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FEDERAL RESERVE BANK OF DALLAS October 4, 1934 To Banking Institutions, Brokers and Dealers in Securities in the Eleventh Federal Reserve District: There is enclosed fo r your inform ation a copy o f the Federal Reserve Board’s Regulation T, Series o f 1934, entitled “ E xtension and Maintenance o f Credit by Brokers, Dealers, and Members o f National Securities E xchanges,” this regulation having been approved by the Federal Reserve Board on Septem ber 27, 1934, effective October 1, 1934. Additional copies o f the regulation are available at m y office and will be furnished upon request. For your fu rth er inform ation there is quoted below a press statement released by the Fed eral Reserve Board with Regulation T on September 28, 1934: “ M ARG IN REQ U IREM EN TS “ The Federal Reserve Board, acting in accordance with the requirements o f the Securities E x change A c t o f 1934, has prescribed the m argins to be required by brokers and dealers from cus tom ers borrow ing fo r the purpose o f purchasing or carrying securities. “ The m argin requirements which the Board has prescribed are those laid down as a standard in the A ct, which gives the Board authority to impose low er or higher m argins in accordance with prevailing conditions. Under the standard adopted, a broker or dealer m ay lend to a custom er on many securities as m uch as 75 per cent o f their current m arket value, while on other securities, in particular on those that have had a rapid rise in value since July 1, 1933, the percentage that m ay be lent is smaller, but in no case less than 55 per cent. “ Rules prescribed fo r m argin requirements constitute a part Federal Reserve Board, which also deals w ith other m atters relating o f credit by brokers, dealers, and m em bers o f securities exchanges or carrying securities. M ost o f the rules in this regulation are fo r circum vention o f the m argin requirem ents, and no restrictions are agricultural, or com m ercial purposes. o f Regulation T issued by the to the extension or maintenance fo r the purpose o f purchasing the purpose o f preventing the placed on loans fo r industrial, “ The regulation becom es effective O ctober 1, 1934. In order, however, that persons affected m ight have additional tim e to fam iliarize themselves w ith its provisions, the Securities and E x change Commission at the request o f the Federal Reserve Board has made broad use o f its power to exem pt securities from the pertinent sections of the Securities Exchange A ct. “ The exem ption granted is fo r the period from O ctober 1 to O ctober 15. Regulation T does not prescribe a specific m argin that m ust be maintained after a loan has been granted, but imposes restrictions on the operations which the customer m ay carry on in his account i f his margin falls below the standard prescribed fo r initial extensicn o f credit. “ Under the law the Board has authority to prescribe regulations, including margin require ments, applicable to loans made by banks fo r the purpose o f purchasing or carrying securities. This authority is additional to other statutes fo r credit supervision. The Board is studying the pres ent statute in connection with these other statutes and in due time will issue the required regula tion as to bank loans made to purchase or carry securities.” This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) The attention o f banking institutions is called to Section 11 o f Regulation T with respect to the qualification o f non-member banking institutions to lend to mem bers o f national securities ex changes and brokers and dealers in securities. A s stated in the regulation, an agreem ent (F.R.B. F orm T - l) should be executed and delivered to me in duplicate original by any banking institution having its principal place o f business in this district, which is not a m em ber o f the Federal Reserve System and w hich desires to qualify, pursuant to the provisions o f subsection (a) o f Section 8 o f the Securities E xchange A c t o f 1934, as a bank from which it is lawful fo r any mem ber o f a na tional securities exchange or any broker or dealer who transacts a business in securities through the medium o f any such member, to borrow in the ordinary course o f business as a broker or dealer on registered securities (other than exem pted securities). These are enclosed three copies o f F.R.B. Form T -l, and additional form s will be supplied upon request. Copies o f F.R.B. Form T-2, fo r use by banking institutions o f the classes described in subsec tion (b) o f Section X I o f Regulation T, are also available at m y office and will be supplied upon re quest. Non-m em ber banking institutions desiring to qualify are urged to do so as prom ptly as possible and in any event prior to O ctober 15, 1934, by filing w ith me in duplicate original the agreem ent on F.R.B. Form T -l (or on F.R.B. F orm T-2 in the ease o f any banking institution o f a class referred to in subsection (b ) o f Section X I o f Regulation T) accompanied by p roof o f authorization o f the execution o f such agreem ent provided in such form . It will be noted that Regulation T provides that banks executing F.R.B. Form T-2, shall file it (in duplicate original) with the Federal Reserve A gent o f the Federal R eserve Bank o f New Y ork or o f San Francisco. Yours very truly, Federal Reserve A gent