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federal reserve Bank DALLAS, TEXAS of Dallas 75222 Circular No. 82-45 April 15, 1982 REGULATION T Credit By Brokers and Dealers Proposed Rule TO ALL MEMBER BANKS OTHER CREDITORS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors of the Federal Reserve System is proposing for public comment a complete revision and simplification of Regulation T, Credit By Brokers and Dealers. Comments on the proposed rule should be received on or before June 25, 1982. Printed on the following pages is the Board's press release dated March 25, 1982, detailing the principal proposed changes and the purposes of the changes of the Regulation. Interested persons are invited to submit comments to the Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. Please refer to Docket No. R-0389 when submitting comments. Questions concerning the proposed Rule should be directed to this Bank's Legal Department, Ext. 6171. Additional copies of this circular and Federal Register material pertaining to this proposal may be obtained from the Department of Communications, Financial and Community Affairs, Ext. 6289. Sincerely yours, William H. Wallace First Vice President Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE press release For immediate release March 25, 1982 The Federal Reserve Board today proposed for public comment a complete overhaul of its Regulation T — extensions of credit on securities by brokers and dealers. The Board asked for comment by June 25, 1982. The proposed revision of Regulation T, one of the Board's four regulations concerning margin requirements, is part of the Board's Regulatory Improvement Project in which the Board is reviewing and revising all its regulations to update them, simplify their language, eliminate obsolete or unneeded language or provisions and lighten the burden of compliance. The rev i s e d r e g ulation, as proposed, w o u l d be s h o rtened by a p p r o x i m a t e l y a third. It would incorporate amendments adopted by the Board last January that: — Relax restrictions on the arranging of credit by brokers and dealers to permit investment banking services that may otherwise be prohibited , and — Remove some restrictions on transactions in highly leveraged margin accounts, to increase the flexibility of holders of such accounts in reallocating portfolios. The p r i n c i p a l p r o p o s e d changes in R e g u la t i o n T include: — Incorporation in provisions affecting customers' cash accounts of a 1973 Board interpretation on permissible use of the cash account for option transactions and an addition facilitating the institutional writing of covered options. — A change in the provisions of the regulation to permit a clearing agency that issues options to accept any underlying margin security as the required deposit. — Consolidation of three separate kinds of customer accounts into one margin account. These are accounts for convertible bonds, corporate and government bonds and equity securities. (OVER) -2— A change in terminology throughout the regulation to "equity/margin requirement" instead of "maximum loan value/adjusted debit balance." — Expansion of the class of brokers and dealers who may make loans to other brokers and dealers and of the ability of brokers and dealers to finance positions with other brokers and dealers. The language of two previously proposed amendments in the revised regulation is included without change. One would allow brokers and dealers to use letters of credit as collateral when they borrow or lend securities. The other would revise the criteria for inclusion of stocks on the list of over-the-counter (OTC) issues requiring margins. The Board's proposals are explained and set forth in detail in the attached notice. ATTACHMENT -0 -
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