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federal Reserve bank DALLAS, TEX AS of D allas 75222 C ircu lar No. 76-169 December 20, 1976 American Revolution Bicentennial REGULATION U— CREDIT BY BANKS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCKS N otice of F u r t h e r R e v i s i o n s to R e v i s e d F orm U-1 TO ALL BANKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e S y s t e m h a s a d o p t e d f u r t h e r c h a n g e s in its r e v i s e d F e d e r a l R e s e r v e F orm U - l , " S t a te m e n t of P u r p o s e o f a S t o c k - S e c u r e d E x t e n s io n of C r e d i t b y a B a n k . " In s u b m i t t i n g t h e f u r t h e r r e v i s i o n s of t h e U-1 f o r p u b l i c a t i o n in t h e FEDERAL REGISTER, t h e B o a r d of G o v e r n o r s m a d e t h e fo llo w in g s ta t e m e n t: On J u n e 11, 1976, n o tic e w a s p u b l i s h e d in t h e FEDERAL REGISTER (41 FR 23667) t h a t t h e B o a r d o f G o v e r n o r s h a d a d o p t e d a r e v i s e d F e d e r a l R e s e r v e F orm U - 1 , " S t a te m e n t o f P u r p o s e of a S t o c k - S e c u r e d E x t e n s io n of C r e d i t b y a B a n k , " to b e e f f e c tiv e S e p t e m b e r 1, 1976. In o r d e r to r e v i e w c e r t a i n o p e r a t i o n a l q u e s t i o n s t h a t w e r e r a i s e d in c o n n e c tio n w ith t h e u s e of s u c h r e v i s e d F e d e r a l R e s e r v e F o rm U - 1 , t h e B o a r d p o s t p o n e d t h e e f fe c tiv e d a te of t h e r e v i s e d fo rm u n ti l J a n u a r y 1, 1977 (41 FR 35477 a n d 41 FR 4 8 3 3 5 ). T h e B oard h a s re v ie w e d th e q u e stio n s p re s e n te d an d b eliev es th a t f u r th e r a m e n d m e n t s to t h e r e v i s e d f o r m , p a r t i c u l a r l y w ith r e g a r d to t h e o f f i c e r 's c e r t i f i c a t i o n on P a r t II o f t h e fo rm , a r e w a r r a n t e d . A c c o r d i n g l y , t h e B o a r d h a s f u r t h e r r e v i s e d t h e f o r m , e f f e c tiv e J a n u a r y 1, 1 9 7 7 .1 / In a d d i t i o n to c e r t a i n c l a r i f y i n g t e c h n i c a l c h a n g e s in t h e l a n g u a g e of t h e o f f i c e r 's c e r t i f i c a t i o n , t h e p r i n c i p a l p u r p o s e s of t h e a m e n d m e n t a r e (i) to c l a r i f y t h a t t h e b a n k o f f ic e r s i g n i n g t h e fo rm m a y , in g o o d f a i t h , r e l y u p o n o t h e r b a n k e m p lo y e e s to e x a m i n e a n d v a l i d a t e t h e s e c u r i t i e s , a n d (ii) to r e s t r i c t t h e e x a m in a t io n a n d v a l i d a t i o n r e q u i r e m e n t s o n ly to s e c u r i t i e s t h a t a r e o r w ill b e in t h e p h y s i c a l p o s s e s s i o n of t h e b a n k . In a d o p t i n g f u r t h e r r e v i s i o n s to t h e F o rm U - 1 , t h e B o a r d a n n o u n c e d t h a t a n y b a n k s t h a t h a v e r e p r o d u c e d c o p i e s of t h e e a r l i e r v e r s i o n o f t h e F orm U-1 1/ A c o p y of t h e o r i g i n a l F e d e r a l R e s e r v e F o rm U - l is f il e d a s a p a r t of t h e o r i g i n a l d o c u m e n t . C o p ie s a r e a v a i l a b l e o n r e q u e s t from t h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e S ystem o r an y F ed eral R e s e r v e B an k. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - t h a t w a s to h a v e b e c o m e e f f e c tiv e S e p t e m b e r 1, 1976, m ay c o n t i n u e to u s e s u c h e a r l i e r v e r s i o n u n til t h e i r s u p p l y of s u c h f o r m s is e x h a u s t e d o r u n ti l D e c e m b e r 31, 1977, w h i c h e v e r s h a l l o c c u r s o o n e r , a n d t h a t f o r t h i s in t e r im p e r i o d , t h e e a r l i e r v e r s i o n s h a ll b e d e e m e d to m e et t h e r e q u i r e m e n t s of S e c tio n 2 2 1 . 3 ( a ) o f R e g u l a t i o n U (12 CFR 2 2 1 . 3 ( a ) ) . E n c lo s e d is a c o p y of t h e n e w form w h i c h b e c o m e s e f f e c tiv e J a n u a r y 1, 1977. It w ill b e n e c e s s a r y f o r u s e r s of th i s form to h a v e t h e i r s u p p l i e s r e p r i n t e d in e x a c t d u p l i c a t e . A lim ite d n u m b e r of c o p i e s o f t h e fo rm a r e a v a i l a b l e u p o n r e q u e s t fro m o u r R e g u l a ti o n s D epartm ent. S in ce rely y o u r s , R o b e r t H . B o y k in F i r s t V ic e P r e s i d e n t Enclosure Form U-l R ev. 1 2 / 7 6 Exp‘ 12/79 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM STATEMENT OF PURPOSE O F A STOCK-SECURED EXTENSION O F CREDIT BY (Name of Bank) (FEDERAL RESERVE FORM U-l) A FALSE OR DISHONEST STATEMENT ON THIS FORM MAY BE PUNISHABLE BY FINE OR IMPRISONMENT (U.S. CODE, TITLE 15, SECTION 78ff AND TITLE 18, SECTIONS 1001, 1005 AND 1014). A BORROWER WHO FALSELY CERTIFIES THE PURPOSE OF A CREDIT ON THIS FORM OR OTHERWISE WILLFULLY OR INTENTIONALLY EVADES THE PROVISIONS OF REGULATION U WILL ALSO VIOLATE FEDERAL RESERVE REGULATION X, “RULES GOVERNING BORROWERS WHO OBTAIN SECURITIES CREDIT” . Instructions: (1) Section 221.3(a) o f Regulation U requires that a statement of purpose must be obtained in connection with any extension of credit by a bank secured directly or indirectly by any stock. The term “ stock” is defined in section 221.3(0 and includes any security commonly known as a stock; any voting trust certificate;any security convertible, with or w ithout consideration, into such security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right. (2) Part I (3) and (4) need be filled in only if the purpose o f the credit described in Part I (1) is other than to purchase or carry margin stock. The term “ margin stock” is defined in section 221.3(v) and generally means (1) stocks that are registered on a national securities exchange and stocks that are on the Federal Reserve Board’s List of OTC Margin Stocks, (2) debt securities (bonds) that are convertible into such stocks and (3) shares of most mutual funds. (3) Part II “ Date and source of valuation” need be filled in only if such source is other than regularly published information in a journal of general circulation. (4) Part II, except for the certification by the officer of the bank, need not be completed in the case o f a credit o f $5,000 or less which is not for the purpose o f purchasing or carrying margin stock. However, in such cases, Part I must be completed. (5) Please print or type (if space is inadequate attach separate sheet). PART I To be com p lete d b y borrower(s) YES NO CU _ Lj In addition to this credit, do you have any other outstanding credit th a t has been extended by this bank, or has this bank agreed to extend additional credit to you? □ □ Is any o f the collateral listed in tables (1) and (2) o f Part II to be delivered, or has any such collateral been delivered, from a bank, broker, dealer or person o th er than you? □ □ (3) If “ yes” , from w h o m ? ............................................................................... Against paym ent to deliverer? □ □ (4) Has any of the collateral listed in Part II been owned less than 30 days? □ □ (1) Is this credit in the am ount o f $........................................... . or any part thereof, for the purpose o f purchasing or carrying margin stock? If “ n o ” , describe the specific p u rpose............................................................................................................ (2) The undersigned has (have) read this form and any attachm ents thereto and hereby certifies and affirm s th at to the best of m y (our) knowledge and belief the inform ation contained therein is true, accurate and complete. Furtherm ore, to the best of my (our) knowledge, the securities listed as collateral in Part II are authentic, gen uine, unaltered, and n ot stolen, forged or counterfeit. SIGNED.................................................................................... (Borrower’s signature) (Print or type name) (Date) SIGNED............................................................................. (Borrower’s signature) (Print or type name) THIS FORM SHOULD NOT BE SIGNED IN BLANK (Date) ' ** PART II To be completed by bank (1) Collateral consisting o f stock, other than debt securities convertible into margin stock. The maximum loan value of such stock under the current Supplement to Regulation U is.......... per cent of its current market y^lue. No. of shares Issue Market price per share Date and source of valuation Total market value per issue (2) Collateral consisting of debt securities convertible into margin stock. The maximum loan value of such debt securities under the current Supplement to Regulation U is..........per cent of the current market value. Principal amount Issue Market price Date and source of valuation Total market value per issue Market price Source of valuation Good faith loan value (3) O ther collateral. Describe briefly The undersigned, a duly authorized officer of the bank, (i) is aware that this stock-secured credit may be subject to the credit restrictions of Regulation U, (ii) has read this form and any attachments thereto, (iii) has accepted the customer’s statement in Part I in good faith as required by Regulation U*, and (iv) hereby certifies and af firms that, to the best of the officer’s knowledge and belief, all the information contained herein is true, accu rate and complete. If any of the securities described above in tables 1 and 2 that directly secure the credit have been or will be physically delivered to the bank, the undersigned officer further certifies that he or she (a) has ex amined, or will examine, the physical aspects o f such securities and performed, or will perform, such validation procedures as are required by bank policy and government regulations promulgated under section 17(f) o f the Securities Exchange Act of 1934, as amended, or has been informed that another employee of the bank has per formed or will perform such functions, (b) if any o f such securities are not or will not be registered in the name of the borrower or its nominee, has examined the written consent o f the registered owner to pledge such secur ities, and (c) is satisfied to the best of the officer’s knowledge and belief that such securities are genuine and not stolen or forged and their faces have not been altered. Date.................................................................................... (Title) SIGNED;............................................................................ (Bank officer’s signature) (Print or type name) *To accept this statement in good faith, the officer of the bank (1) must be alert to the circumstances surrounding the credit and (2) if the officer has any information which would cause a prudent person not to accept the statement without inquiry, must have investigated and be satisfied that the statement is truthful. Among the facts which would’require such investigation are receipt of the statement through the mail or from a1third party. THIS FORM MUST BE RETAINED BY THE BANK FOR AT LEAST THREE YEARS AFTER THE CREDIT IS EXTINGUISHED
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