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F ederal R eserve Bank OF DALLAS W IL L IA M H. W A LLA C E rrst vice president September 24, 1987 d a lla s , te x a s 75222 AND C H IE F O PER ATING O FFIC ER C i r c u l a r 87-70 TO: The Chief Executive O f f i c e r o f a l l member banks and o t h e r s concerned in th e Eleventh Federal Reserve D i s t r i c t SUBJECT Final rule on amendment to Regulation U - Credit by Banks for the Purpose of Purchasing or Carrying Margin Stock DETAILS The Board of Governors o f th e Federal Reserve System has adopted an amendment to Regulation U t h a t w i l l reduce th e paperwork burden f o r banks t h a t ta ke margin st o ck s as c o l l a t e r a l f o r l o a n s . The amendment i s e f f e c t i v e September 23, 1987. The a c t i o n no lon g er r e q u i r e s banks to use Form FR U-l f o r loans of $100,000 o r l e s s t h a t a r e secured d i r e c t l y or i n d i r e c t l y by margin s t o c k . ATTACHMENTS The m a t e r i a l as publis he d in the Federal R e g i s t e r i s a t t a c h e d . MORE INFORMATION For f u r t h e r i n f o r m a t i o n , pl e a se c o n t a c t Sharon Sweeney o f t h i s Bank's Legal Department a t (214) 651-6228. I f you wish t o r e c e i v e a d d i t i o n a l copies o f t h i s c i r c u l a r , p le a s e c o n t a c t our Publi c A f f a i r s Department a t (214) 651-6289. 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) FEDERAL RESERVE SYSTEM 12 CFR Part 221 Regulation D [Docket No. R-0608] Credit by Banks for the Purpose of Purchasing or Carrying Margin Stock AGENCY: ACTION: SUMMARY: Board of Governors of the Federal Reserve System. Final Rule. The Board is amending Regulation U to exempt banks, when making loans of $100,000 or less, from the requirement that Federal Reserve Form U-l be executed. EFFECTIVE DATE: September 23, 1987. FOR FURTHER INFORMATION CONTACT: Scott Holz, Attorney, Division of Banking Supervision and Regulation, (202) 452-2781; or for any user of a Telecommunication Device for the Deaf (TDD), Ernestine Hill or Dorothea Thompson, SUPPLEMENTARY INFORMATION: (202) 452-3244. Over 100 comments were received on this proposal which was published in the Federal Register on August 11, 1987 (52 Fed. Reg. 29701). With the exception of one money-center bank, they all supported the proposal as a useful way to reduce paperwork burden. The exception suggested two further deregulatory revisions in this area. These suggestions will be addressed next year when the form is scheduled for System review. - 2 - FINAL REGULATORY FLEXIBILITY ANALYSIS: The Board's Initial Regulatory Flexibility Analysis indicated that this proposed amendment, if adopted, is expected to substantially reduce paperwork burden on small banks and, therefore, will have no adverse economic impact on small entities. Comments were invited on the statement; no comments to the contrary were received. The Board, therefore, certifies for the purposes of 5 U.S.C. section 605(b) that the amendment is not expected to have any adverse impact on a substantial number of small entities. The amendment imposes no additional information collection requirements. The requirement of 5 U.S.C. section 553(d) with respect to deferred effective date is not being followed in connection with this amendment because the amendment relieves a restriction previously imposed. LIST OF SUBJECTS IN 12 C.F.R. PART 221: Banks, Banking, Credit, Federal Reserve System, Investments, Margin, Margin requirements, Reporting and recordkeeping requirements, Securities. For the reasons set out in this notice, and pursuant to the Board's authority under sections 7 and 23 of the Securities Exchange Act of 1934, as amended (15 U.S.C. sections 78g and w ) , the Board amends 12 C.F.R. Part 221 as follows: PART 221— [AMENDED] 1. The authority citation for Part 221 continues to read as follows: Authority: 15 U.S.C. sections 78c, 78g, 78h and 78w. 3 - 2. - Section 221.3 is amended by revising paragraph (b) redesignating (c)(i) and (ii) as (c)(1) and (2), and revising (c) (1) as follows: Section 221.3 General Requirements * * * (b) Purpose statement. * * Except for credit extended under paragraph (c) of this section, whenever a bank extends credit secured directly or indirectly by any margin stock, in an amount exceeding $100,000, the bank shall require its customer to execute Form FR U-l (OMB No. 7100-0115), which shall be signed and accepted by a duly authorized officer of the bank acting in good faith. (c) Purpose statement for revolving-credit or multiple-draw agreements. (1) If a bank extends credit, secured directly or indirectly by any margin stock, in an amount exceeding $100,000, under a revolving-credit or other multiple-draw agreement, Form FR U-l can either be executed each time a disbursement is made under the agreement, or at the time the credit arrangement is originally established. * * * * * By order of the Board of Governors of the Federal Reserve System, September 16, 1987. (signed) William W. Wiles Secretary of the Board
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