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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:
“ 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.”

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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
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

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