ers of record, as defined in SEC Rule 12g5-l
(17 C.F.R. § 240.12g5-l), of the stock who are
not officers, directors, or beneficial owners of
10 per cent or more of the stock,
(4) The issuer continues to be a U. S. cor­
poration,

(7) The shares described in subparagraph
(6) of this paragraph continue to have a mar­
ket value of at least $2.5 million,
(8) 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.
(f)
Minimum equity ratio. The minimum
equity ratio of a credit subject to § 221.1 is
40 per cent.

5