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Federal R eserve Bank OF DALLAS W IL L IA M H. W ALLACE DALLAS. TEXAS 75222 FIRST VICE PRESIDENT AND CHIEF OPERATING OFFICER October 21, 1988 Circular 88-73 TO: The Chief Executive Officer of all member banks, bank holding companies and others concerned in the Eleventh Federal Reserve District SUBJECT Slip sheet with amendments to Regulations G, T and U -- Securities Credit Transactions DETAILS The Board of Governors of the Federal Reserve System has published amendments in slip-sheet form to Regulations G, T and U, effective September 1988. The new slip sheet should be inserted in Volume 2 of your Regulations Binders. ENCLOSURES Enclosed is the slip sheet to Regulations G, T and U. MORE INFORMATION For more information, please contact Dean A. Pankonien at (214) 651-6228. Sincerely yours, For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800) 527-9200 (interstate). 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 Amendments to Regulations G, T, and U Securities Credit Transactions September 1988* REGULATION G 1. Effective November 13, 1984, section 207.2(i) o f Regulation G is amended by add ing a new paragraph (3) and renumbering paragraphs (3), (4), and (5) to (4), (5), and (6). The new paragraph (3) reads as follows: (3) any OTC security designated as quali fied for trading in the National Market Sys tem under a designation plan approved by the Securities and Exchange Commission (NMS Security); 2. Effective April 19, 1985, section 207.2(i)(6) o f Regulation G is amended (1) by deleting the period and substituting or” at the end o f subparagraph (ii) and (2) by adding a new subparagraph (iii): (iii) a company which issues face-amount .certificates as defined in IS USC 80a-2(a)(lS), but only with respect of such securities. The parenthetical cite in subparagraph (ii) is corrected to read “15 USC 78c(a)(12),\ 3. Effective November 13, 1984, section 207.3 o f Regulation G is amended by adding a new paragraph (q) to read as follows: (q) Lack o f notice o f NM S security desig nation. Failure to treat an NMS security as a margin stock in connection with an exten sion of credit shall not be deemed a viola * The Board’s margin regulations, as amended effective September IS, 1988, consist of— • the Securities Credit Transactions pamphlet dated De cember 1983 (see inside cover) and a this slip sheet. Item 7 is new. All other items were included on the Febru ary 1988 slip sheet. tion of this part if the designation is made between quarterly publications of the Board's list of OTC margin stocks and the lender does not have actual notice of the designation. 4. Effective July 22, 1985, section 207.5 o f Regulation G is amended by revising the heading and adding a new paragraph (c) as follows: (c) Credit to ESOPs. A lender may extend and maintain purpose credit without regard to the provisions of this part, except for sec tions 207.3(a) and 207.3(o), if such credit is extended to an employee stock ownership plan (ESOP) qualified under section 401 of the Internal Revenue Code, as amended (26 USC 401). REGULATION T 5. Effective November 13, 1984, section 220.2(o) o f Regulation T is amended by numbering the listed items and adding an item (paragraph (4)). Subsection (o) now reads as follows: (o) “Margin security” means (1) any reg istered security; (2) any OTC margin stock; (3) any OTC margin bond; (4) any OTC security designated as qualified for trading in the National Mar ket System under a designation plan ap proved by the Securities and Exchange Commission (NMS security); or (5) any security issued by either an open-end investment company or unit in vestment trust which is registered under section 8 of the Investment Company Act of 1940 (15 USC 80a-8). 1 Securities Credit Transactions 6. Effective August 27, 1987, section 220.2(r) is amended by deleting the period at the end o f paragraph (2)(iii) and inserting or" and by adding a new paragraph (3): (3) A mortgage-related security as defined in section 3(a) (41) of the act. 7. Effective September IS, 1988, section 220.2(r) is amended by deleting “or” from the end o f paragraph (2) (iii), by deleting the period at the end o f paragraph (3) and in serting or”, and by adding a new para graph (4): (4) A debt security issued or guaranteed as a general obligation by the government of a foreign country, its provinces, states, or cit ies, or a supranational entity, if at the time of the extension of credit one of the follow ing is rated in one of the two highest rating categories by a nationally recognized statis tical rating organization: (i) the issue, (ii) the issuer or guarantor (implicitly), or (iii) other outstanding unsecured long term debt securities issued or guaranteed by the government or entity. and shall be for the amount of the margin deficiency so created or increased. 10. Effective September 30, 1985, section 220.5(c)(2) is amended to read as follows: (2) Margin fo r options on equity securities. The required margin for each transaction involving any short put or short call on an equity security shall be the amount set forth in section 220.18 (the supplement). 11. Effective July 22, 1985, section 220.9 o f Regulation T is amended by revising the heading and adding a new paragraph (a)(4) to read as follows: SECTION 220.9—Nonsecurities Credit and Employee Stock Ownership Account (a) In a nonsecurities credit account a creditor may * • • (4) extend and maintain credit to em ployee stock ownership plans without re gard to the other sections of this part. • 8. Effective January 25, 1988, section 220.3 is amended by adding a new paragraph (e)(4) to read as follows: (4) A creditor may accept, in lieu of secu rities, a properly executed exercise notice for a stock option issued by the customer’s employer and instructions to the issuer to deliver the resulting stock to the creditor. Prior to acceptance, the creditor must veri fy that the issuer will deliver the securities promptly and the customer must designate the account into which the securities are to be deposited. 9. The last sentence o f section 220.4(c)(1) o f Regulation T is corrected to read as fo l lows: Additional margin is required on any day when the day’s transactions create or in crease a margin deficiency in the account * * * * 12. Effective April 19, 1985, section 220.13 o f Regulation T is amended by adding a new paragraph (c): (c) a subsequent loan or advance on a face-amount certificate as permitted under 15 USC 80a-28(d). 13. Section 220.14(b)(2) o f Regulation T is corrected by adding the word “and” after the semicolon. 14. Effective April 13, 1984, section 220.14(b)(3) o f Regulation T is amended to read as follows: (3) the deposit consists of any margin se curity and complies with the rules of the clearing agency which have been ap proved by the SEC. Securities Credit Transactions 15. Effective September 22, 1985, section 220.18 o f Regulation T is revised to read as follows: SECTION 220.18—Supplement: Margin Requirements The required margin for each security po sition held in a margin account shall be as follows: (a) Margin equity security, except for an exempted security or a long position in an option: 50 percent of the current market value of the security. (b) Exempted security, registered non convertible debt security or OTC margin bond: the margin required by the creditor in good faith. (c) Short sale of nonexempted security: 150 percent of the current market value of the security, or 100 percent of the current market value if a security exchangeable or convertible within 90 calendar days with out restriction other than the payment of money into the security sold short is held in the account. (d) Short sale of an exempted security: 100 percent of the current market value of the security plus the margin required by the creditor in good faith. (e) Nonmargin, nonexempted security or a long position in any option: 100 percent of the current market value. (f) Short put or short call on a security, certificate of deposit, securities index or foreign currency: (1) in the case of puts and calls issued by a registered clearing corporation and listed or traded on a registered na tional securities exchange' or a regis tered securities association, the amount, or other position (except in the case of an option on an equity secu rity), specified by the rules of the regis tered national securities exchange or the registered securities association au thorized to trade the option, provided that all such rules have been approved or amended by the SEC; or (2) in the case of all other puts and calls, the amount, or other position (except in the case of an option on an equity security), specified by the main tenance rules of the creditor’s self-reg ulatory organization. REGULATION U 16. Effective November 13, 1984, section 221.2(h) o f Regulation U is amended by adding a new paragraph (3) and renum bering paragraphs (3), (4), and (5) to (4), (5), and (6). The new paragraph (3) reads as follows: (3) any OTC security designated as qual ified for trading in the National Market System under a designation plan ap proved by the Securities and Exchange Commission (NMS security); 17. Effective April 19, 1985, section 221.2(h)(6) o f Regulation U is amended (1) by deleting the period and substituting or" at the end o f subparagraph (ii) and (2) by adding a new subparagraph (iii): (iii) a company which issues faceamount certificates as defined in 15 USC 80a-2(a)(15), but only with respect of such securities. The parenthetical cite in subparagraph (ii) is corrected to read "15 USC 78c(a)(12)". 18. Effective September 23, 1987, paragraphs (b) and (c)(1) o f section 221.3 are amend ed by adding in an amount exceeding $100,000," after Vcredit secured directly or indirectly by margin stock". 19. Effective November 13, 1984, section 221.3 o f Regulation U is amended by adding a new paragraph (I) to read as follows: (I) Lack o f notice o f NM S security des3 Securities Credit Transactions ignation. Failure to treat an NMS security as a margin stock in connection with an extension of credit shall not be deemed a violation of this part if the designation is made between quarterly publications of the Board’s list of OTC margin stocks and A the bank does not have actual notice of the designation. 20. The mandatory effective date fo r compli ance with the revised Regulation T is June 30, 1984.
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