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F ederal R eserve Bank
OF DALLAS
ROBERT

D. M c T E E R , J R .

PRESIDENT
AND CH IE F E X EC U TIV E O F F IC E R

D ecem ber 13, 1996

DALLAS, TEXAS
7 5 2 65 -5 90 6

Notice 96-129

TO:

T he C hief Executive Officer of
each financial institution in the
Eleventh Federal Reserve District

SUBJECT
Revised Pamphlets for
Regulations E, S, Securities Credit Transactions
(G, T, U, and X), and to the Official Staff
Commentary on Regulation E
DETAILS
T he B oard of Governors of the F ed eral Reserve
System has published revised pam phlets for R egulation E,
effective May 1, 1996; the Official Staff Com m entary on R egu­
lation E, effective M ay 2, 1996; Regulations G, T, U, and X,
with various effective dates; and R egulation S, effective July
12, 1996.
T he revised pam phlets were inadvertently om itted
from this B ank’s Notice 96-110 dated N ovem ber 15, 1996. We
apologize for any inconvenience this may have caused.

For additional copies, bankers and others are encouraged to use one o f the follow ing toll-free
numbers in contacting the Federal Reserve Bank o f Dallas: Dallas Office (800) 333-4460;
El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; H ou ston Branch Intrastate
(800) 392-4162, Interstate (800) 221-0363; San A ntonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

ENCLOSURES
The revised pam phlets are enclosed. Please insert
them in your R egulations binders.
MORE INFORMATION
For m ore inform ation regarding Regulation E, the
Official Staff Com m entary on Regulation E, or R egulations G,
T, U, and X, please contact Eugene Coy at (214) 922-6201.
F o r m ore inform ation regarding R egulation S, please contact
Jam es D ean at (214) 922-6237.
F or additional copies of this B ank’s notice or the
revised pamphlets, please contact the Public Affairs D e p art­
m ent at (214) 922-5254.
Sincerely yours,

Board of Governors of the Federal Reserve System

Regulation E
Electronic Fund Transfers
12 CFR 205; as amended effective May 1, 1996

Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank of
the District in which the inquiry arises.
July 1996

Contents

Page
Section 205.1—Authority and purpose . . . . 1
(a) Authority ............................................. 1
(b) Purpose ............................................... 1
Section 205.2—D efinitions............................ 1
Section 205.3—C overage.............................. 2
(a) General................................................. 2
(b) Electronic fund transfer...................... 2
(c) Exclusions from coverage................. 2
Section 205.4— General disclosure
requirements; jointly offered services . . 3
(a) Form of disclosures........................... 3
(b) Additional information;
disclosures required by other
law s....................................................... 3
(c) [Reserved]............................................. 3
(d) Multiple accounts and account
holders.................................................. 3
(e) Services offered jointly...................... 3
Section 205.5— Issuance of access
devices.......................................................... 3
(a) Solicited issuance................................ 3
(b) Unsolicited issuance........................... 3
Section 205.6—Liability of consumer
for unauthorized tran sfers....................... 4
(a) Conditions for liab ility ...................... 4
(b) Limitations on amount of
liability.................................................. 4
Section 205.7—Initial disclosures.................. 5
(a) Timing of disclosures........................ 5
(b) Content of disclosures...................... 5
Section 205.8—Change-in-terms notice;
error-resolution notice................................. 5
(a) Change-in-terms n o tice ...................... 5
(b) Error-resolution notice ...................... 5
Section 205.9—Receipts at electronic
terminals; periodic statements .................. 6
(a) Receipts at electronic terminals . . . . 6
(b) Periodic statements............................. 6
(c) Exceptions to the periodicstatement requirement for certain
accounts................................................ 6
(d) Documentation for foreigninitiated transfers................................. 7
Section 205.10—Preauthorized transfers . . 7
(a) Preauthorized transfers to
consumer’s a c c o u n t............................ 7
(b) Written authorization for
preauthorized transfers from
consumer’s a c c o u n t............................ 7

Page
(c) Consumer’s right to stop
paym ent................................................ 7
(d) Notice of transfers varying in
am ount.................................................. 8
(e) Compulsory u se .................................. 8
Section 205.11—Procedures for
resolving e rro rs ........................................... 8
(a) Definition of e rro r............................. 8
(b) Notice of error from consumer . . . . 8
(c) Time limits and extent of
investigation........................................ 9
(d) Procedures if financial institution
determines no error or different
error occurred..................................... 9
(e) Reassertion of e rro r ........................ 10
Section 205.12—Relation to other laws
10
(a) Relation to truth in lending............. 10
(b) Preemption of inconsistent state
la w s..................................................... 10
(c) State exem ptions.............................. 10
Section 205.13— Administrative
enforcement; record retention.................. 11
(a) Enforcement by federal agencies
11
(b) Record retention .............................. 11
Section 205.14— Electronic fund transfer
service provider not holding
consumer’s a c c o u n t................................. 11
(a) Provider of electronic fund
transfer s e rv ic e ................................. 11
(b) Compliance by service provider . . . 11
(c) Compliance by account-holding
institution..........................................
12
Section 205.15— Electronic fund transfer
of government benefits............................ 12
(a) Government agency subject to
regulation..........................................
12
(b) Issuance of access d e v ic e s............. 12
(c) Alternative to periodic statement
12
(d) Modified requirem ents.................... 13
Appendix A—Model disclosure clauses
and form s.................................................. 13
Appendix B—Federal enforcement
agencies..................................................... 17
Appendix C—Issuance of staff
interpretations..........................................
18
Electronic Fund Transfer A c t .................... 19

Regulation E
Electronic Fund Transfers
12 CFR 205; as amended effective May 1, 1996*

SECTION 205.1— Authority and Purpose
(a) Authority. The regulation in this part,
known as Regulation E, is issued by the
Board of Governors of the Federal Reserve
System pursuant to the Electronic Fund Trans­
fer Act (15 USC 1693 et seq.). The information-collection requirements have been ap­
proved by the Office of Management and
Budget under 44 USC 3501 et seq. and have
been assigned OMB No. 7100-0200.
(b) Purpose. This part carries out the pur­
poses of the Electronic Fund Transfer Act,
which establishes the basic rights, liabilities,
and responsibilities of consumers who use
electronic fund transfer services and of finan­
cial institutions that offer these services. The
primary objective of the act and this part is
the protection of individual consumers engag­
ing in electronic fund transfers.

tution that initially issued the device or a
successor.
(b )(1 ) A ccount means a dem and deposit
(checking), savings, or other consumer asset
account (other than an occasional or inci­
dental credit balance in a credit plan) held
directly or indirectly by a financial institu­
tion and established primarily for personal,
family, or household purposes.
(2) The term does not include an account
held by a financial institution under a bona
fide trust agreement.
(c)
A ct means the Electronic Fund Transfer
Act (title IX of the Consumer Credit Protec­
tion Act, 15 USC 1693 et seq.).
(d) Business day means any day on which the
offices of the consumer’s financial institution
are open to the public for carrying on substan­
tially all business functions.
(e) Consumer means a natural person.

SECTION 205.2— Definitions
For purposes of this regulation, the following
definitions apply:
(a) (1) Access device means a card, code, or
other means of access to a consumer’s ac­
count, or any combination thereof, that may
be used by the consumer to initiate elec­
tronic fund transfers;
(2) An access device becomes an “ac­
cepted access d e v ic e ” w hen
the
consumer—
(i) requests and receives, or signs, or
uses (or authorizes another to use) the ac­
cess device to transfer money between
accounts or to obtain money, property, or
services;
(ii) requests validation of an access de­
vice issued on an unsolicited basis; or
(iii) receives an access device in renewal
of, or in substitution for, an accepted ac­
cess device from either the financial insti­
* Reliance on May 1, 19%, revisions optional until Janu­
ary 1, 1997.

(f) Credit means the right granted by a finan­
cial institution to a consumer to defer pay­
ment of debt, incur debt and defer its pay­
ment, or purchase property or services and
defer payment therefor.
(g) Electronic fu nd transfer is defined in sec­
tion 205.3.
(h) Electronic terminal means an electronic
device, other than a telephone operated by a
consumer, through which a consumer may ini­
tiate an electronic fund transfer. The term in­
cludes, but is not limited to, point-of-sale ter­
minals, automated teller machines, and cash
dispensing machines.
(i) Financial institution means a bank, savings
association, credit union, or any other person
that directly or indirectly holds an account be­
longing to a consumer or that issues an access
device and agrees with a consumer to provide
electronic fund transfer services.
Person means a natural person or an or­
ganization, including a corporation, govem( j)

1

§ 205.2
ment agency, estate, trust, partnership, propri­
etorship, cooperative, or association.
(k) Preauthorized electronic fu n d transfer
means an electronic fund transfer authorized
in advance to recur at substantially regular
intervals.
(/) State means any state, territory, or posses­
sion of the United States; the District of Co­
lumbia; the Commonwealth of Puerto Rico; or
any political subdivision of the above in this
paragraph (I).
(m) U nauthorized electronic fu n d transfer
means an electronic fund transfer from a con­
sumer’s account initiated by a person other
than the consumer without actual authority to
initiate the transfer and from which the con­
sumer receives no benefit. The term does not
include an electronic fund transfer initiated—
(1) by a person who was furnished the ac­
cess device to the consumer’s account by
the consumer, unless the consumer has noti­
fied the financial institution that transfers by
that person are no longer authorized;
(2) with fraudulent intent by the consumer
or any person acting in concert with the
consumer; or
(3) by the financial in stitu tio n or its
employee.

SECTION 205.3— Coverage
(a) General. This part applies to any elec­
tronic fund transfer that authorizes a financial
institution to debit or credit a consumer’s ac­
count. Generally, this part applies to financial
in stitu tio n s. For purposes o f sections
205.10(b), (d), and (e) and 205.13, this part
applies to any person.
(b) Electronic fu nd transfer. The term elec­
tronic fund transfer means any transfer of
funds that is initiated through an electronic
terminal, telephone, computer, or magnetic
tape for the purpose of ordering, instructing,
or authorizing a financial institution to debit
or credit an account. The term includes, but is
not limited to—
(1) point-of-sale transfers;
(2) automated teller machine transfers;
(3) direct deposits or withdrawals of funds;
2

Regulation E
(4) transfers initiated by telephone; and
(5) transfers resulting from debit card trans­
actions, whether or not initiated through an
electronic terminal.
(c) Exclusions from coverage. The term elec­
tronic fund transfer does not include:
(1) Checks. Any transfer of funds origi­
nated by check, draft, or similar paper in­
strument; or any payment made by check,
draft, or similar paper instrument at an elec­
tronic terminal.
(2) Check guarantee or authorization. Any
transfer of funds that guarantees payment or
authorizes acceptance of a check, draft, or
similar paper instrument but that does not
directly result in a debit or credit to a con­
sumer’s account.
(3) Wire or other similar transfers. Any
tran sfer o f funds through Fedw ire or
through a similar wire transfer system that
is used primarily for transfers between fi­
nancial institutions or between businesses.
(4) Securities and commodities transfers.
Any transfer of funds the primary purpose
o f which is the purchase or sale of a secur­
ity or commodity, if the security or com­
modity is—
(i) regulated by the Securities and Ex­
change Commission or the Commodity
Futures Trading Commission;
(ii) purchased or sold through a brokerdealer regulated by the Securities and Ex­
change Commission or through a futures
commission merchant regulated by the
Commodity Futures Trading Commission;
or
(iii) held in book-entry form by a Fed­
eral Reserve Bank or federal agency.
(5) Automatic transfers by account-holding
institutions. Any transfer of funds under an
agreement between a consumer and a finan­
cial institution which provides that the insti­
tution will initiate individual transfers with­
out a specific request from the consumer:
(i) between a consumer’s accounts within
the financial institution;
(ii) from a consumer’s account to an ac­
count of a member of the consumer’s
family held in the same financial institu­
tion; or
(iii) between a consumer’s account and

Regulation E
an account of the financial institution, ex­
cept that these transfers remain subject to
section 205.10(e) regarding compulsory
use and sections 915 and 916 of the act
regarding civil and criminal liability.
(6) Telephone-initiated transfers. Any trans­
fer of funds that—
(i) is initiated by a telephone communi­
cation between a consumer and a finan­
cial institution making the transfer, and
(ii) does not take place under a telephone
bill-payment or other written plan in
which periodic or recurring transfers are
contemplated.
(7) Small institutions. Any preauthorized
transfer to or from an account if the assets
of the account-holding financial institution
were $100 million or less on the preceding
December 31. If assets of the account-hold­
ing institution subsequently exceed $100
m illion, the institution’s exem ption for
preauthorized transfers terminates one year
from the end of the calendar year in which
the
assets
exceed
$100
m illion.
Preauthorized transfers exempt under this
paragraph (c)(7) remain subject to section
205.10(e) regarding compulsory use and
sections 915 and 916 of the act regarding
civil and criminal liability.

SECTION 205.4— General Disclosure
Requirements; Jointly Offered Services
(a) Form o f disclosures. Disclosures required
under this part shall be clear and readily un­
derstandable, in writing, and in a form the
consumer may keep. A financial institution
may use commonly accepted or readily under­
standable abbreviations in complying with the
disclosure requirements of this part.
(b) A dditional information; disclosures re­
quired by other laws. A financial institution
may include additional information and may
combine disclosures required by other laws
(such as the Truth in Lending Act (15 USC
1601 et seq.) or the Truth in Savings Act (12
USC 4301 et seq.)) with the disclosures re­
quired by this part.
(c) [Reserved]
(d) Multiple accounts and account holders.

§ 205.5
(1) Multiple accounts. A financial institu­
tion may combine the required disclosures
into a single statement for a consumer who
holds m ore than one account at the
institution.
(2) Multiple account holders. For joint ac­
counts held by two or more consumers, a
financial institution need provide only one
set of the required disclosures and may pro­
vide them to any of the account holders.
(e) Services offered jointly. Financial institu­
tions that provide electronic fund transfer ser­
vices jointly may contract among themselves
to comply with the requirements that this part
imposes on any or all of them. An institution
need make only the disclosures required by
sections 205.7 and 205.8 that are within its
knowledge and within the purview of its rela­
tionship with the consumer for whom it holds
an account.

SECTION 205.5— Issuance o f Access
Devices
(a) Solicited issuance. Except as provided in
paragraph (b) of this section, a financial insti­
tution may issue an access device to a con­
sumer only—
(1) in response to an oral or written request
for the device; or
(2) as a renewal of, or in substitution for,
an accepted access device whether issued
by the institution or a successor.
(b) Unsolicited issuance. A financial institu­
tion may distribute an access device to a con­
sumer on an unsolicited basis if the access
device is—
(1) not validated, meaning that the institu­
tion has not yet performed all the proce­
dures that would enable a consumer to initi­
ate an electronic fund transfer using the
access device;
(2) accompanied by a clear explanation that
the access device is not validated and how
the consumer may dispose of it if validation
is not desired;
(3) accom panied by the disclosures re­
quired by section 205.7, of the consumer’s
rights and liabilities that will apply if the
access device is validated; and
3

§ 205.5
(4) validated only in response to the con­
sumer’s oral or written request for valida­
tion, after the institution has verified the
consumer’s identity by a reasonable means.

SECTION 205.6— Liability of Consumer
for Unauthorized Transfers
(a) Conditions fo r liability. A consumer may
be held liable, within the limitations described
in paragraph (b) of this section, for an unau­
thorized electronic fund transfer involving the
consumer’s account only if the financial insti­
tution has provided the disclosures required by
section 205.7(b)(1), (2), and (3). If the unau­
thorized transfer involved an access device, it
must be an accepted access device and the
financial institution must have provided a
means to identify the consumer to whom it
was issued.
(b) Limitations on amount o f liability. A con­
sumer’s liability for an unauthorized electronic
fund transfer or a series of related unautho­
rized transfers shall be determined as follows:
(1) Timely notice given. If the consumer
notifies the financial institution within two
business days after learning of the loss or
theft of the access device, the consumer’s
liability shall not exceed the lesser of $50
or the amount of unauthorized transfers that
occur before notice to the financial
institution.
(2) Timely notice not given. If the con­
sumer fails to notify the financial institution
within two business days after learning of
the loss or theft of the access device, the
consumer’s liability shall not exceed the
lesser of $500 or the sum of—
(i) $50 or the amount of unauthorized
transfers that occur within the two busi­
ness days, whichever is less; and
(ii) the amount of unauthorized transfers
that occur after the close of two business
days and before notice to the institution,
provided the institution establishes that
these transfers would not have occurred
had the consumer notified the institution
within that two-day period.
(3) Periodic statement; timely notice not
given. A consumer must report an unautho­
4

Regulation E
rized electronic fund transfer that appears
on a periodic statement within 60 days of
the financial institution’s transmittal of the
statement to avoid liability for subsequent
transfers. If the consumer fails to do so, the
consumer’s liability shall not exceed the
amount of the unauthorized transfers that
occur after the close of the 60 days and
before notice to the institution, and that the
institution establishes would not have oc­
curred had the consumer notified the institu­
tion within the 60-day period. When an ac­
cess device is involved in the unauthorized
transfer, the consumer may be liable for
other amounts set forth in paragraphs (b)(1)
or (b)(2) of this section, as applicable.
(4) Extension o f time limits. If the con­
sumer’s delay in notifying the financial in­
stitution was due to extenuating circum­
stances, the institution shall extend the
tim es specified above to a reasonable
period.
(5) Notice to financial institution.
(i) Notice to a financial institution is
given when a consumer takes steps rea­
sonably necessary to provide the institu­
tion w ith the pertinent inform ation,
whether or not a particular employee or
agent of the institution actually receives
the information.
(ii) The consumer may notify the institu­
tion in person, by telephone, or in
writing.
(iii) Written notice is considered given at
the time the consumer mails the notice or
delivers it for transmission to the institu­
tion by any other usual means. Notice
may be considered constructively given
when the institution becomes aware of
circumstances leading to the reasonable
belief that an unauthorized transfer to or
from the consumer’s account has been or
may be made.
(6) Liability under state law or agreement.
If state law or an agreement between the
consumer and the financial institution im­
poses less liability than is provided by this
section, the consumer’s liability shall not
exceed the amount imposed under the state
law or agreement.

Regulation E

SECTION 205.7— Initial Disclosures
(a) Timing o f disclosures. A financial institu­
tion shall make the disclosures required by
this section at the time a consumer contracts
for an electronic fund transfer service or
before the first electronic fund transfer is
made involving the consumer’s account.
(b) Content o f disclosures. A financial institu­
tion shall provide the following disclosures, as
applicable:
(1) Liability o f consumer. A summary of
the consumer’s liability, under section 205.6
or under state or other applicable law or
agreement, for unauthorized electronic fund
transfers.
(2) Telephone number and address. The
telephone number and address of the person
or office to be notified when the consumer
believes that an unauthorized electronic
fund transfer has been or may be made.
(3) Business days. The financial institu­
tion’s business days.
(4) Types o f transfer; limitations. The type
of electronic fund transfers that the con­
sumer may make and any limitations on the
frequency and dollar amount of transfers.
Details of the limitations need not be dis­
closed if confidentiality is essential to main­
tain the security of the electronic fund
transfer system.
(5) Fees. Any fees imposed by the financial
institution for electronic fund transfers or
for the right to make transfers.
(6) Documentation. A summary of the con­
sumer’s right to receipts and periodic state­
ments, as provided in section 205.9, and
notices regarding preauthorized transfers as
p rovided in sections 205.10(a) and
205.10(d).
(7) Stop payment. A summary of the con­
sum er’s rig h t to stop paym ent o f a
preauthorized electronic fund transfer and
the procedure for placing a stop-payment
order, as provided in section 205.10(c).
(8) Liability o f institution. A summary of
the financial institution’s liability to the
consumer under section 910 of the act for
failure to make or to stop certain transfers.
(9) C onfidentiality. The circum stances
under which, in the ordinary course of busi­

§ 205.8
ness, the financial institution may provide
information concerning the consumer’s ac­
count to third parties.
(10) Error resolution. A notice that is sub­
stantially similar to Model Form A-3 as set
out in appendix A of this part concerning
error resolution.

SECTION 205.8— Change-in-Terms
Notice; Error-Resolution Notice
(a) Change-in-terms notice.
(1) Prior notice required. A financial insti­
tution shall mail or deliver a written notice
to the consumer at least 21 days before the
effective date of any change in a term or
condition required to be disclosed under
section 205.7(b) if the change would result
in—
(i) increased fees for the consumer;
(ii) increased liability for the consumer;
(iii) fewer types of available electronic
fund transfers; or
(iv) stricter limitations on the frequency
or dollar amount of transfers.
(2) Prior-notice exception. A financial insti­
tution need not give prior notice if an im­
mediate change in terms or conditions is
necessary to maintain or restore the security
of an account or an electronic fund transfer
system. If the institution makes such a
change permanent and disclosure would not
jeopardize the security of the account or
system, the institution shall notify the con­
sumer in writing on or with the next regu­
larly scheduled periodic statement or within
30 days of making the change permanent.
(b) Error-resolution notice. For accounts to or
from which electronic fund transfers can be
made, a financial institution shall mail or de­
liver to the consumer, at least once each cal­
endar year, an error-resolution notice substan­
tially similar to the model form set forth in
appendix A of this part (Model Form A-3).
Alternatively, an institution may include an
abbreviated notice substantially similar to the
model form error-resolution notice set forth in
appendix A of this part (Model Form A-3), on
or with each periodic statement required by
section 205.9(b).
5

§ 205.9

SECTION 205.9— Receipts at Electronic
Terminals; Periodic Statements
(a) Receipts at electronic terminals. A finan­
cial institution shall make a receipt available
to a consumer at the time the consumer initi­
ates an electronic fund transfer at an elec­
tronic terminal. The receipt shall set forth the
following information, as applicable:
(1) Amount. The amount of the transfer. A
transaction fee may be included in this
amount, provided the amount of the fee is
disclosed on the receipt and displayed on or
at the terminal.
(2) Date. The date the consumer initiates
the transfer.
(3) Type. The type of transfer and the type
of the consumer’s account(s) to or from
which funds are transfered. The type of ac­
count may be omitted if the access device
used is able to access only one account at
that terminal.
(4) Identification. A number or code that
identifies the consumer’s account or ac­
counts, or the access device used to initiate
the transfer. The number or code need not
exceed four digits or letters to comply with
the requirements of this paragraph (a)(4).
(5) Terminal location. The location of the
terminal where the transfer is initiated, or
an identification such as a code or terminal
number. Except in limited circumstances
where all terminals are located in the same
city or state, if the location is disclosed, it
shall include the city and state or foreign
country and one of the following:
(i) the street address; or
(ii) a generally accepted name for the
specific location; or
(iii) the name of the owner or operator
of the terminal if other than the accountholding institution.
(6) Third party transfer. The name of any
third party to or from whom funds are
transferred.
(b) Periodic statements. For an account to or
from which electronic fund transfers can be
made, a financial institution shall send a peri­
odic statement for each monthly cycle in
which an electronic fund transfer has occurred
and shall send a periodic statement at least
quarterly if no transfer has occurred. The
6

Regulation E
statement shall set forth the following infor­
mation, as applicable:
(1) Transaction inform ation. For each
electronic fund transfer occurring during the
cycle—
(i) the amount of the transfer;
(ii) the date the transfer was credited or
debited to the consumer’s account;
(iii) the type of transfer and type of ac­
count to or from which funds were
transferred;
(iv) for a transfer initiated by the con­
sumer at an electronic terminal (except
for a deposit of cash or a check, draft, or
similar paper instrument), the terminal lo­
cation described in paragraph (a)(5) of
this section; and
(v) the name of any third party to or
from whom funds were transferred.
(2) Account number. The number of the
account.
(3) Fees. The amount of any fees assessed
against the account during the statement pe­
riod for electronic fund transfers, for the
right to make transfers, or for account
maintenance.
(4) Account balances. The balance in the
account at the beginning and at the close of
the statement period.
(5) Address and telephone number fo r in­
quiries. The address and telephone number
to be used for inquiries or notice of errors,
preceded by “ Direct inquiries to” or similar
language. The address and telephone num­
ber provided on an error-resolution notice
under section 205.8(b) given on or with the
statement satisfies this requirement.
(6) Telephone num ber fo r preauthorized
transfers. A telephone number the consumer
may call to ascertain whether preauthorized
transfers to the consumer’s account have
occurred, if the financial institution uses the
telep h on e-n o tice option under section
205.10(a)(l)(iii).
(c) Exceptions to the periodic-statement
quirement fo r certain accounts—
(1) Preauthorized transfers to accounts.
accounts that may be accessed only
preauthorized transfers to the account
following rules apply:
(i) Passbook accounts. For passbook

re­
For
by
the
ac-

Regulation E
counts, the financial institution need not
provide a periodic statement if the insti­
tution updates the passbook upon presen­
tation or enters on a separate document
the amount and date of each electronic
fund transfer since the passbook was last
presented.
(ii) Other accounts. For accounts other
than passbook accounts, the financial in­
stitution must send a periodic statement
at least quarterly.
(2) Intra-institutional transfers. For an elec­
tronic fund transfer initiated by the con­
sumer between two accounts of the con­
sumer in the same institution, documenting
the transfer on a periodic statement for one
of the two accounts satisfies the periodic
statement requirement.
(3) Relationship between paragraphs (c)(1)
and (c)(2) o f this section. An account that
is accessed by preauthorized transfers to the
account described in paragraph (c)(1) of
this section and by intra-institutional trans­
fers described in paragraph (c)(2) of this
section, but by no other type of electronic
fund transfers, qualifies for the execptions
provided by paragraph (c)(1) of this section.
(d) Documentation fo r foreign-initiated trans­
fers. The failure by a financial institution to
provide a terminal receipt for an electronic
fund transfer or to document the transfer on a
periodic statement does not violate this part
if—
(1) the transfer is not initiated within a
state; and
(2) the financial institution treats an inquiry
for clarification or documentation as a no­
tice of error in accordance with section
205.11.

SECTION 205.10— Preauthorized
Transfers
(a) Preauthorized transfers to consum er’s
account.
(1) Notice by financial institution. When a
person initiates preauthorized electronic
fund transfers to a consumer’s account at
least once every 60 days, the account-holding financial institution shall provide notice
to the consumer by—

§ 205.10
(i) Positive notice. Providing oral or
written notice of the transfer within two
business days after the transfer occurs; or
(ii) Negative notice. Providing oral or
written notice, within two business days
after the date on which the transfer was
scheduled to occur, that the transfer did
not occur; or
(iii) Readily available telephone line.
Providing a readily available telephone
line that the consumer may call to deter­
mine whether the transfer occurred and
disclosing the telephone number on the
initial disclosure of account terms and on
each periodic statement.
(2) Notice by payor. A financial institution
need not provide notice of a transfer if the
payor gives the consumer positive notice
that the transfer has been initiated.
(3) Crediting. A financial institution that re­
ceives a preauthorized transfer of the type
described in paragraph (a)(1) of this section
shall credit the amount of the transfer as of
the date the funds for the transfer are
received.
(b) Written authorization fo r preauthorized
tra n sfers fro m
co n su m er’s
account.
Preauthorized electronic fund transfers from a
consumer’s account may be authorized only
by a writing signed or similarly authenticated
by the consumer. The person that obtains the
authorization shall provide a copy to the
consumer.
(c) Consumer's right to stop payment.
(1) Notice. A consumer may stop payment
of a preauthorized electronic fund transfer
from the consumer’s account by notifying
the financial institution orally or in writing
at least three business days before the
scheduled date of the transfer.
(2) Written confirmation. The financial in­
stitution may require the consumer to give
written confirmation of a stop-payment or­
der within 14 days of an oral notification.
An institution that requires written confir­
mation shall inform the consumer of the re­
quirement and provide the address where
confirmation must be sent when the con­
sumer gives the oral notification. An oral
stop-payment order ceases to be binding af­
7

§ 205.10
ter 14 days if the consumer fails to provide
the required written confirmation.
(d) Notice o f transfers varying in amount.
(1) Notice. When a preauthorized electronic
fund transfer from the consumer’s account
will vary in amount from the previous
transfer under the same authorization or
from the preauthorized amount, the desig­
nated payee or the financial institution shall
send the consumer written notice of the
amount and date of the transfer at least 10
days before the scheduled date of transfer.
(2) Range. The designated payee or the in­
stitution shall inform the consumer of the
right to receive notice of all varying trans­
fers, but may give the consumer the option
of receiving notice only when a transfer
falls outside a specified range of amounts or
only when a transfer differs from the most
recent transfer by more than an agreed-upon
amount.
(e) Compulsory use.
(1) Credit. No financial institution or other
person may condition an extension of credit
to a consumer on the consumer’s repayment
by preauthorized electronic fund transfers,
except for credit extended under an over­
draft credit plan or extended to maintain a
specified minimum balance in the con­
sumer’s account.
(2) Employment or government benefit. No
financial institution or other person may re­
quire a consumer to establish an account for
receipt of electronic fund transfers with a
particular institution as a condition of em­
ploym ent or receipt o f a governm ent
benefit.

SECTION 205.11 — Procedures for
Resolving Errors
(a) Definition o f error.
(1) Types o f transfers or inquiries covered.
The term error means—
(i) an unauthorized electro n ic fund
transfer;
(ii) an incorrect electronic fund transfer
to or from the consumer’s account;
(iii) the omission of an electronic fund
transfer from a periodic statement;

Regulation E
(iv) a computational or bookkeeping er­
ror made by the financial institution relat­
ing to an electronic fund transfer;
(v) the consumer’s receipt of an incorrect
amount of money from an electronic
terminal;
(vi) an electronic fund transfer not iden­
tified in accordance with section 205.9 or
205.10(a) of Regulation E; or
(vii) the consumer’s request for docu­
mentation required by section 205.9 or
205.10(a) or for additional information or
clarification concerning an electronic
fund transfer, including a request the
consumer makes to determine whether an
error exists under paragraphs (a)(l)(i)
through (vi) of this section.
(2) Types o f inquiries not covered. The
term error does not include—
(i) a routine inquiry about the con­
sumer’s account balance;
(ii) a request for information for tax or
other recordkeeping purposes; or
(iii) a request for duplicate copies of
documentation.
(b) Notice o f error from consumer.
(1) Timing; contents. A financial institution
shall comply with the requirements of this
section with respect to any oral or written
notice of error from the consumer that—
(i) is received by the institution no later
than 60 days after the institution sends
the periodic statement or provides the
passbook documentation, required by sec­
tion 205.9, on which the alleged error is
first reflected;
(ii) enables the institution to identify the
consumer’s name and account number;
and
(iii) indicates why the consumer believes
an error exists and includes to the extent
possible the type, date, and amount of
the error, except for requests described in
paragraph (a)(l)(vii) of this section.
(2) Written confirmation. A financial insti­
tution may require the consumer to give
written confirmation of an error within 10
business days of an oral notice. An institu­
tion that requires written confirmation shall
inform the consumer of the requirement and
provide the address where confirmation

Regulation E
must be sent when the consumer gives the
oral notification.
(3) Request fo r documentation or clarifica­
tions. When a notice of error is based on
documentation or clarification that the con­
sumer requested under paragraph (a)(l)(vii)
of this section, the consumer’s notice of er­
ror is timely if received by the financial in­
stitution no later than 60 days after the in­
stitution sends the information requested.
(c) Time limits and extent o f investigation.
(1) Ten-day period. A financial institution
shall investigate promptly and, except as
otherwise provided in this paragraph (c),
shall determine whether an error occurred
within 10 business days of receiving a no­
tice of error. The institution shall report the
results to the consumer within three busi­
ness days after completing its investigation.
The institution shall correct the error within
one business day after determining that an
error occurred.
(2) Forty-five day period. If the financial
institution is unable to complete its investi­
gation within 10 business days, the institu­
tion may take up to 45 days from receipt of
a notice of error to investigate and deter­
mine whether an error occurred, provided
the institution does the following:
(i) Provisionally credits the consumer’s
account in the amount of the alleged er­
ror (including interest where applicable)
within 10 business days of receiving the
error notice. If the financial institution
has a reasonable basis for believing that
an unauthorized electronic fund transfer
has occurred and the institution has satis­
fied the requirements of section 205.6(a),
the institution may withhold a maximum
of $50 from the amount credited. An in­
stitution need not provisionally credit the
consumer’s account if—
(A) the institution requires but does
not receive written confirmation within
10 business days of an oral notice of
error; or
(B) the alleged error involves an ac­
count that is subject to Regulation T
(Securities C redit by Brokers and
Dealers, 12 CFR 220);
(ii) Informs the consumer, within two

§ 205.11
business days after the provisional credit­
ing, of the amount and date of the provi­
sional crediting and gives the consumer
full use o f the funds during the
investigation;
(iii) Corrects the error, if any, within one
business day after determining that an er­
ror occurred; and
(iv) Reports the results to the consumer
within three business days after complet­
ing its investigation (including, if applica­
ble, notice that a provisonal credit has
been made final).
(3) Extension o f time periods. The applica­
ble time periods in this paragraph (c)(3) are
20 business days in place of 10 business
days, and 90 days in place of 45 days, if a
notice of error involves an electronic fund
transfer that—
(i) was not initiated within a state; or
(ii) resulted from a point-of-sale debit
card transaction.
(4) Investigation. With the exception of
transfers covered by section 205.14, a finan­
cial institution’s review of its own records
regarding an alleged error satisfies the re­
quirements of this section if—
(i) the alleged error concerns a transfer
to or from a third party; and
(ii) there is no agreement between the in­
stitution and the third party for the type
of electronic fund transfer involved.
(d) Procedures if financial institution deter­
mines no error or different error occurred. In
addition to following the procedures specified
in paragraph (c) of this section, the financial
institution shall follow the procedures set forth
in this paragraph (d) if it determines that no
error occurred or that an error occurred in a
manner or amount different from that de­
scribed by the consumer.
(1) Written explanation. The institution’s
report of the results of its investigation
shall include a written explanation of the
institution’s findings and shall note the con­
sumer’s right to request the documents that
the institution relied on in making its deter­
mination. Upon request, the institution shall
promptly provide copies of the documents.
(2) Debiting provisional credit. Upon debit­
9

§ 205.11
ing a provisionally credited amount, the fi­
nancial institution shall—
(i) notify the consumer of the date and
amount of the debiting;
(ii) notify the consumer that the institu­
tion will honor checks, drafts, or similar
instruments payable to third parties and
preauthorized transfers from the con­
sumer’s account (without charge to the
consumer as a result of an overdraft) for
five business days after the notification.
The institution shall honor items as speci­
fied in the notice, but need honor only
items that it would have paid if the pro­
visionally credited funds had not been
debited.
(e) Reassertion o f error. A financial institu­
tion that has fully complied with the error res­
olution requirements has no further responsi­
bilities under this section should the consumer
later reassert the same error, except in the
case of an error asserted by the consumer fol­
lowing receipt of information provided under
paragraph (a)(l)(vii) of this section.

SECTION 205.12— Relation to Other
Laws
(a) Relation to truth in lending.
(1) The Electronic Fund Transfer Act and
this part govern—
(i) the addition to an accepted credit
card, as defined in Regulation Z (12 CFR
226.12(a)(2), footnote 21), of the capabil­
ity to initiate electronic fund transfers;
(ii) the issuance of an access device that
permits credit extensions (under a preex­
isting agreement between a consumer and
a financial institution) only when the con­
sumer’s account is overdrawn or to main­
tain a specified minimum balance in the
consumer’s account; and
(iii) a consumer’s liability for an unau­
thorized electronic fund transfer and the
investigation of errors involving an ex­
tension of credit that occurs under an
agreement between the consumer and a
financial institution to extend credit when
the consumer’s account is overdrawn or
to maintain a specified minimum balance
in the consumer’s account.

Regulation E
(2) The Truth in Lending Act and Regula­
tion Z (12 CFR 226), which prohibit the
u nso licited issuance o f cred it cards,
govern—
(i) the addition of a credit feature to an
accepted access device; and
(ii) Except as provided in paragraph
(a)(l)(ii) of this section, the issuance of a
credit card that is also an access device.
(b) Preemption o f inconsistent state laws.
(1) Inconsistent requirements. The Board
shall determine, upon its own motion or
upon the request of a state, financial institu­
tion, or other interested party, whether the
act and this part preempt state law relating
to electronic fund transfers. Only state laws
that are inconsistent with the act and this
part are preempted and then only to the ex­
tent of the inconsistency. A state law is not
inconsistent with the act and this part if it
is more protective of consumers.
(2) Standards fo r determination. State law
is inconsistent with the requirements of the
act and this part if it—
(i) requires or permits a practice or act
prohibited by the federal law;
(ii) provides for consumer liability for
unauthorized electronic fund transfers
that exceeds the limits imposed by the
federal law;
(iii) allows longer time periods than the
federal law for investigating and cor­
recting alleged errors, or does not require
the financial institution to credit the con­
sumer’s account during an error investi­
gation in accordance w ith section
205.1
l(c)(2)(i); or
(iv) requires initial disclosures, periodic
statements, or receipts that are different
in content from those required by the
federal law except to the extent that the
disclosures relate to consum er rights
granted by the state law and not by the
federal law.
(c) State exemptions.
(1) General rule. Any state may apply for
an exemption from the requirements of the
act or this part for any class of electronic
fund transfers within the state. The Board
shall grant an exemption if it determines
that—

Regulation E
(i) under state law, the class of electronic
fund transfers is subject to requirements
substantially similar to those imposed by
the federal law; and
(ii) there is adequate provision for state
enforcement.
(2) Exception. To assure that the federal
and state courts continue to have concurrent
jurisdiction and to aid in implementing the
act—
(i) no exemption shall extend to the civil
liability provisions of section 915 of the
act; and
(ii) when the Board grants an exemption,
the state law requirements shall constitute
the requirements of the federal law for
purposes of section 915 of the act, except
for state law requirements not imposed
by the federal law.

SECTION 205.13— Administrative
Enforcement; Record Retention
(a) Enforcement by federal agencies. Compli­
ance with this part is enforced by the agencies
listed in appendix B of this part.
(b) Record retention.
(1) Any person subject to the act and this
part shall retain evidence of compliance
with the requirements imposed by the act
and this regulation for a period of not less
than two years from the date disclosures are
required to be made or action is required to
be taken.
(2) Any person subject to the act and this
part having actual notice that it is the sub­
ject of an investigation or an enforcement
proceeding by its enforcement agency, or
having been served with notice of an action
filed under sections 910, 915, or 916(a) of
the act, shall retain the records that pertain
to the investigation, action, or proceeding
until final disposition of the matter unless
an earlier time is allowed by court or
agency order.

§ 205.14

SECTION 205.14—Electronic Fund
Transfer Service Provider Not Holding
Consumer’s Account
(a) Provider o f electronic fun d transfer ser­
vice. A person that provides an electronic
fund transfer service to a consumer but that
does not hold the consumer’s account is sub­
ject to all requirements of this part if the
person—
(1) issues a debit card (or other access de­
vice) that the consumer can use to access
the consumer’s account held by a financial
institution; and
(2) has no agreement with the accountholding institution regarding such access.
(b) Compliance by service provider. In addi­
tion to the requirements generally applicable
under this part, the service provider shall
comply with the following special rules:
(1) D isclosures and documentation. The
service provider shall give the disclosures
and documentation required by sections
205.7, 205.8, and 205.9 that are within the
purview of its relationship with the con­
sumer. The service provider need not fur­
nish the periodic statement required by sec­
tion 205.9(b) if the following conditions are
met:
(i) the debit card (or other access device)
issued to the consumer bears the service
provider’s name and an address or tele­
phone number for making inquiries or
giving notice of error;
(ii) the consumer receives a notice con­
cerning use of the debit card that is sub­
stantially similar to the notice contained
in appendix A of this part;
(iii) the consumer receives, on or with
the receipts required by section 205.9(a),
the address and telephone number to be
used for an inquiry, to give notice of an
error, or to report the loss or theft of the
debit card;
(iv) the service provider transmits to the
account-holding institution the informa­
tion specified in section 205.9(b)(1), in
the format prescribed by the automated
clearinghouse system used to clear the
fund transfers;
(v) The service provider extends the time
period for notice of loss or theft of a
11

§ 205.14
debit card, set forth in section 205.6(b)(1)
and (2), from two business days to four
business days after the consumer leams
of the loss or theft; and extends the time
periods for reporting unauthorized trans­
fers or errors, set forth in sections
205.6(b)(3) and 205.1 l(b)(l)(i), from 60
days to 90 days following the transmittal
of a periodic statement by the accountholding institution.
(2) Error resolution.
(i) The service provider shall extend by a
reasonable time the period in which no­
tice of an error must be received, speci­
fied in section 205.1 l(b)(l)(i), if a delay
resulted from an initial attempt by the
consumer to notify the account-holding
institution.
(ii) The service provider shall disclose to
the consumer the date on which it initi­
ates a transfer to effect a provisional
cred it in accordance w ith section
205.1 l(c)(2)(ii).
(iii) If the service provider determines an
error occurred, it shall transfer funds to
or from the consumer’s account, in the
appropriate amount and within the appli­
cable time period, in accordance with
section 205.1 l(c)(2)(i)
(iv) If funds were provisionally credited
and the service provider determines no
error occurred, it may reverse the credit.
The service provider shall notify the ac­
count-holding institution of the period
during which the account-holding institu­
tion must honor debits to the account in
accordance with section 205.1 l(d)(2)(ii).
If an overdraft results, the service pro­
vider shall promptly reimburse the ac­
count-holding institution in the amount of
the overdraft.
(c) Compliance by account-holding institution.
The account-holding institution need not com­
ply with this part of the act and this regula­
tion with respect to electronic fund transfers
initiated through the service provider except
as follows:
(1) Documentation. The account-holding in­
stitution shall provide a periodic statement
that describes each electronic fund transfer
initiated by the consumer with the access
12

Regulation E
device issued by the service provider. The
account-holding institution has no liability
for the failure to comply with this require­
ment if the service provider did not provide
the necessary information; and
(2) Error resolution. Upon request, the account-holding institution shall provide infor­
mation or copies of documents needed by
the service provider to investigate errors or
to furnish copies of documents to the con­
sumer. The account-holding institution shall
also honor debits to the account in accor­
dance with section 205.1 l(d)(2)(ii).

SECTION 205.15— Electronic Fund
Transfer of Government Benefits
(a) Government agency subject to regulation.
(1) A government agency is deemed to be
a financial institution for purposes of the
act and regulation if directly or indirectly it
issues an access device to a consumer for
use in initiating an electronic fund transfer
of government benefits from an account.
The agency shall comply with all applicable
requirements of the act and regulation ex­
cept as provided in this section.
(2) For purposes of this section, the term
account means an account established by a
government agency for distributing govern­
ment benefits to a consumer electronically,
such as through automated teller machines
or point-of-sale terminals.
(b) Issuance o f access devices. For purposes
of this section, a consumer is deemed to re­
quest an access device when the consumer ap­
plies for government benefits that the agency
disburses or will disburse by means of an
electronic fund transfer. The agency shall ver­
ify the identity of the consumer receiving the
device by reasonable means before the device
is activated.
(c) Alternative to periodic statement. A gov­
ernment agency need not furnish the periodic
statement required by section 205.9(b) if the
agency makes available to the consumer—
(1) the consum er’s account balance,
through a readily available telephone line
and at a terminal (such as by providing bal­
ance information at a balance-inquiry termi­

Regulation E
nal or providing it, routinely or upon re­
quest, on a terminal receipt at the time of
an electronic fund transfer); and
(2) A written history of the consumer’s ac­
count transactions that is provided promptly
in response to an oral or written request
and that covers at least 60 days preceding
the date of a request by the consumer.
(d) M odified requirements. A government
agency that does not furnish periodic state­
ments, in accordance with paragraph (c) of
this section, shall comply with the following
special rules:
(1) Initial disclosures. The agency shall
m odify the d isclosu res under section
205.7(b) by disclosing—
(i) A ccount balance. The m eans by
which the consumer may obtain informa­
tion concerning the account balance, in­
cluding a telephone number. The agency
provides a notice substantially similar to
the notice contained in paragraph A-5 in
appendix A of this part.
(ii) Written account history. A summary
of the consumer’s right to receive a writ­
ten account history upon request, in place
of the periodic statement required by sec­
tion 205.7(b)(6), and the telephone num­
ber to call to request an account history.
This disclosure may be made by provid­
ing a notice substantially similar to the
notice contained in paragraph A-5 in ap­
pendix A of this part.
(iii) Error resolution. A notice concern­
ing error resolution that is substantially
similar to the notice contained in para­
graph A-5 in appendix A of this part, in
place of the notice required by section
205.7(b)(10).
(2) Annual error-resolution notice. The
agency shall provide an annual notice con­
cerning error resolution that is substantially
similar to the notice contained in paragraph
A-5 in appendix A of this part, in place of
the notice required by section 205.8(b).
(3) Limitations on liability. For purposes of
section 205.6(b)(3), regarding a 60-day pe­
riod for reporting any unauthorized transfer
that appears on a periodic statement, the
60-day period shall begin with transmittal

Appendix A
of a written account history or other ac­
count information provided to the consumer
under paragraph (c) of this section.
(4) Error resolution. The agency shall com­
ply with the requirements of section 205.11
in response to an oral or written notice of
an error from the consumer that is received
no later than 60 days after the consumer
obtains the written account history or other
account information, under paragraph (c) of
this section, in which the error is first
reflected.

APPENDIX A— Model Disclosure
Clauses and Forms
A -l
A-2
A-3
A-4
A-5

Model Clauses for Unsolicited Issuance
(§ 205.5(b)(2))
Model Clauses for Initial Disclosures
(§ 205.7(b))
Model Forms for Error-Resolution No­
tice (§§ 205.7(b)(10) and 205.8(b))
Model Form for Service-Providing Insti­
tutions (§ 205.14(b)( 1)(ii))
Model Forms for Government Agencies
(§ 205.15(d)(1) and (2))

A -l— Model Clauses for Unsolicited
Issuance (§ 205.5(b)(2))
(a) Accounts using cards. YOU CANNOT
USE THE ENCLOSED CARD TO TRANS­
FER MONEY INTO OR OUT OF YOUR
ACCOUNT UNTIL WE HAVE VALIDATED
IT. IF YOU DO NOT WANT TO USE THE
CARD, PLEASE (destroy it at once by cut­
ting it in half).
[Financial institution may add validation in­
structions here.]
(b) Accounts using codes. YOU CANNOT
USE THE ENCLOSED CODE TO TRANS­
FER MONEY INTO OR OUT OF YOUR
ACCOUNT UNTIL WE HAVE VALIDATED
IT. IF YOU DO NOT WANT TO USE THE
CODE, PLEASE (destroy this notice at once)
[Financial institution may add validation in­
structions here.]
13

Appendix A

A-2— Model Clauses for Initial
Disclosures (§ 205.7(b))
(a) Consumer liability (§ 205.7(b)(1)). (Tell
us AT ONCE if you believe your (card)(code)
has been lost or stolen. Telephoning is the
best way o f keeping your possible losses
down. You could lose all the money in your
account (plus your maximum overdraft line of
credit). If you tell us within two business
days, you can lose no more than $50 if some­
one used your (card)(code) without your per­
mission.) (If you believe your (card)(code) has
been lost or stolen, and you tell us within two
business days after you learn of the loss or
theft, you can lose no more than $50 if some­
one used your (card)(code) w ithout your
permission.)
If you do NOT tell us within two business
days after you learn of the loss or theft of
your (card)(code), and we can prove we could
have stopped som eone from using your
(card)(code) without your permission if you
had told us, you could lose as much as $500.
Also, if your statement shows transfers that
you did not make, tell us at once. If you do
not tell us within 60 days after the statement
was mailed to you, you may not get back any
money you lost after the 60 days if we can
prove that we could have stopped someone
from taking the money if you had told us in
time.
If a good reason (such as a long trip or a
hospital stay) kept you from telling us, we
will extend the time periods.
(b) Contact in event o f unauthorized transfer
(§ 205.7(b)(2)). If you believe your [card]
[code] has been lost or stolen or that someone
has transferred or may transfer money from
your account without your permission, call:
[Telephone number]
or write:
[Name of person or office to be notified]
[Address]
(c) Business days (§ 205.7(b)(3)). For pur­
poses of these disclosures, our business days
are (M onday through Friday) (M onday
through Saturday) (any day including Satur­
days and S undays). H olidays are (not)
included.
14

Regulation E
(d) Transfer
types
and
lim ita tio n s
(§ 205.7(b)(4)).
(1) Account access. You may use your
[card] [code] to:
(i) Withdraw cash from your [checking]
[or] [savings] account.
(ii) Make deposits to your [checking]
[or] [savings] account.
(iii) Transfer funds between your check­
ing and savings accounts whenever you
request.
(iv) Pay for purchases at places that have
agreed to accept the [card] [code].
(v) Pay bills directly [by telephone] from
your [checking] [or] [savings] account in
the amounts and on the days you request.
Some of these services may not be avail­
able at all terminals.
(2) Limitations on frequency o f transfers.
(i) You may make only [insert number,
e.g., 3] cash withdrawals from our termi­
nals each [insert time period, e.g., week].
(ii) You can use your telephone bill-payment service to pay [insert number] bills
each [insert time period] [telephone call].
(iii) You can use our point-of-sale trans­
fer service for [insert number] transac­
tions each [insert time period].
(iv) For security reasons, there are limits
on the number of transfers you can make
using our [terminals] [telephone bill-paym ent service] [point-of-sale transfer
service].
(3) L im itatio ns on d o lla r am ounts o f
transfers.
(i) You may withdraw up to [insert dollar
amount] from our terminals each [insert
time period] time you use the [card]
[code].
(ii) You may buy up to [insert dollar
amount] worth of goods or services each
[insert time period] time you use the
[card] [code] in our point-of-sale transfer
service.
(e) Fees (§ 205.7(b)(5)).
(1) Per transfer charge. We will charge
you [insert dollar amount] for each transfer
you make using our [automated teller ma­
chines] [telephone bill-paym ent service]
[point-of-sale transfer service],
(2) Fixed charge. We will charge you [in­

Regulation E
sert dollar amount] each [insert time period]
for our [automated teller machine service]
[telephone bill-payment service] [point-ofsale transfer service],
(3) Average or minimum balance charge.
We will only charge you for using our [au­
tomated teller machines] [telephone billpayment service] [point-of-sale transfer ser­
vice] if the [average] [minimum] balance in
your [checking account] [savings account]
[accounts] falls below [insert d ollar
amount]. If it does, we will charge you [in­
sert dollar amount] each [transfer] [insert
time period],
(f) Confidentiality (§ 205.7(b)(9)). We will
disclose information to third parties about
your account or the transfers you make:
(i) Where it is necessary for completing
transfers, or
(ii) In order to verify the existence and
condition of your account for a third party,
such as a credit bureau or merchant, or
(iii) In order to comply with government
agency or court orders, or
(iv) If you give us your written permission.
(g) Documentation (§ 205.7(b)(6)).
(1) Terminal transfers. You can get a re­
ceipt at the time you make any transfer to
or from your account using one of our [au­
tomated teller machines] [or] [point-of-sale
terminals],
(2) Preauthorized credits. If you have ar­
ranged to have direct deposits made to your
account at least once every 60 days from
the same person or company, (we will let
you know if the deposit is [not] made.) [the
person or company making the deposit will
tell you every time they send us the money]
[you can call us at (insert telephone num­
ber) to find out whether or not the deposit
has been made],
(3) Periodic statements. You will get a
[monthly] [quarterly] account statement (un­
less there are no transfers in a particular
month. In any case you will get the state­
ment at least quarterly).
(4) Passbook account where the only possi­
ble electro n ic fu n d tran sfers are
preauthorized credits. If you bring your
passbook to us, we will record any elec­
tronic deposits that were made to your ac­

Appendix A
count since the last time you brought in
your passbook.
(h) Preauthorized payments (§ 205.7(b)(6),
(7), and (8); § 205.10(d)).
(1) Right to stop payment and procedure
fo r doing so. If you have told us in advance
to make regular payments out of your ac­
count, you can stop any of these payments.
Here’s how:
Call us at [insert telephone number], or
write us at [insert address], in time for us
to receive your request three business days
or more before the payment is scheduled to
be made. If you call, we may also require
you to put your request in writing and get it
to us within 14 days after you call. (We
will charge you [insert amount] for each
stop-payment order you give.)
(2) Notice o f varying amounts. If these reg­
ular payments may vary in amount, [we]
[the person you are going to pay] will tell
you, 10 days before each payment, when it
will be made and how much it will be.
(You may choose instead to get this notice
only when the payment would differ by
more than a certain amount from the previ­
ous payment, or when the amount would
fall outside certain limits that you set.)
(3) Liability fo r failure to stop payment o f
preauthorized transfer. If you order us to
stop one of these payments three business
days or more before the transfer is sched­
uled, and we do not do so, we will be lia­
ble for your losses or damages.
(i) F ina ncia l
in stitu tio n ’s
lia b ility
(§ 205.7(b)(8)). If we do not complete a trans­
fer to or from your account on time or in the
correct amount according to our agreement
with you, we will be liable for your losses or
damages. However, there are some exceptions.
We will not be liable, for instance:
(1) If, through no fault of ours, you do not
have enough money in your account to
make the transfer.
(2) If the transfer would go over the credit
limit on your overdraft line.
(3) If the automated teller machine where
you are making the transfer does not have
enough cash.
(4) If the [terminal] [system] was not work­
15

Appendix A
ing properly and you knew about the break­
down when you started the transfer.
(5) If circumstances beyond our control
(such as fire or flood) prevent the transfer,
despite reasonable precautions that we have
taken.
(6) There may be other exceptions stated in
our agreement with you.

A-3— Model Forms for Error-Resolution
Notice (§§ 205.7(b)(10) and 205.8(b)).
(a) Initial and annual error-resolution notice
(§§ 205.7(b)(10) and 205.8(b)).
In Case of Errors or Questions About Your
Electronic Transfers
Telephone us at [insert telephone number]
or
Write us at [insert address]
as soon as you can, if you think your state­
ment or receipt is wrong or if you need more
information about a transfer listed on the
statement or receipt. We must hear from you
no later than 60 days after we sent the FIRST
statement on which the problem or error
appeared.
(1) Tell us your name and account number
(if any).
(2) Describe the error or the transfer you
are unsure about, and explain as clearly as
you can why you believe it is an error or
why you need more information.
(3) Tell us the dollar amount of the sus­
pected error.
If you tell us orally, we may require that
you send us your complaint or question in
writing within 10 business days.
We will tell you the results of our investi­
gation within 10 business days after we hear
from you and will correct any error promptly.
If we need more time, however, we may take
up to 45 days to investigate your complaint or
question. If we decide to do this, we will
credit your account within 10 business days
for the amount you think is in error, so that
you will have the use of the money during the
time it takes us to complete our investigation.
If we ask you to put your complaint or ques­
tion in writing and we do not receive it within
16

Regulation E
10 business days, we may not credit your
account.
If we decide that there was no error, we
will send you a written explanation within
three business days after we finish our investi­
gation. You may ask for copies of the docu­
ments that we used in our investigation.
(b) Error-resolution notice on periodic state­
ments (§ 205.8(b)).
In Case of Errors or Questions About Your
Electronic Transfers
Telephone us at [insert telephone number]
or
Write us at [insert address]
as soon as you can, if you think your state­
ment or receipt is wrong or if you need more
information about a transfer on the statement
or receipt. We must hear from you no later
than 60 days after we sent you the FIRST
statement on which the error or problem
appeared.
(1) Tell us your name and account number
(if any).
(2) Describe the error or the transfer you
are unsure about, and explain as clearly as
you can why you believe it is an error or
why you need more information.
(3) Tell us the dollar amount of the sus­
pected error.
We will investigate your complaint and will
correct any error promptly. If we take more
than 10 business days to do this, we will
credit your account for the amount you think
is in error, so that you will have the use of
the money during the time it takes us to com­
plete our investigation.

A -4 — Model Form for Service-Providing
Institutions (§ 205.14(b)( 1)(ii))

ALL QUESTIO N S A BOUT TRA N SA C­
TIONS MADE WITH YOUR (NAME OF
CARD) CARD MUST BE DIRECTED TO
US (NAME OF SERVICE PROVIDER) AND
NOT TO THE BANK OR OTHER FINAN­
CIAL INSTITUTION WHERE YOU HAVE
YOUR ACCOUNT. We are responsible for
the [name of service] service and for resolving
any errors in transactions made with your
[name of card] card.

Regulation E
We will not send you a periodic statement
listing transactions that you make using your
[name of card] card. The transactions will ap­
pear only on the statement issued by your
bank or other financial institution. SAVE THE
RECEIPTS YOU ARE GIVEN WHEN YOU
USE YOUR [NAME OF CARD] CARD,
AND CHECK THEM AGAINST THE AC­
COUNT STATEMENT YOU RECEIV E
FROM YOUR BANK OR OTHER FINAN­
CIAL INSTITUTION. If you have any ques­
tions about one of these transactions, call or
write us at [telephone number and address]
[the telephone number and address indicated
below],
IF YOUR [NAME OF CARD] CARD IS
LOST OR STOLEN, NOTIFY US AT ONCE
by calling or writing to us at [telephone num­
ber and address].

A-5— MODEL FORMS FOR
GOVERNMENT AGENCIES
(§ 205.15(d)(I)(i) and (ii))
(1) Disclosure by government agencies o f in­
form ation about obtaining account balances
and account histories § 205.15(d)(l)(i) and
(ii).
You may obtain inform ation about the
amount of benefits you have remaining by
calling [telephone number]. That information
is also available [on the receipt you get when
you make a transfer with your card at (an
ATM)(a POS terminal)] [when you make a bal­
ance inquiry at an ATM] [when you make a
balance inquiry at specified locations].
You also have the right to receive a written
summary of transactions for the 60 days pre­
ceding your request by calling [telephone
number], [Optional: Or you may request the
summary by contacting your caseworker.]
(2) Disclosure o f error-resolution procedures
fo r government agencies that do not provide
periodic statements (§ 205.15(d)(l)(iii) and
(d)(2)).
In Case of Errors or Questions About Your
Electronic Transfers
Telephone us at [telephone number]
or
Write us at [address]

Appendix B
as soon as you can, if you think an error has
occurred in your [EBT] [agency’s name for
program] account. We must hear from you no
later than 60 days after you learn of the error.
You will need to tell us:
Your name and [case] [file] number.
Why you believe there is an error, and the
dollar amount involved.
Approximately when the error took place.
If you tell us orally, we may require that
you send us your complaint or question in
writing within 10 business days. We will gen­
erally complete our investigation within 10
business days and correct any error promptly.
In some cases, an investigation may take
longer, but you will have the use of the funds
in question after the 10 business days. If we
ask you to put your complaint or question in
writing and we do not receive it within 10
business days, we may not credit your account
during the investigation.
For errors involving transactions at pointof-sale terminals in food stores, the periods
referred to above 20 business days instead of
10 business days.
If we decide that there was no error, we
will send you a written explanation within
three business days after we finish our investi­
gation. You may ask for copies of the docu­
ments that we used in our investigation.
If you need more information about our er­
ror-resolution procedures, call us at [telephone
number][the telephone number shown above].

APPENDIX B— Federal Enforcement
Agencies
The following list indicates which federal
agency enforces Regulation E for particular
classes of institutions. Any questions concern­
ing compliance by a particular institution
should be directed to the appropriate enforcing
agency. Terms that are not defined in the Fed­
eral Deposit Insurance Act (12 USC 1813(s»
shall have the meaning given to them in the
International Banking Act of 1978 (12 USC
3101).
17

Appendix B
National banks, and federal branches and
federal agencies o f foreign banks
District office of the Office of the Comptrol­
ler of the Currency where the institution is
located

State member banks, branches and agencies
o f foreign banks (other than federal branch­
es, federal agencies, and insured state
branches o f foreign banks), commercial lend­
ing companies owned or controlled by fo r­
eign banks, and organizations operating
under section 25 or 25A o f the Federal Re­
serve Act
Federal Reserve Bank serving the District in
which the institution is located

Nonmember insured banks and insured state
branches o f foreign banks
Federal Deposit Insurance Corporation re­
gional director for the region in which the
institution is located

Savings institutions insured under the Sav­
ings Association Insurance Fund o f the
FDIC and federally chartered savings banks
insured under the Bank Insurance Fund o f
the FDIC (but not including state-chartered
savings banks insured under the Bank Insur­
ance Fund).
Office of Thrift Supervision regional director
for the region in which the institution is lo­
cated

Federal credit unions
Division of Consumer Affairs
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Regulation E
400 Seventh Street, S.W.
Washington, D.C. 20590

Brokers and dealers
Division of Market Regulation
Securities and Exchange Commission
Washington, D.C. 20549

Retailers, consumer finance companies, cer­
tain other financial institutions, and all
others not covered above
Federal Trade Commission
Electronic Fund Transfers
Washington, D.C. 20580

APPENDIX C— Issuance of Staff
Interpretations
Official S taff Interpretations
Pursuant to section 915(d) of the act, the
Board has designated the director and other
officials of the Division of Consumer and
Community Affairs as officials “duly author­
ized” to issue, at their discretion, official staff
interpretations of this part. Except in unusual
circumstances, such interpretations will not be
issued separately but will be incorporated in
an official commentary to this part, which will
be amended periodically.
Requests fo r Issuance o f Official Staff
Interpretations
A request for an official staff interpretation
shall be in writing and addressed to the Direc­
tor, Division of Consumer and Community
Affairs, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551.
The request shall contain a complete statement
of all relevant facts concerning the issue, in­
cluding copies of all pertinent documents.
Scope o f Interpretations

A ir carriers
Assistant General Counsel for
Aviation Enforcement and Proceedings
Department of Transportation
18

No staff interpretations will be issued approv­
ing financial institutions’ forms or statements.
This restriction does not apply to forms or
statements whose use is required or sanctioned
by a government agency.

Electronic Fund Transfer Act
15 USC 1693 et seq.; 92 Stat. 3728; Pub. L. 95-630, Financial Institutions
Regulatory and Interest Rate Control Act, Title XX (November 10, 1978)

SECTION 901— Short Title
This title may be cited as the “Electronic
Fund Transfer Act” .
[15 USC 1693 note.]

SECTION 902— Findings and Purpose
(a) The Congress finds that the use of elec­
tronic systems to transfer funds provides the
potential for substantial benefits to consumers.
However, due to the unique characteristics of
such systems, the application of existing con­
sumer protection legislation is unclear, leaving
the rights and liabilities of consumers, finan­
cial institutions, and intermediaries in elec­
tronic fund transfers undefined.
(b) It is the purpose of this title to provide a
basic framework establishing the rights, liabil­
ities, and responsibilities of participants in
electronic fund transfer systems. The primary
objective of this title, however, is the provi­
sion of individual consumer rights.
[15 USC 1693.]

SECTION 903— Definitions
As used in this title—
(1) the term “ accepted card or other means
of access” means a card, code, or other
means of access to a consumer’s account
for the purpose of initiating electronic fund
transfers when the person to whom such
card or other means of access was issued
has requested and received or has signed or
has used, or authorized another to use, such
card or other means of access for the pur­
pose of transferring money between ac­
counts or obtaining money, property, labor,
or services;
(2) the term “ account” means a demand
deposit, savings deposit, or other asset ac­
count (other than an occasional or inciden­
tal credit balance in an open end credit plan
as defined in section 103(i) of this Act), as
described in regulations of the Board, estab­

lished primarily for personal, family, or
household purposes, but such term does not
include an account held by a financial insti­
tution pursuant to a bona fid e tru st
agreement;
(3) the term “ Board” means the Board of
Governors of the Federal Reserve System:
(4) the term “business day” means any day
on which the offices of the consumer’s fi­
nancial institution involved in an electronic
fund transfer are open to the public for car­
rying on substantially all of its business
functions;
(5) the term “consumer” means a natural
person;
(6) the term “ electronic fund transfer”
means any transfer of funds, other than a
transaction originated by check, draft, or
similar paper instrument, which is initiated
through an electronic terminal, telephonic
instrument, or computer or magnetic tape so
as to order, instruct, or authorize a financial
institution to debit or credit an account.
Such term includes, but is not limited to,
point-of-sale transfers, automated teller ma­
chine transactions, direct deposits or with­
drawals of funds, and transfers initiated by
telephone. Such term does not include—
(A) any check guarantee or authorization
service which does not directly result in a
debit or credit to a consumer’s account;
(B) any transfer of funds, other than
those processed by automated clearing­
house, made by a financial institution on
behalf of a consumer by means of a ser­
vice that transfers funds held at either
Federal Reserve banks or other deposi­
tory institutions and which is not de­
signed primarily to transfer funds on be­
half of a consumer;
(C) any transaction the primary purpose
of which is the purchase or sale of secur­
ities or commodities through a brokerdealer registered with or regulated by the
Securities and Exchange Commission;
(D) any automatic transfer from a sav­
ings account to a demand deposit account
pursuant to an agreement between a con­
19

Electronic Fund Transfer Act

§ 903
sumer and a financial institution for the
purpose o f covering an overdraft or
maintaining an agreed upon minimum
balance in the consumer’s demand de­
posit account; or
(E) any transfer of funds which is initi­
ated by a telephone conversation between
a consumer and an officer or employee of
a financial institution which is not pursu­
ant to a prearranged plan and under
which periodic or recurring transfers are
not contemplated; as determined under
regulations of the Board;
(7) the term “electronic terminal” means
an electronic device, other than a telephone
operated by a consumer, through which a
consumer may initiate an electronic fund
transfer. Such term includes but is not lim­
ited to, point-of-sale terminals, automated
teller m achines, and cash dispensing
machines;
(8) the term “ financial institution” means a
State or National bank, a State or Federal
savings and loan association, a mutual sav­
ings bank, a State or Federal credit union,
or any other person who, directly or indi­
rectly, holds an account belonging to a
consumer;
(9) the term “preauthorized electronic fund
transfer” means an electronic fund transfer
authorized in advance to recur at substan­
tially regular intervals;
(10) the term “State” means any State, ter­
ritory, or possession of the United States,
the District of Columbia, the Common­
wealth of Puerto Rico, or any political sub­
division of any of the foregoing; and
(11) the term “unauthorized electronic fund
transfer” means an electronic fund transfer
from a consumer’s account initiated by a
person other than the consumer without ac­
tual authority to initiate such transfer and
from which the consumer receives no bene­
fit, but the term does not include any elec­
tronic fund transfer (A) initiated by a per­
son other than the consum er who was
furnished with the card, code, or other
means of access to such consumer’s ac­
count by such consumer, unless the con­
sumer has notified the financial institution
involved that transfers by such other person
are no longer authorized, (B) initiated with

fraudulent intent by the consumer or any
person acting in concert with the consumer,
or (C) which constitutes an error committed
by a financial institution.
[15 USC 1693a.]

SECTION 904— Regulations
(a) The Board shall prescribe regulations to
carry out the purposes of this title. In pre­
scribing such regulations, the Board shall:
(1) consult with the other agencies referred
to in section 917 and take into account, and
allow for, the continuing evolution of elec­
tronic banking services and the technology
utilized in such services,
(2) prepare an analysis of economic impact
which considers the cost and benefits to fi­
nancial institutions, consumers, and other
users of electronic fund transfers, including
the extent to which additional documenta­
tion, reports, records, or other paper work
would be required, and the effects upon
competition in the provision of electronic
banking services among large and small fi­
nancial institutions and the availability of
such services to different classes of con­
sumers, particularly low income consumers,
(3) to the extent practicable, the Board
shall demonstrate that the consumer protec­
tions of the proposed regulations outweigh
the compliance costs imposed upon con­
sumers and financial institutions, and
(4) any proposed regulations and accompa­
nying analyses shall be sent promptly to
Congress by the Board.
(b) The Board shall issue model clauses for
optional use by financial institutions to facili­
tate compliance with the disclosure require­
ments of section 905 and to aid consumers in
understanding the rights and responsibilities of
participants in electronic fund transfers by
utilizing readily understandable language.
Such model clauses shall be adopted after no­
tice duly given in the Federal Register and
opportunity for public comment in accordance
with section 553 of title 5, United States
Code. With respect to the disclosures required
by section 905(a)(3) and (4), the Board shall
take account of variations in the services and

Electronic Fund Transfer Act
charges under different electronic fund transfer
systems and, as appropriate, shall issue alter­
native model clauses for disclosure of these
differing account terms.
(c) Regulations prescribed hereunder may
contain such classifications, differentiations, or
other provisions, and may provide for such
adjustments and exceptions for any class of
electronic fund transfers, as in the judgment
of the Board are necessary or proper to effec­
tuate the purposes of this title, to prevent cir­
cumvention or evasion thereof, or to facilitate
compliance therewith. The Board shall by reg­
ulation modify the requirements imposed by
this title on small financial institutions if the
Board determines that such modifications are
necessary to alleviate any undue compliance
burden on small financial institutions and such
modifications are consistent with the purpose
and objective of this title.
(d) In the event that electronic fund transfer
services are made available to consumers by a
person other than a financial institution hold­
ing a consumer’s account, the Board shall by
regulation assure that the disclosures, protec­
tions, responsibilities, and remedies created by
this title are made applicable to such persons
and services.
[15 USC 1693b.]

SECTION 905— Terms and Conditions
of Transfers
(a) The terms and conditions of electronic
fund transfers involving a consumer’s account
shall be disclosed at the time the consumer
contracts for an electronic fund transfer ser­
vice, in accordance with regulations of the
Board. Such disclosures shall be in readily un­
derstandable language and shall include, to the
extent applicable—
(1) the consumer’s liability for unautho­
rized electronic fund transfers and, at the
financial institution’s option, notice of the
advisability of prompt reporting of any loss,
theft, or unauthorized use of a card, code,
or other means of access;
(2) the telephone number and address of
the person or office to be notified in the
event the consumer believes that an unau­

§ 905
thorized electronic fund transfer has been or
may be effected;
(3) the type and nature of electronic fund
transfers which the consumer may initiate,
including any limitations on the frequency
or dollar amount of such transfers, except
that the details of such limitations need not
be disclosed if their confidentiality is neces­
sary to maintain the security of an elec­
tronic fund transfer system, as determined
by the Board;
(4) any charges for electronic fund transfers
or for the right to make such transfers;
(5) the consumer’s right to stop payment of
a preauthorized electronic fund transfer and
the procedure to initiate such a stop pay­
ment order;
(6) the consumer’s right to receive docu­
mentation of electronic fund transfers under
section 906;
(7) a summary, in a form prescribed by
regulations of the Board, of the error reso­
lution provisions of section 908 and the
consumer’s rights thereunder. The financial
institution shall thereafter transm it such
summary at least once per calendar year;
(8) the financial institution’s liability to the
consumer under section 910; and
(9) under what circumstances the financial
institution will in the ordinary course of
business disclose information concerning
the consumer’s account to third persons.
(b) A financial institution shall notify a con­
sumer in writing at least twenty-one days
prior to the effective date of any change in
any term or condition of the consumer’s ac­
count required to be disclosed under subsec­
tion (a) if such change would result in greater
cost or liability for such consumer or de­
creased access to the consumer’s account. A
financial institution may, however, implement
a change in the terms or conditions of an ac­
count without prior notice when such change
is immediately necessary to maintain or re­
store the security of an electronic fund trans­
fer system or a consumer’s account. Subject
to subsection (a)(3), the Board shall require
subsequent notification if such a change is
made permanent.
(c) For any account of a consumer made ac­
cessible to electronic fund transfers prior to
21

§ 905
the effective date of this title, the information
required to be disclosed to the consumer
under subsection (a) shall be disclosed not
later than the earlier of—
(1) the first periodic statement required by
section 906(c) after the effective date of
this title; or
(2) thirty days after the effective date of
this title.
[15 USC 1693c.]

SECTION 906— Documentation of
Transfers; Periodic Statements
(a) For each electronic fund transfer initiated
by a consumer from an electronic terminal,
the financial institution holding such con­
sumer’s account shall, directly or indirectly, at
the time the transfer is initiated, make avail­
able to the consumer written documentation of
such transfer. The documentation shall clearly
set forth to the extent applicable—
(1) the amount involved and date the trans­
fer is initiated;
(2) the type of transfer;
(3) the identity of the consumer’s account
with the financial institution from which or
to which funds are transferred;
(4) the identity of any third party to whom
or from whom funds are transferred; and
(5) the location or identification of the elec­
tronic terminal involved.
(b) For a consumer’s account which is sched­
uled to be credited by a preauthorized elec­
tronic fund transfer from the same payor at
least once in each successive sixty-day period,
except where the payor provides positive no­
tice of the transfer to the consumer, the finan­
cial institution shall elect to provide promptly
either positive notice to the consumer when
the credit is made as scheduled, or negative
notice to the consumer when the credit is not
made as scheduled, in accordance with regula­
tions of the Board. The means of notice
elected shall be disclosed to the consumer in
accordance with section 905.
(c) A financial institution shall provide each
consumer with a periodic statement for each
account of such consumer that may be ac­
cessed by means of an electronic fund trans22

Electronic Fund Transfer Act
fer. Except as provided in subsections (d) and
(e), such statement shall be provided at least
monthly for each monthly or shorter cycle in
which an electronic fund transfer affecting the
account has occurred, or every three months,
whichever is more frequent. The statement,
which may include inform ation regarding
transactions other than electronic fund trans­
fers, shall clearly set forth—
(1) with regard to each electronic fund
transfer during the period, the information
described in subsection (a), which may be
provided on an accompanying document;
(2) the amount of any fee or charge as­
sessed by the financial institution during the
period for electronic fund transfers or for
account maintenance;
(3) the balances in the consumer’s account
at the beginning of the period and at the
close of the period; and
(4) the address and telephone number to be
used by the financial institution for the pur­
pose of receiving any statement inquiry or
notice of account error from the consumer.
Such address and telephone number shall be
preceded by the caption “ Direct Inquiries
To:” or other similar language indicating
that the address and number are to be used
for such inquiries or notices.
(d) In the case of a consumer’s passbook ac­
count which may not be accessed by elec­
tronic fund transfers other than preauthorized
electronic fund transfers crediting the account,
a financial institution may, in lieu of comply­
ing with the requirements of subsection (c),
upon presentation of the passbook provide the
consumer in writing with the amount and date
of each such transfer involving the account
since the passbook was last presented.
(e) In the case of a consumer’s account other
than a passbook account, which may not be
accessed by electronic fund transfers other
than preauthorized electronic fund transfers
crediting the account, the financial institution
may provide a periodic statement on a quar­
terly basis which otherwise complies with the
requirements of subsection (c).
(f) In any action involving a consumer, any
documentation required by this section to be
given to the consumer which indicates that an

Electronic Fund Transfer Act
electronic fund transfer was made to another
person shall be admissible as evidence of such
transfer and shall constitute prima facie proof
that such transfer was made.
[15 USC 1693d.)

SECTION 907— Preauthorized Transfers
(a) A preauthorized electronic fund transfer
from a consumer’s account may be authorized
by the consumer only in writing, and a copy
of such authorization shall be provided to the
consumer when made. A consumer may stop
payment of a preauthorized electronic fund
transfer by notifying the financial institution
orally or in writing at any time up to three
business days preceding the scheduled date of
such transfer. The financial institution may re­
quire written confirmation to be provided to it
within fourteen days of an oral notification if,
when the oral notification is made, the con­
sumer is advised of such requirement and the
address to which such confirmation should be
sent.
(b) In the case of preauthorized transfers from
a consumer’s account to the same person
which may vary in amount, the financial insti­
tution or designated payee shall, prior to each
transfer, provide reasonable advance notice to
the consumer, in accordance with regulations
of the Board, of the amount to be transferred
and the scheduled date of the transfer.
[15

use

1693e.]

SECTION 908— Error Resolution
(a) If a financial institution, within sixty days
after having transmitted to a consumer docu­
mentation pursuant to section 906 (a), (c), or
(d) or notification pursuant to section 906(b),
receives oral or written notice in which the
consumer—
(1) sets forth or otherwise enables the fi­
nancial institution to identify the name and
account number of the consumer;
(2) indicates the consumer’s belief that the
documentation, or, in the case of notifica­
tion pursuant to section 906(b), the con­

§ 908
sumer’s account, contains an error and the
amount of such error; and
(3) sets forth the reasons for the con­
sumer’s belief (where applicable) that an er­
ror has occurred, the financial institution
shall investigate the alleged error, determine
whether an error has occurred, and report or
mail the results of such investigation and
determination to the consumer within ten
business days. The financial institution may
require written confirmation to be provided
to it within ten business days of an oral
notification of error if, when the oral notifi­
cation is made, the consumer is advised of
such requirement and the address to which
such confirmation should be sent. A finan­
cial institution which requires written con­
firmation in accordance with the previous
sentence need not provisionally recredit a
consumer’s account in accordance with sub­
section (c), nor shall the financial institution
be liable under subsection (e) if the written
confirmation is not received within the tenday period referred to in the previous
sentence.
(b) If the financial institution determines that
an error did occur, it shall promptly, but in no
event more than one business day after such
determination, correct the error, subject to sec­
tion 909, including the crediting of interest
where applicable.
(c) If a financial institution receives notice of
an error in the manner and within the time
period specified in subsection (a), it may, in
lieu of the requirements of subsections (a) and
(b), within ten business days after receiving
such notice provisionally recredit the con­
sumer’s account for the amount alleged to be
in error, subject to section 909, including in­
terest where applicable, pending the conclu­
sion of its investigation and its determination
of whether an error has occurred. Such inves­
tigation shall be concluded not later than
forty-five days after receipt of notice of the
error. During the pendency of the investiga­
tion, the consumer shall have full use of the
funds provisionally recredited.
(d) If the financial institution determines after
its investigation pursuant to subsection (a) or
(c) that an error did not occur, it shall deliver
23

§ 908
or mail to the consumer an explanation of its
findings within 3 business days after the con­
clusion of its investigation, and upon request
of the consumer promptly deliver or mail to
the consumer reproductions of all documents
which the financial institution relied on to
conclude that such error did not occur. The
financial institution shall include notice of the
right to request reproductions with the expla­
nation of its findings.
(e) If in any action under section 915, the
court finds that—
(1) the financial institution did not provi­
sionally recredit a consum er’s account
within the ten-day period specified in sub­
section (c), and the financial institution (A)
did not make a good faith investigation of
the alleged error, or (B) did not have a rea­
sonable basis for believing that the con­
sumer’s account was not in error; or
(2) the financial institution knowingly and
willfully concluded that the consumer’s ac­
count was not in error when such conclu­
sion could not reasonably have been drawn
from the evidence available to the financial
institution at the time of its investigation,
then the consumer shall be entitled to treble
dam ages determ ined under section
915(a)(1).
(f) For the purpose of this section, an error
consists of—
(1) an unauthorized electron ic fund
transfer;
(2) an incorrect electronic fund transfer
from or to the consumer’s account;
(3) the omission from a periodic statement
of an electronic fund transfer affecting the
consum er’s account which should have
been included;
(4) a computational error by the financial
institution;
(5) the consumer’s receipt of an incorrect
am ount of m oney from an electronic
terminal;
(6) a consumer’s request for additional in­
formation or clarification concerning an
electronic fund transfer or any documenta­
tion required by this title; or
(7) any other error described in regulations
of the Board.

Electronic Fund Transfer Act
[15 USC 1693f.)

SECTION 909— Consumer Liability for
Unauthorized Transfers
(a) A consumer shall be liable for any unau­
thorized electronic fund transfer involving the
account of such consumer only if the card or
other means of access utilized for such trans­
fer was an accepted card or other means of
access and if the issuer of such card, code, or
other means of access has provided a means
whereby the user of such card, code, or other
means of access can be identified as the per­
son authorized to use it, such as by signature,
photograph, or fingerprint or by electronic or
mechanical confirmation. In no event, how­
ever, shall a consumer’s liability for an unau­
thorized transfer exceed the lesser of—
(1) $50; or
(2) the amount of money or value of prop­
erty or services obtained in such unautho­
rized electronic fund transfer prior to the
time the financial institution is notified of,
or otherwise becomes aware of, circum­
stances which lead to the reasonable belief
that an unauthorized electronic fund transfer
involving the consumer’s account has been
or may be effected. Notice under this para­
graph is sufficient when such steps have
been taken as may be reasonably required
in the ordinary course of business to pro­
vide the financial institution with the perti­
nent information, whether or not any partic­
ular officer, employee, or agent of the
financial institution does in fact receive
such information.
Notwithstanding the foregoing, reimbursement
need not be made to the consumer for losses
the financial institution establishes would not
have occurred but for the failure of the con­
sumer to report within sixty days of transmit­
tal of the statement (or in extenuating circum­
stances such as extended trav el or
hospitalization, within a reasonable time under
the circumstances) any unauthorized electronic
fund transfer or account error which appears
on the periodic statement provided to the con­
sumer under section 906. In addition, reim­
bursement need not be made to the consumer
for losses which the financial institution estab­

§ 910

Electronic Fund Transfer Act
lishes would not have occurred but for the
failure of the consumer to report any loss or
theft of a card or other means of access
within two business days after the consumer
learns of the loss or theft (or in extenuating
circumstances such as extended travel or hos­
pitalization, within a longer period which is
reasonable under the circumstances), but the
consumer’s liability under this subsection in
any such case may not exceed a total of $500,
or the amount of unauthorized electronic fund
transfers which occur following the close of
two business days (or such longer period) af­
ter the consumer learns of the loss or theft but
prior to notice to the financial institution
under this subsection, whichever is less.
(b) In any action which involves a con­
sumer’s liability for an unauthorized electronic
fund transfer, the burden of proof is upon the
financial institution to show that the electronic
fund transfer was authorized or, if the elec­
tronic fund transfer was unauthorized, then the
burden of proof is upon the financial institu­
tion to establish that the conditions of liability
set forth in subsection (a) have been met, and,
if the transfer was initiated after the effective
date of section 905, that the disclosures re­
quired to be made to the consumer under sec­
tion 905(a) (1) and (2) were in fact made in
accordance with such section.
(c) In the event of a transaction which in­
volves both an unauthorized electronic fund
transfer and an extension of credit as defined
in section 103(e) of this Act pursuant to an
agreement between the consumer and the fi­
nancial institution to extend such credit to the
consumer in the event the consumer’s account
is overdrawn, the limitation on the consumer’s
liability for such transaction shall be deter­
mined solely in accordance with this section.
(d) Nothing in this section imposes liability
upon a consumer for an unauthorized elec­
tronic fund transfer in excess of his liability
for such a transfer under other applicable law
or under any agreement with the consumer’s
financial institution.
(e) Except as provided in this section, a con­
sumer incurs no liability from an unauthorized
electronic fund transfer.

[15 USC 1693g.]

SECTION 910— Liability of Financial
Institutions
(a) Subject to subsections (b) and (c), a finan­
cial institution shall be liable to a consumer
for all damages proximately caused by—
(1) the financial institution’s failure to
make an electronic fund transfer, in accor­
dance with the terms and conditions of an
account, in the correct amount or in a
timely manner when properly instructed to
do so by the consumer, except where—
(A) the consumer’s account has insuffi­
cient funds;
(B) the funds are subject to legal process
or other encumbrance restricting such
transfer;
(C) such transfer would exceed an estab­
lished credit limit;
(D) an electronic terminal has insufficient
cash to complete the transaction; or
(E) as otherwise provided in regulations
of the Board;
(2) the financial institution’s failure to
make an electronic fund transfer due to in­
sufficient funds when the financial institu­
tion failed to credit, in accordance with the
terms and conditions of an account, a de­
posit of funds to the consumer’s account
which would have provided sufficient funds
to make the transfer, and
(3) the financial institution’s failure to stop
payment of a preauthorized transfer from a
consumer’s account when instructed to do
so in accordance with the terms and condi­
tions of the account.
(b) A financial institution shall not be liable
under subsection (a)(1) or (2) if the financial
institution shows by a preponderance of the
evidence that its action or failure to act re­
sulted from—
(1) an act of God or other circumstance be­
yond its control, that it exercised reasonable
care to prevent such an occurrence, and that
it exercised such diligence as the circum­
stances required; or
(2) a technical m alfunction which was
known to the consumer at the time he at­
tempted to initiate an electronic fund trans25

Electronic Fund Transfer Act

§ 910
fer or, in the case of a preauthorized trans­
fer, at the time such transfer should have
occurred.
(c) In the case of a failure described in sub­
section (a) which was not intentional and
which resulted from a bona fide error, not­
withstanding the maintenance of procedures
reasonably adapted to avoid any such error,
the financial institution shall be liable for ac­
tual damages proved.
[15 USC 1693h.]

SECTION 911— Issuance o f Cards or
Other Means of Access
(a) No person may issue to a consumer any
card, code, or other means of access to such
consumer’s account for the purpose of initiat­
ing an electronic fund transfer other than—
(1) in response to a request or application
therefor; or
(2) as a renewal of, or in substitution for,
an accepted card, code, or other means of
access, whether issued by the initial issuer
or a successor.
(b) Notwithstanding the provisions of subsec­
tion (a), a person may distribute to a con­
sumer on an unsolicited basis a card, code, or
other means of access for use in initiating an
electronic fund transfer from such consumer’s
account, if—
(1) such card, code, or other means of ac­
cess is not validated;
(2) such distribution is accompanied by a
complete disclosure, in accordance with
section 905, of the consumer’s rights and
liabilities which will apply if such card,
code, or other means of access is validated;
(3) such distribution is accompanied by a
clear explanation, in accordance with regu­
lations of the Board, that such card, code,
or other means of access is not validated
and how the consumer may dispose of such
code, card, or other means of access if vali­
dation is not desired; and
(4) such card, code, or other means of ac­
cess is validated only in response to a re­
quest or application from the consumer,
upon verification of the consumer’s identity.
26

(c) For the purpose of subsection (b), a card,
code, or other means of access is validated
when it may be used to initiate an electronic
fund transfer.
[15 USC 16931.]

SECTION 912— Suspension of
Obligations
If a system malfunction prevents the effectua­
tion of an electronic fund transfer initiated by
a consumer to another person, and such other
person has agreed to accept payment by such
means, the consumer’s obligation to the other
person shall be suspended until the malfunc­
tion is corrected and the electronic fund trans­
fer may be completed, unless such other per­
son has subsequently, by written request,
demanded payment by means other than an
electronic fund transfer.
[15 USC 1693j.]

SECTION 913— Compulsory Use of
Electronic Fund Transfers
No person may—
(1) condition the extension of credit to a
consumer on such consumer’s repayment by
means of preauthorized electronic fund
transfers; or
(2) require a consumer to establish an ac­
count for receipt of electronic fund transfers
with a particular financial institution as a
condition of employment or receipt of a
government benefit.
[15 USC 1693k.]

SECTION 914— Waiver of Rights
No writing or other agreement between a con­
sumer and any other person may contain any
provision which constitutes a waiver of any
right conferred or cause of action created by
this title. Nothing in this section prohibits,
however, any w riting or other agreement
which grants to a consumer a more extensive
right or remedy or greater protection than con­
tained in this title or a waiver given in settle­
ment of a dispute or action.

§ 915

Electronic Fund Transfer Act
[15 USC 1693 /.]

SECTION 915— Civil Liability
(a) Except as otherwise provided by this sec­
tion and section 910, any person who fails to
comply with any provision of this title with
respect to any consumer, except for an error
resolved in accordance with section 908, is li­
able to such consumer in an amount equal to
the sum of—
(1) any actual damage sustained by such
consumer as a result of such failure;
(2) (A) in the case of an individual action,
an amount not less than $100 nor greater
than $1,000; or
(B) in the case of a class action, such
amount as the court may allow, except
that (i) as to each member of the class no
minimum recovery shall be applicable,
and (ii) the total recovery under this subparagraph in any class action or series of
class actions arising out of the same fail­
ure to comply by the same person shall
not be more than the lesser of $500,000
or 1 per centum of the net worth of the
defendant; and
(3) in the case of any successful action to
enforce the foregoing liability, the costs of
the action, together with a reasonable attor­
ney’s fee as determined by the court,
(b) In determining the amount of liability in
any action under subsection (a), the court
shall consider, among other relevant factors—
(1) in any individual action under subsec­
tion (a)(2)(A), the frequency and persistence
of noncompliance, the nature of such noncompliance, and the extent to which the
noncompliance was intentional; or
(2) in any class action under subsection
(a)(2)(B), the frequency and persistence of
noncompliance, the nature of such compli­
ance, the resources of the defendant, the
number of persons adversely affected, and
the extent to which the noncompliance was
intentional.
(c) Except as provided in section 910, a per­
son may not be held liable in any action
brought under this section for a violation of
this title if the person shows by a preponder­

ance of evidence that the violation was not
intentional and resulted from a bona fide error
notwithstanding the maintenance of proce­
dures reasonably adapted to avoid any such
error.
(d) No provision of this section or section
916 imposing any liability shall apply to—
(1) any act done or omitted in good faith in
conformity with any rule, regulation, or in­
terpretation thereof by the Board or in con­
formity with any interpretation or approval
by an official or employee of the Federal
Reserve System duly authorized by the
Board to issue such interpretations or ap­
provals under such procedures as the Board
may prescribe therefor; or
(2) any failure to make disclosure in proper
form if a financial institution utilized an ap­
propriate model clause issued by the Board,
notwithstanding that after such act, omission,
or failure has occurred, such rule, regulation,
approval, or model clause is amended, re­
scinded, or determined by judicial or other au­
thority to be invalid for any reason.
(e) A person has no liability under this sec­
tion for any failure to comply with any re­
quirement under this title if, prior to the insti­
tution of an action under this section, the
person notifies the consumer concerned of the
failure, complies with the requirements of this
title, and makes an appropriate adjustment to
the consumer’s account and pays actual dam­
ages or, where applicable, damages in accor­
dance with section 910.
(f) On a finding by the court that an unsuc­
cessful action under this section was brought
in bad faith or for purposes of harassment, the
court shall award to the defendant attorney’s
fees reasonable in relation to the work ex­
pended and costs.
(g) Without regard to the amount in contro­
versy, any action under this section may be
brought in any United States district court, or
in any other court of competent jurisdiction,
within one year from the date of the occur­
rence of the violation.
[15 USC 1693m.]

27

Electronic Fund Transfer Act

§ 916

SECTION 916— Criminal Liability
(a) Whoever knowingly and willfully—
(1) gives false or inaccurate information or
fails to provide information which he is re­
quired to disclose by this title or any regu­
lation issued thereunder; or
(2) otherwise fails to comply with any pro­
vision of this title; shall be fined not more
than $5,000 or imprisoned not more than
one year, or both.
(b) Whoever—
(1) knowingly, in a transaction affecting in­
terstate or foreign commerce, uses or at­
tempts or conspires to use any counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained debit instrument to
obtain money, goods, services, or anything
else of value which within any one-year pe­
riod has a value aggregating $1,000 or
more; or
(2) with unlawful or fraudulent intent,
transports or attempts or conspires to trans­
port in interstate or foreign commerce a
counterfeit, fictitious, altered, forged, lost,
stolen, or fraudulently obtained debit instru­
ment knowing the same to be counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained; or
(3) with unlawful or fraudulent intent, uses
any instrumentality of interstate or foreign
commerce to sell or transport a counterfeit,
fictitious, altered, forged, lost, stolen, or
fraudulently obtained debit instrum ent
knowing the same to be counterfeit, ficti­
tious, altered, forged, lost, stolen, or fraudu­
lently obtained; or
(4) knowingly receives, conceals, uses, or
transports money, goods, services, or any­
thing else of value (except tickets for inter­
state or foreign transportation) which (A)
within any one-year period has a value ag­
gregating $1,000 or more, (B) has moved in
or is part of, or which constitutes interstate
or foreign commerce and (C) has been ob­
tained with a counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained
debit instrument; or
(5) knowingly receives, conceals, uses,
sells, or transports in interstate or foreign
commerce one or more tickets for interstate
or foreign transportation, which (A) within

any one-year period have a value aggregat­
ing $500 or more, and (B) have been pur­
chased or obtained with one or more coun­
terfeit, fictitious, altered, forged, lost, stolen,
or fraudulently obtained debit instrument; or
(6)
in a transaction affecting interstate or
foreign commerce, furnishes money, prop­
erty, services, or anything else of value,
which within any one-year period has a
value aggregating $1,000 or more, through
the use of any counterfeit, fictitious, altered,
forged, lost, stolen, or fraudulently obtained
debit instrument knowing the same to be
counterfeit, fictitious, altered, forged, lost,
stolen, or fraudulently obtained—
shall be fined not more than $10,000 or im­
prisoned not more than ten years, or both.
(c) As used in this section, the term “debit
instrument” means a card, code, or other de­
vice, other than a check, draft, or similar pa­
per instrument, by the use of which a person
may initiate an electronic fund transfer.
[15 USC 1693n.]

SECTION 917— Administrative
Enforcement
(a) Compliance with the requirements im­
posed under this title shall be enforced
under—
(1) section 8 of the Federal Deposit Insur­
ance Act, in the case of—
(A) national banks, and Federal branches
and Federal agencies of foreign banks, by
the Office of the Com ptroller o f the
Currency;
(B) member banks of the Federal Re­
serve System (other than national banks),
branches and agencies of foreign banks
(other than Federal branches, Federal
agencies, and insured State branches of
foreign banks), commercial lending com­
panies owned or controlled by foreign
banks, and organizations operating under
section 25 or 25A of the Federal Reserve
Act, by the Board; and
(C) banks insured by the Federal Deposit
Insurance Corporation (other than mem­
bers of the Federal Reserve System) and
insured State branches of foreign banks,

Electronic Fund Transfer Act
by the Board of Directors of the Federal
Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insur­
ance Act, by the Director of the Office of
Thrift Supervision, in the case of a savings
association the deposits of which are in­
sured by the Federal Deposit Insurance Cor­
poration;
(3) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal
credit union.
(4) the Federal Aviation Act of 1958, by
the Civil Aeronautics Board, with respect to
any air carrier or foreign air carrier subject
to that Act; and
(5) the Securities Exchange Act of 1934,
by the Securities and Exchange Commis­
sion, with respect to any broker or dealer
subject to that Act.
The terms used in paragraph (1) that are not
defined in this title or otherwise defined in
section 3(s) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(s» shall have the mean­
ing given to them in section 1(b) of the Inter­
national Banking Act of 1978 (12 U.S.C.
3101).
(b) For the purpose of the exercise by any
agency referred to in subsection (a) of its
powers under any Act referred to in that sub­
section, a violation of any requirement im­
posed under this title shall be deemed to be a
violation of a requirement imposed under that
Act. In addition to its powers under any pro­
vision of law specifically referred to in sub­
section (a), each of the agencies referred to in
that subsection may exercise, for the purpose
of enforcing compliance with any requirement
imposed under this title, any other authority
conferred on it by law.
(c) Except to the extent that enforcement of
the requirements imposed under this title is
specifically committed to some other Govern­
ment agency under subsection (a), the Federal
Trade Commission shall enforce such require­
ments. For the purpose of the exercise by the
Federal Trade Commission of its functions
and powers under the Federal Trade Commis­
sion Act, a violation of any requirement im­
posed under this title shall be deemed a viola­
tion of a requirement imposed under that Act.

§ 919
All of the functions and powers of the Federal
Trade Commission under the Federal Trade
Commission Act are available to the Commis­
sion to enforce compliance by any person sub­
ject to the jurisdiction of the Commission
with the requirements imposed under this title,
irrespective of whether that person is engaged
in commerce or meets any other jurisdictional
tests in the Federal Trade Commission Act.
[15 use 1693o. As amended by acts o f Aug. 9, 1989 (103
Stat. 440) and Dec. 19, 1991 (105 Stat. 2301).]

SECTION 918— Reports to Congress
(a) Not later than twelve months after the ef­
fective date of this title and at one-year inter­
vals thereafter, the Board shall make reports
to the Congress concerning the administration
of its functions under this title, including such
recommendations as the Board deems neces­
sary or appropriate. In addition, each report of
the Board shall include its assessment of the
extent to which compliance with this title is
being achieved, and a summary of the en­
forcement actions taken under section 917 of
this title. In such report, the Board shall par­
ticularly address the effects of this title on the
costs and benefits to financial institutions and
consumers, on competition, on the introduc­
tion of new technology, on the operations of
financial institutions, and on the adequacy of
consumer protection.
(b) In the exercise of its functions under this
title, the Board may obtain upon request the
views of any other Federal agency which, in
the judgment of the Board, exercises regula­
tory or supervisory functions with respect to
any class of persons subject to this title.
[15 USC 1693p. As amended by act o f Dec. 21, 1982 (96
Stat. 1825). ]

SECTION 919— Relation to State Laws
This title does not annul, alter, or affect the
laws of any State relating to electronic fund
transfers, except to the extent that those laws
are inconsistent with the provisions of this ti­
tle, and then only to the extent of the incon­
sistency. A State law is not inconsistent with
this title if the protection such law affords any
29

Electronic Fund Transfer Act

§ 919
consumer is greater than the protection af­
forded by this title. The Board shall, upon its
own motion or upon the request of any finan­
cial institution, State, or other interested party,
submitted in accordance with procedures pre­
scribed in regulations of the Board, determine
whether a State requirement is inconsistent or
affords greater protection. If the Board deter­
mines that a State requirement is inconsistent,
financial institutions shall incur no liability
under the law of that State for a good faith
failure to comply with that law, notwithstand­
ing that such determination is subsequently
amended, rescinded, or determined by judicial
or other authority to be invalid for any reason.
This title does not extend the applicability of
any such law to any class of persons or trans­
actions to which it would not otherwise apply.
[15 USC 1693q.]

SECTION 920— Exemption for State
Regulation
The Board shall by regulation exempt from

the requirements of this title any class of elec­
tronic fund transfers within any State if the
Board determines that under the law of that
State that class of electronic fund transfers is
subject to requirements substantially similar to
those imposed by this title, and that there is
adequate provision for enforcement.
[15 USC 1693r.]

SECTION 921— Effective Date
This title takes effect upon the expiration of
eighteen months from the date of its enact­
ment, except that sections 909 and 911 take
effect upon the expiration of ninety days after
the date of enactment.
[15

u se

1693 note.]

Board of Governors of the Federal Reserve System

Regulation S
Reimbursement for Providing
Financial Records;
Recordkeeping Requirements
for Certain Financial Records
12 CFR 219; as amended, effective July 12, 1996

Any inquiry relating to Regulation S should be addressed to the Federal Reserve Bank of the
District in which the inquiry arises.
July 1996

Contents

Subpart A— Reimbursement to
Financial Institutions for Providing
Financial Records

Page

Section 219.1—Authority, purpose, and
sc o p e ............................................................
Section 219.2—D efinitions............................
Section 219.3—Cost reimbursement.............
(a) Fees pay ab le........................................
(b) Search and processing costs...............
(c) Reproduction c o s ts ..............................
(d) Transportation costs ............................
Appendix A to section 219.3—
Reimbursement schedule............................
Section 219.4— E xceptions............................
(a) Security interests, bankruptcy
claims, debt collection.........................
(b) Government loan p ro g ram s...............
(c) Nonidentifiable inform ation...............
(d) Financial supervisory ag en cies..........
(e) Internal Revenue sum m o n s...............
(0 Federally required re p o rts ..................
(g) Government civil or criminal
litigation................................................
(h) Administrative agency subpoenas . .
(i) Investigation of financial
institution or its noncustomer.............
(j) General Accounting Office
requests..................................................
(k) Federal Housing Finance Board
requests..................................................
(Z) Department of Veterans Affairs . . . .
Section 219.5—Conditions for payment . .
(a) Direct co sts...........................................

1
1
1
1
1
2
2
2
2
2
2
2
2
2
2

Page
(b) Compliance with legal process,
request, or authorization.................... 3
(c) Itemized bill or invoice..................... 3
Section 219.6—Payment procedures............. 3
(a) Notice to submit invoice................... 3
(b) Special notice ..................................... 3
Subpart B— Recordkeeping and Reporting
Requirements for Funds Transfers and
Transmittals of Funds
Section 219.21—Authority, purpose, and
sc o p e ............................................................ 3
Section 219.22—D efinitions......................... 3
Section 219.23— Recordkeeping and
reporting requirements .............................. 4
(a) Domestic and international funds
transfers by insured depository
institutions............................................. 4
(b) International transmittals of funds
by financial institutions other than
insured depository institutions............. 4
Section 219.24— Retention p e rio d ............... 4

2
2

STATUTORY AUTHORITY
2

Right to Financial Privacy Act of 1978
2
2
3
3
3

Section 1115-^Cost reim bursement.............

5

Federal Deposit Insurance Act
Section 21—Retention of records by
insured depository institutions..................

5

Regulation S
Reimbursement for Providing Financial Records;
Recordkeeping Requirements for Certain Financial Records
12 CFR 219; as amended effective July 12, 1996

SUBPART A— REIMBURSEMENT TO
FINANCIAL INSTITUTIONS FOR
PROVIDING FINANCIAL RECORDS

SECTION 219.1— Authority, Purpose
and Scope
This subpart of Regulation S is issued by the
Board of Governors of the Federal Reserve
System (the Board) under section 1115 of the
Right to Financial Privacy Act (the act) (12
USC 3415). It establishes the rates and condi­
tions for reimbursement of reasonably neces­
sary costs directly incurred by financial insti­
tutions in assembling or providing customer
financial records to a government authority
pursuant to the act.

SECTION 219.2— Definitions
For the purposes of this subpart, the following
definitions shall apply:
Customer means any person or authorized rep­
resentative of that person who uses any ser­
vice of a financial institution, or for whom a
financial institution acts or has acted as a fidu­
ciary in relation to an account maintained in
the person’s name. Customer does not include
corporations or partnerships comprised of
more than five persons.
Financial institution means any office of a
bank, savings bank, card issuer as defined in
section 103 of the Consumer Credit Protection
Act (15 USC 1602(n)), industrial loan com­
pany, trust company, savings association,
building and loan, or homestead association
(including cooperative banks), credit union, or
consumer finance institution, located in any
state or territory of the United States, the Dis­
trict of Columbia, Puerto Rico, Guam, Ameri­
can Samoa, or the Virgin Islands.
Financial record means an original or copy
of, or information known to have been de­
rived from, any record held by a financial in­

stitution pertaining to a customer’s relation­
ship with the financial institution.
Government authority means any agency or
department of the United States, or any of­
ficer, employee, or agent thereof.
Person means an individual or a partnership
of five or fewer individuals.

SECTION 219.3— Cost Reimbursement
(a) Fees payable. Except as provided in sec­
tion 219.4, a government authority, or a court
issuing an order or subpoena in connection
with grand jury proceedings, seeking access to
financial records pertaining to a customer shall
reimburse the financial institution for reasona­
bly necessary costs directly incurred in search­
ing for, reproducing or transporting books, pa­
pers, records, or other data as set forth in this
section. The reimbursement schedule for a fi­
nancial institution is set forth in appendix A
to this section. If a financial institution has
financial records that are stored at an indepen­
dent storage facility that charges a fee to
search for, reproduce, or transport particular
records requested, these costs are considered
to be directly incurred by the financial institu­
tion and may be included in the
reimbursement.
(b) Search and processing costs. (1) Reim­
bursement of search and processing costs shall
cover the total amount of personnel time spent
in locating, retrieving, reproducing, and
preparing financial records for shipment.
Search and processing costs shall not cover
analysis of material or legal advice.
(2) If item ized separately, search and
processing costs may include the actual cost
of extracting information stored by com­
puter in the format in which it is normally
produced, based on computer time and nec­
essary supplies; however, personnel time for
computer search may be paid for only at
the rates specified in appendix A to this
section.
1

§ 219.3

Regulation S

(c) Reproduction costs. The reimbursement
rates for reproduction costs for requested doc­
uments are set forth in appendix A to this
section. Copies of photographs, films, com­
puter tapes, and other materials not listed in
appendix A to this section are reimbursed at
actual cost.
(d) Transportation costs. Reimbursement for
transportation costs shall be for the reasonably
necessary costs directly incurred to transport
personnel to locate and retrieve the requested
information, and to convey such material to
the place of examination.

Appendix A to Section
219.3— Reimbursement Schedule
Reproduction:
Photocopy, per page
Paper copies of microfiche, per
frame
Duplicate microfiche, per
microfiche
Computer diskette
Search and Processing:
Clerical/Technical, hourly rate
Manager/Supervisory, hourly rate

$

.25

$

.25

$ .50
$ 5.00
$11.00
$17.00

SECTION 219.4— Exceptions
A financial institution is not entitled to reim­
bursement under this subpart for costs in­
curred in assembling or providing financial
records or information related to:
(a) Security interests, bankruptcy claims, debt
collection. Any financial records provided as
an incident to perfecting a security interest,
proving a claim in bankruptcy, or otherwise
collecting on a debt owing either to the finan­
cial institution itself or in its role as a
fiduciary.
(b) G overnm ent loan program s. Financial
records that are necessary to permit the appro­
priate government authority to carry out its re­
sponsibilities under a government loan, loan
guaranty, or loan insurance program.
(c) N onidentifiable inform ation. Financial
records that are not identified with or identifi­

able as being derived from the financial
records of a particular customer.
(d) Financial supervisory agencies. Financial
records disclosed to a financial supervisory
agency in the exercise of its supervisory, reg­
ulatory, or monetary functions with respect to
a financial institution.
(e) Internal Revenue summons. Financial
records disclosed in accordance with proce­
dures authorized by the Internal Revenue
Code.
(f) F ederally required reports. Financial
records required to be reported in accordance
with any federal statute or rule promulgated
thereunder.
(g) Government civil or criminal litigation.
Financial records sought by a government au­
thority under the Federal Rules of Civil or
Criminal Procedure or comparable rules of
other courts in connection with litigation to
which the government authority and the cus­
tomer are parties.
(h) Administrative agency subpoenas. Finan­
cial records sought by a government authority
pursuant to an administrative subpoena issued
by an administrative law judge in an adjudica­
tory proceeding subject to 5 USC 554, and to
which the government authority and the cus­
tomer are parties.
(i) Investigation o f financial institution or its
noncustomer. Financial records sought by a
government authority in connection with a
lawful proceeding, investigation, examination,
or inspection directed at the financial institu­
tion in possession of such records, or at an
entity that is not a customer as defined in sec­
tion 219.2 of this part.
(j) General Accounting Office requests. Finan­
cial records sought by the General Accounting
Office pursuant to an authorized proceeding,
investigation, examination, or audit directed at
a government authority.
(k) Federal Housing Finance Board requests.
Financial records or information sought by the
Federal Housing Finance Board (FHFB) or
any of the Federal Home Loan Banks in the
exercise of the FHFB’s authority to extend
credit to financial institutions or others.

§ 219.22

Regulation S
(0 Department o f Veterans Affairs. The dis­
closure of the name and address of any cus­
tomer to the Department of Veterans Affairs
where such disclosure is necessary to, and
used solely for, the proper administration of
benefits programs under laws administered by
that department.

SECTION 219.5— Conditions for
Payment
(a) Direct costs. Payment shall be made only
for costs that are both directly incurred and
reasonably necessary to provide requested ma­
terial. Search and processing, reproduction,
and transportation costs shall be considered
separately when determining whether the costs
are reasonably necessary.
(b) Compliance with legal process, request, or
authorization. No payment may be made to a
financial institution until it satisfactorily com­
plies with the legal process, the formal written
request, or the customer authorization. When
the legal process or formal written request is
withdrawn, or the customer authorization is
revoked, or where the customer successfully
challenges disclosure to a grand jury or gov­
ernment authority, the financial institution
shall be reimbursed for the reasonably neces­
sary costs incurred in assembling the re­
quested financial records prior to the time the
financial institution is notified of such event.
(c) Itemized bill or invoice. No reimbursement
is required unless a financial institution sub­
mits an itemized bill or invoice specifically
detailing its search and processing, reproduc­
tion, and transportation costs. Search and
processing time should be billed in 15-minute
increments.

SECTION 219.6— Payment Procedures
(a) Notice to submit invoice. Promptly follow­
ing a service of legal process or request, the
court or government authority shall notify the
financial institution that it must submit an
itemized bill or invoice in order to obtain pay­
ment and shall furnish an address for this
purpose.

(b) Special notice. If a grand jury or govern­
ment authority withdraws the legal process or
formal written request, or if the customer re­
vokes the authorization, or if the legal process
or request has been successfully challenged by
the customer, the grand jury or government
authority shall promptly notify the financial
institution of these facts, and shall also notify
the financial institution that it must submit an
itemized bill or invoice in order to obtain pay­
ment of costs incurred prior to the time the
financial institution receives this notice.

SUBPART B— RECORDKEEPING
AND REPORTING REQUIREMENTS
FOR FUNDS TRANSFERS AND
TRANSMITTALS OF FUNDS
SECTION 219.21— Authority, Purpose
and Scope
This subpart of Regulation S is issued by the
Board under the authority of section 21(b) of
the Federal Deposit Insurance Act (12 USC
1829b), as amended by the Annunzio-Wylie
Anti-Money Laundering Act of 1992 (Pub.L.
102-550, title XV), which authorizes the
Board and the secretary of the Treasury
jointly to prescribe recordkeeping and report­
ing requirements for domestic wire transfers
by insured depository institutions; and which
also required the Board and the Treasury
jointly to prescribe recordkeeping and report­
ing requirements for international wire trans­
fers by insured depository institutions and by
nonbank financial institutions. The definitions
and recordkeeping and reporting requirements
referenced in this subpart are promulgated and
administered jointly by the Board and the
Treasury and are codified in 31 CFR 103.11
and 103.33(e) and (f). Such recordkeeping and
reporting requirements will assist in the prose­
cution of money-laundering activities and are
determined to have a high degree of useful­
ness in criminal, tax, or regulatory investiga­
tions or proceedings.

SECTION 219.22— Definitions
The following terms are defined in 31 CFR
3

§ 219.22
103.11 under the joint authority of the Board
and the Treasury:

Regulation S
tions are codified at 31 CFR 103.33(e). For
the purposes of this subpart, the provisions of
31 CFR 103.33(e) apply only to funds trans­
fers by insured depository institutions.

Accept.
Beneficiary.
Beneficiary’s bank.
Established customer.
Execution date.
Funds transfer.
Intermediary bank.
Intermediary financial institution.
Originator.
Originator’s bank.
Payment date.
Payment order.
Receiving bank.
Receiving financial institution.
Recipient.
Recipient’s financial institution.
Sender.
Transmittal of funds.
Transmittal order.
Transmittor.
Transmitter’s financial institution.

(b) International transmittals o f funds by fi ­
nancial institutions other than insured deposi­
tory institutions. The Board and the Treasury
are required to promulgate jointly reporting
and recordkeeping requirements for interna­
tional transm ittals o f funds by financial
institutions, including brokers and dealers in
securities and businesses that provide moneytransmitting services. In prescribing these re­
quirements, the Board and the Treasury take
into account the usefulness of these records in
criminal, tax, or regulatory investigations or
proceedings and the effect the recordkeeping
will have on the cost and efficiency of the
payment system. These regulations are codi­
fied at 31 CFR 103.33(f). For the purposes of
this subpart, the provisions o f 31 CFR
103.33(f) apply only to international transmit­
tals of funds.

SECTION 219.23— Recordkeeping and
Reporting Requirements

SECTION 219.24— Retention Period

(a) Domestic and international funds transfers
by insured depository institutions. The Board
and the Treasury are authorized to promulgate
jointly recordkeeping and reporting require­
ments for domestic and international funds
transfers by insured depository institutions
whenever the agencies determine that the
maintenance of such records has a high degree
of usefulness in criminal, tax, or regulatory
investigations or proceedings. These regula­

All records that are required to be retained by
this subpart shall be retained for a period of
five years. All these records shall be filed or
stored in such a way as to be accessible
within a reasonable period of time, taking into
consideration the nature of the record and the
amount of time that has expired since the re­
cord was made. Any records required to be
retained by this subpart shall be made avail­
able to the Board upon request.

Statutory Authority for Regulation S

RIGHT TO FINANCIAL PRIVACY
ACT OF 1978
SECTION 1115— Cost Reimbursement
(a) Except for records obtained pursuant to
section 1103(d) or 1113 (a) through (h), or as
otherwise provided by law, a Government au­
thority shall pay to the financial institution as­
sembling or providing finanial records pertain­
ing to a customer and in accordance with
procedures established by this title a fee for
reimbursement for such costs as are reasona­
bly necessary and which have been directly
incurred in searching for, reproducing, or
transporting books, papers, records, or other
data required or requested to be produced.
The Board of Governors of the Federal Re­
serve System shall, by regulation, establish the
rates and conditions under which such pay­
ment may be made.
(b) This section shall take effect on October
1, 1979.
[12 USC 3415.1

FEDERAL DEPOSIT INSURANCE
ACT
SECTION 21— Retention of Records by
Insured Depository Institutions
(a) Congressional findings and declaration o f
purpose.
(1) The C ongress finds th at adequate
records maintained by insured depository
institutions have a high degree of usefulness
in criminal, tax, and regulatory investiga­
tions and proceedings. The Congress further
finds that microfilm or other reproductions
and other records made by banks of checks,
as well as records kept by banks of the
identity of persons maintaining or author­
ized to act with respect to accounts therein,
have been o f particular value in this
respect.
(2) It is the purpose of this section to re­
quire the maintenance of appropriate types

of records by insured depository institutions
in the United States where such records
have a high degree of usefulness in crimi­
nal, tax, or regulatory investigations or
proceedings.
(b) Recordkeeping regulations.
(1) Where the Secretary of the Treasury
(referred to in this section as the “Secre­
tary” ) determines that the maintenance of
appropriate types of records and other evi­
dence by insured depository institutions has
a high degree of usefulness in criminal, tax,
or regulatory investigations or proceedings,
he shall prescribe regulations to carry out
the purposes of this section.
(2) Whenever the Secretary and the Board
of Governors of the Federal Reserve Sys­
tem (hereafter in this section referred to as
the ‘Board’) determine that the maintenance
of records, by insured depository institu­
tions, of payment orders which direct trans­
fers of funds over wholesale funds transfer
systems has a high degree of usefulness in
criminal, tax, or regulatory investigations or
proceedings, the Secretary and the Board
shall jointly prescribe regulations to carry
out the purposes of this section with respect
to the maintenance of such records.
(3) (A) The Secretary and the Board shall
jointly prescribe, after consultation with
State banking supervisors, final regula­
tions requiring that insured depository in­
stitutions, businesses that provide check
cashing services, money transm itting
businesses, and businesses that issue or
redeem money orders, travelers’ checks
or other similar instruments maintain
such records of payment orders which—
(i) involve international transactions;
and
(ii) direct transfers o f funds over
wholesale funds transfer systems or on
the books of any insured depository in­
stitution, or on the books of any busi­
ness that provides check cashing ser­
vices, any m oney tran sm itting
business, and any business that issues
5

Statutory Authority
or redeems money orders, travelers’
checks or similar instruments,
that will have a high degree of usefulness
in criminal, tax, or regulatory investiga­
tions or proceedings.
(B) In prescribing the regulations re­
quired under subparagraph (A), the Sec­
retary and the Board shall consider—
(i) the usefulness in criminal, tax, or
regulatory investigations or proceed­
ings of any record required to be main­
tained pursuant to the proposed regula­
tions; and
(ii) the effect the recordkeeping re­
quired pursuant to such proposed regu­
lations will have on the cost and effi­
ciency of the payment system.
(C) Any records required to be main­
tained pursuant to the regulations pre­
scribed under subparagraph (A) shall be
submitted or made available to the Secre­
tary or the Board upon request.
(c) Identity o f persons having accounts and
persons authorized to act with respect to such
accounts; exemptions. Subject to the require­
ments of any regulations prescribed jointly by
the Secretary and the Board under paragraph
(2) or (3) of subsection (b), each insured de­
pository institution shall maintain such records
and other evidence, in such form as the Secre­
tary shall require, of the identity of each per­
son having an account in the United States
with the insured depository institution and of
each individual authorized to sign checks,
make withdrawals, or otherwise act with re­
spect to any such account. The Secretary may
make such exemptions from any requirement
otherwise imposed under this subsection as
are consistent with the purposes of this
section.
(d) Reproduction o f checks, drafts, and other
instruments; record o f transactions; identity o f
party. Each insured depository institution shall
make, to the extent that the regulations of the
Secretary so require—
(1) a microfilm or other reproduction of
each check, draft, or similar instrument
drawn on it and presented to it for pay­
ment; and
(2) a record of each check, draft, or similar
instrument received by it for deposit or col­
6

Regulation S
lection, together with an identification of
the party for whose account it is to be de­
posited or collected, unless the insured de­
pository institution has already made a re­
cord of the party’s identity pursuant to
subsection (c) of this section.
(e) Identity o f persons making reportable cur­
rency and foreign transactions. Subject to the
requirements of any regulations prescribed
jointly by the Secretary and the Board under
paragraph (2) or (3) of subsection (b), when­
ever any individual engages (whether as prin­
cipal, agent, or bailee) in any transaction with
an insured depository institution which is re­
quired to be reported or recorded under sub­
chapter II of chapter 53 of Title 31, the in­
sured depository institution shall require and
retain such evidence of the identity of that in­
dividual as the Secretary may prescribe as ap­
propriate under the circumstances.
(f) Additions to or substitutes fo r required
records. Subject to the requirements of any
regulations prescribed jointly by the Secretary
and the Board under paragraph (2) or (3) of
subsection (b), in addition to or in lieu of the
records and evidence otherwise referred to in
this section, each insured depository institution
shall maintain such records and evidence as
the Secretary may prescribe to carry out the
purposes of this section.
(g) Retention period. Any type of record or
evidence required under this section shall be
retained for such period as the Secretary may
prescribe for the type in question. Any period
so prescribed shall not exceed six years unless
the Secretary determines, having regard for
the purposes of this section, that a longer pe­
riod is necessary in the case of a particular
type of record or evidence.
(h) Report to Congress by Secretary o f the
Treasury. The Secretary shall include in his
annual report to the Congress information on
his implementation of the authority conferred
by this section and any similar authority with
respect to recordkeeping or reporting require­
ments conferred by other provisions of law.
(i) Application o f provisions to foreign banks.
The provisions of this section shall not apply
to any foreign bank except with respect to the

Regulation S
transactions and records of any insured branch
of such a bank.
(j) Civil penalties.
(1) Any insured depository institution and
any director, officer, or employee of an in­
sured depository institution who willfully or
through gross negligence violates or any
person who willfully causes such a viola­
tion, any regulation prescribed under sub­
section (b) of this section shall be liable to
the United States for a civil penalty of not
more than $10,000.
(2) A separate violation of any regulation

Statutory Authority
prescribed under subsection (b) of this sec­
tion occurs for each day the violation con­
tinues and at each office, branch, or place
of business at which such violation occurs.
(3) Any penalty imposed under paragraph
(1) shall be assessed, mitigated, and col­
lected in the manner provided in subsec­
tions (b) and (c) of section 5321 of Title
31.
[12 USC 1829b. As added by act of Oct. 26, 1970 (84 Stat.
1114) and amended by acts o f Sept. 17, 1978 (92 Stat.
620); Nov. 18, 1988 (102 Stat. 4356); Aug. 9, 1989 (103
Stat. 187); Oct. 28, 1992 (106 Stat. 4058, 4059, 4066); and
Sept. 23, 1994 (108 Stat. 2290).]

7

Board of Governors of the Federal Reserve System

Official Staff Commentary
on Regulation E
Electronic Fund Transfers
As amended effective May 2, 1996

Any inquiry relating to Regulation E should be addressed to the Federal Reserve Bank of the
Federal Reserve District in which the inquiry arises.
August 1996

Contents

Page
'Section 205.2—D efinitions............................ 1
Section 205.3— C overage.............................. 2
Section 205.4— General disclosure
requirements; jointly offered services . . 5
Section 205.5—Issuance of access
devices.......................................................... 5
Section 205.6—Liability of consumer
for unauthorized tran sfers......................... 6
Section 205.7—Initial disclosures.................. 7
Section 205.8—Change-in-terms notice;
error-resolution notice.............................. 10
Section 205.9—Receipts at electronic
terminals; periodic statements ............... 10

Page
Section 205.10—Preauthorized transfers
14
Section 205.11—Procedures for
resolving e rro rs ........................................ 16
Section 205.12—Relation to other laws . 19
Section 205.13— Administrative
enforcement; record retention.................. 20
Section 205.14— Electronic fund transfer
service provider not holding
consumer’s a c c o u n t................................. 20
Appendix A—Model disclosure clauses
and form s.................................................. 21

i

Official Staff Commentary
on Regulation E
As amended effective May 2, 1996*

^ P E C T I O N 205.2— Definitions

2(a) Access Device
1. Examples. The term “access device” in­
cludes debit cards, personal identification
numbers (PINs), telephone transfer and tele­
phone bill payment codes, and other means
that may be used by a consumer to initiate an
electronic fund transfer (EFT) to or from a
consumer account. The term does not include
magnetic tape or other devices used internally
by a financial institution to initiate electronic
transfers.

2(b) Account
I. Consumer asset account. The term “con­
sumer asset account” includes:
1.

•

Club accounts, such as vacation clubs. In
many cases, however, these accounts are
exempt from the regulation under section
205.3(c)(5) because all electronic transfers
to or from the account have been
preauthorized by the consumer and involve another account of the consumer at
the same institution,
ii. A retail repurchase agreem ent (repo),
which is a loan made to a financial institu­
tion by a consumer that is collateralized
by government or government-insured se­
curities.

2. Examples of accounts not covered by Reg­
ulation E (12 CFR 205) include:
i.

Profit-sharing and pension accounts estab­
lished under a trust agreement, which are
exempt under section 205.2(b)(2).
ii. Escrow accounts, such as those established
to ensure payment of items such as real
estate taxes, insurance premiums, or com­
pletion of repairs or improvements.
iii. A ccounts for accum ulating funds to
purchase U.S. savings bonds.
* Reliance on May 2, 1996, revisions optional until Janu­
ary 1, 1997.

Paragraph 2(b)(2)
1. Bona fid e trust agreem ents. The term
“bona fide trust agreement” is not defined by
the act or regulation; therefore, financial insti­
tutions must look to state or other applicable
law for interpretation.
2. Custodial agreements. An account held
under a custodial agreement that qualifies as a
trust under the Internal Revenue Code, such
as an individual retirement account, is consid­
ered to be held under a trust agreement for
purposes of Regulation E.

2(d) Business Day
1. Duration. A business day includes the en­
tire 24-hour period ending at midnight, and a
notice required by the regulation is effective
even if given outside normal business hours.
The regulation does not require, however, that
a financial institution make telephone lines
available on a 24-hour basis.
2. Substantially all business functions. “ Sub­
stantially all business functions” include both
the public and the back-office operations of
the institution. For example, if the offices of
an institution are open on Saturdays for han­
dling some consumer transactions (such as de­
posits, withdrawals, and other teller transac­
tio n s), but not for perform ing intern al
functions (such as investigating account er­
rors), then Saturday is not a business day for
that institution. In this case, Saturday does not
count toward the business-day standard set by
the regulation for reporting lost or stolen ac­
cess devices, resolving errors, etc.
3. Short hours. A financial institution may de­
termine, at its election, whether an abbreviated
day is a business day. For example, if an in­
stitution engages in substantially all business
functions until noon on Saturdays instead of
its usual 3:00 p.m. closing, it may consider
Saturday a business day.
4. Telephone line. If a financial institution
makes a telephone line available on Sundays
for reporting the loss or theft of an access
1

§ 205.2
device, but performs no other business func­
tions, Sunday is not a business day under the
“ su b stan tially all business fu n ctio n s”
standard.

2(h) Electronic Terminal
1. Point-of-sale (POS) payments initiated by
telephone. Because the term electronic termi­
nal excludes a telephone operated by a con­
sumer, a financial institution need not provide
a terminal receipt when—
1.

a consumer uses a debit card at a public
telephone to pay for the call;
ii. a consumer initiates a transfer by a means
analogous in function to a telephone, such
as by home banking equipment or a fac­
simile machine.
2. POS terminals. A POS terminal that cap­
tures data electronically, for debiting or credit­
ing to a consumer’s asset account, is an elec­
tronic terminal for purposes of Regulation E if
a debit card is used to initiate the transaction.
3. Teller-operated terminals. A terminal or
other computer equipment operated by an em­
ployee of a financial institution is not an elec­
tronic terminal for purposes of the regulation.
However, transfers initiated at such terminals
by means of a consumer’s access device (us­
ing the consumer’s PIN, for example) are
EFTs and are subject to other requirements of
the regulation. If an access device is used
only for identification purposes or for deter­
mining the account balance, the transfers are
not EFTs for purposes of the regulation.

2(m) Unauthorized Electronic Fund
Transfer
1. Transfer by institution’s employee. A con­
sumer has no liability for erroneous or fraudu­
lent transfers initiated by an employee of a
financial institution.
2. Authority. If a consumer furnishes an ac­
cess device and grants authority to make
transfers to a person (such as a family mem­
ber or co-worker) who exceeds the authority
given, the consumer is fully liable for the
transfers unless the consumer has notified the
financial institution that transfers by that per­
son are no longer authorized.
2

Regulation E (Official Staff Commentary)
3. Access device obtained through robbery or
fraud. An unauthorized EFT includes a trans­
fer initiated by a person who obtained the ac­
cess device from the consumer through fraud
or robbery.
4. Forced initiation. An EFT at an automated
teller machine (ATM) is an unauthorized
transfer if the consumer has been induced by
force to initiate the transfer.

SECTION 205.3— Coverage
3(a) General
1. Accounts covered. The requirements of the
regulation apply only to an account for which
an agreement for EFT services to or from the
account has been entered into between—
1.

the consumer and the financial institution
(including an account for which an access
device has been issued to the consumer,
for example):
ii. the consum er and a third party (for
preauthorized debits or credits, for exam­
ple), when the account-holding institution
has received notice of the agreement and
the fund transfers have begun.
2. Automated clearinghouse (ACH) member­
ship. The fact that membership in an ACH
requires a financial institution to accept E F M
to accounts at the institution does not m ak?
every account of that institution subject to the
regulation.
3. Foreign applicability. Regulation E applies
to all persons (including branches and other
offices of foreign banks located in the United
States) that offer EFT services to residents of
any state, including resident aliens. It covers
any account located in the United States
through which EFTs are offered to a resident
of a state. This is the case whether or not a
particular transfer takes place in the United
States and whether or not the financial institu­
tion is chartered in the United States or a for­
eign country. The regulation does not apply to
a foreign branch of a U.S. bank unless the
EFT services are offered in connection with
an account in a state as defined in section
205.2(0.

§ 205.3

Regulation E (Official Staff Commentary)

3(b) Electronic Fund Transfer
1. Fund transfers covered. The term “elec­
tronic fund transfer” includes:
A deposit made at an ATM or other elec­
tronic term inal (including a deposit in
cash or by check) provided a specific
agreement exists between the financial in­
stitution and the consumer for EFTs to or
from the account to which the deposit is
made.
ii. A transfer sent via ACH. For example,
Social Security benefits under the U.S.
Treasury’s direct-deposit program are cov­
ered, even if the listing of payees and
payment amounts reaches the accountholding institution by means of a comput­
er printout from a correspondent bank.
iii. A preauthorized transfer credited or debit­
ed to an account in accordance with in­
structions contained on magnetic tape,
even if the financial institution holding the
account sends or receives a composite
check.
iv. A transfer from the consumer’s account
resulting from a debit-card transaction at a
merchant location, even if no electronic
terminal is involved at the time of the
transaction, if the consumer’s asset ac­
count is subsequently debited for the
amount of the transfer.
Fund transfers not covered. The term
^ ^ ‘electronic fund transfer” does not include—
i.

a payment that does not debit or credit a
consumer asset account, such as a payroll
allotment to a creditor to repay a credit
extension (which is deducted from salary);
ii. a payment made in currency by a consum­
er to another person at an electronic termi­
nal;
iii. a preauthorized check drawn by the finan­
cial institution on the consumer’s account
(such as an interest or other recurring pay­
ment to the consumer or another party),
even if the check is computer-generated.

check-authorization service, debiting of the
consumer’s account occurs when the check or
draft is presented for payment. These services
are exempt from coverage, even when a tem­
porary hold on the account is memo-posted
electronically at the time of authorization.
Paragraph 3(c)(3)— Wire or Other Similar
Transfers
1. Fedwire and ACH. If a financial institution
makes a fund transfer to a consumer’s account
after receiving funds through Fedwire or a
similar network, the transfer by ACH is cov­
ered by the regulation even though the
Fedwire or network transfer is exempt.
2. Article 4A. Financial institutions that offer
telephone-initiated Fedwire payments are sub­
ject to the requirements of UCC section 4A202, which encourages verification of Fedwire
payment orders pursuant to a security proce­
dure established by agreement between the
consumer and the receiving bank. These trans­
fers are not subject to Regulation E and the
agreement is not considered a telephone plan
if the service is offered separately from a tele­
phone bill-payment or other prearranged plan
subject to Regulation E. The Board’s Regula­
tion J (12 CFR 210) specifies the rules appli­
cable to funds handled by Federal Reserve
Banks. To ensure that the rules for all fund
transfers through Fedwire are consistent, the
Board used its preemptive authority under
UCC section 4A-107 to determine that subpart
B of Regulation J (12 CFR 210), including
the provisions of article 4A, applies to all
fund transfers through Fedwire, even if a por­
tion of the fund transfer is governed by the
EFTA. The portion of the fund transfer that is
governed by the EFTA is not governed by
subpart B of Regulation J (12 CFR 210).
3. Similar fund transfer systems. Fund transfer
systems that are similar to Fedwire include
the Clearing House Interbank Payments Sys­
tem (CHIPS), Society for W orldwide In­
terbank
F in an cial
T elecom m unication
(SWIFT), Telex, and transfers made on the
books of correspondent banks.

3(c) Exclusions from Coverage
Paragraph 3(c)(2)— Check Guarantee or
Authorization
1. Memo posting. Under a check-guarantee or

Paragraph 3(c)(4)—Securities and
Commodities Transfers
1. Coverage. The securities exemption applies
to securities and commodities that may be
3

§ 205.3

Regulation E (Official Staff Commentary)

sold by a registered broker-dealer or futures
commission merchant, even when the security
or commodity itself is not regulated by the
Securities and Exchange Commission or the
Commodity Futures Trading Commission.

fers between accounts of the consumer at af­
filiated institutions (such as between a bank
and its subsidiary or within a holding com­
pany) are not intra-institutional transfers and
thus do not qualify for the exemption.
^

2. Example o f exempt transfer. The exemption
applies to a transfer involving a transfer initi­
ated by a telephone order to a stockbroker to
buy or sell securities or to exercise a margin
call.

Paragraph 3(c)(6)—Telephone-Initiated
Transfers

3. Examples o f nonexempt transfers. The ex­
em ption does not apply to a tran sfer
involving:
A debit card or other access device that
accesses a securities or commodities ac­
count such as a money market mutual
fund and that the consum er uses for
purchasing goods or services or for ob­
taining cash.
ii. A payment of interest or dividends into
the consum er’s account (for exam ple,
from a brokerage firm or from a Federal
Reserve Bank for government securities).

1. Written plan or agreement. A transfer that
the consumer initiates by telephone is covered
only if the transfer is made under a written
plan or agreement between the consumer and
the financial institution making the transfer.
The following do not, by themselves, consti­
tute a written plan or agreement:

i.

Paragraph 3(c)(5)—Automatic Transfers by
Account-Holding Institution
1. Automatic transfers exempted. The exemp­
tion applies to—
1.

electronic debits or credits to consumer
accounts for check charges, stop-payment
charges, NSF charges, overdraft charges,
provisional credits, error adjustments, and
similar items that are initiated automatical­
ly on the occurrence of certain events;
ii. debits to consumer accounts for group in­
surance available only through the finan­
cial institution and payable only by means
of an aggregate payment from the institu­
tion to the insurer;
iii. EFTs between a thrift institution and its
paired commercial bank in the state of
Rhode Island, which are deemed under
state law to be intra-institutional;
iv. automatic transfers between a consumer’s
accounts within the same financial institu­
tion, even if the account holders on the
two accounts are not identical.
2. Automatic transfers not exempted. Trans4

1.

a hold-harmless agreement on a signature
card that protects the institution if the con­
sumer requests a transfer
ii. a legend on a signature card, periodic
statem ent, or passbook that limits the
number of telephone-initiated transfers the
consumer can make from a savings ac­
count because o f reserve requirem ents
under Regulation D (12 CFR 204)
iii. an agreement permitting the consumer to
approve by telephone the rollover of funds
at the maturity of an instrument
2. Examples o f covered transfers. When a
written plan or agreement has been entered
into, a transfer initiated by a telephone csM
from a consumer is covered even though— ^
i.

an employee of the financial institution
completes the transfer manually (for ex­
ample, by means of a debit memo or de­
posit slip);
ii. the consumer is required to make a sepa­
rate request for each transfer;
iii. the consumer uses the plan infrequently;
iv. the consumer initiates the transfer via a
facsimile machine.
Paragraph 3(c)(7)—Small Institutions
1. Coverage. This exemption is limited to
preauthorized transfers; institutions that offer
other EFTs must comply with the applicable
sections of the regulation as to such services.
The preauthorized transfers remain subject to
sections 913, 915, and 916 of the act and sec-

§ 205.5

Regulation E (Official Staff Commentary)
tion 205.10(e), and are therefore exempt from
UCC article 4A.

^ ^ E C T I O N 205.4— General Disclosure
Requirements; Jointly Offered Services
4(a) Form o f Disclosures
1. General. Although no particular rules gov­
ern type size, number of pages, or the relative
conspicuousness of various terms, the disclo­
sures must be in a clear and readily under­
standable written form that the consumer may
retain. Numbers or codes are considered read­
ily understandable if explained elsewhere on
the disclosure form.
2. Foreign language disclosures. Disclosures
may be made in languages other than English,
provided they are available in English upon
request.

SECTION 205.5— Issuance of Access
Devices
1. Coverage. The provisions of this section
limit the circumstances under which a finan­
cial institution may issue an access device to
a consumer. Making an additional account ac­
cessible through an existing access device is
equivalent to issuing an access device and is
Subject to the limitations of this section.

•

5(a) Solicited Issuance

Paragraph 5(a)(1)
1. Joint account. For a joint account, a finan­
cial institution may issue an access device to
each account holder if the requesting holder
specifically authorizes the issuance.
2. Permissible form s o f request. The request
for an access device may be written or oral
(for example, in response to a telephone solic­
itation by a card issuer).
Paragraph (5)(a)(2)
1. One-for-one rule. In issuing a renewal or
substitute access device, a financial institution
may not provide additional devices. For exam­
ple, only one new card and PIN may replace

a card and PIN previously issued. If the re­
placement device permits either additional or
fewer types of electronic fund transfer ser­
vices, a change-in-terms notice or new disclo­
sures are required.
2. Renewal or substitution by a successor in­
stitution. A successor institution is an entity
that replaces the original financial institution
(for example, following a corporate merger or
acquisition) or that acquires accounts or as­
sumes the operation of an EFT system.

5(b) Unsolicited Issuance
1. Compliance. A financial institution may is­
sue an unsolicited access device (such as the
combination of a debit card and PIN) if the
institution’s ATM system has been program­
med not to accept the access device until after
the consumer requests and the institution vali­
dates the device. Merely instructing a con­
sumer not to use an unsolicited debit card and
PIN until after the institution verifies the con­
sumer’s identity does not comply with the
regulation.
2. PINS. A financial institution may impose
no liability on a consumer for unauthorized
transfers involving an unsolicited access de­
vice until the device becomes an “accepted
access device” under the regulation. A card
and PIN combination may be treated as an
accepted access device once the consumer has
used it to make a transfer.
3. Functions o f PIN. If an institution issues a
PIN at the consumer’s request, the issuance
may constitute both a way of validating the
debit card and the means to identify the con­
sumer (required as a condition of imposing li­
ability for unauthorized transfers).
4. Verification o f identity. To verify the con­
sumer’s identity, a financial institution may
use any reasonable means, such as a photo­
graph, fingerprint, personal visit, signature
comparison, or personal information about the
consumer. However, even if reasonable means
were used, if an institution fails to verify cor­
rectly the consumer’s identity and an imposter
succeeds in having the device validated, the
consumer is not liable for any unauthorized
transfers from the account.
5

§ 205.6

Regulation E (Official Staff Commentary)

SECTION 205.6— Liability o f Consumer
for Unauthorized Transfers
6(a) Conditions for Liability
1. Means o f identification. A financial institu­
tion may use various means for identifying
the consumer to whom the access device is
issued, including but not limited to—
1.

electronic
(such as a
ii. comparison
fingerprint,

or m echanical confirm ation
PIN);
of the consumer’s signature,
or photograph.

2. Multiple users. When more than one access
device is issued for an account, the financial
institution may, but need not, provide a sepa­
rate means to identify each user o f the
account.

6(b) Limitations on Amount o f Liability
1. Application o f liability provisions. There
are three possible tiers of consumer liability
for unauthorized EFTs, depending on the situ­
ation. A consumer may be liable for (1) up to
$50; (2) up to $500; or (3) an unlimited
amount depending on when the unauthorized
EFT occurs. More than one tier may apply to
a given situation because each corresponds to
a different (sometimes overlapping) time pe­
riod or set of conditions.
2. Consumer negligence. Negligence by the
consumer cannot be used as the basis for im­
posing greater liability than is permissible
under Regulation E. Thus, consumer behavior
that may constitute negligence under state
law, such as writing the PIN on a debit card
or on a piece of paper kept with the card,
does not affect the consumer’s liability for un­
authorized transfers. (However, refer to com­
ment 2(m)-2 regarding termination of the au­
thority given by the consumer to another
person.)
3. Limits on liability. The extent of the con­
sumer’s liability is determined solely by the
consumer’s promptness in reporting the loss
or theft of an access device. Similarly, no
agreement between the consumer and an insti­
tution may impose greater liability on the con6

sumer for an unauthorized transfer than the
limits provided in Regulation E.
Paragraph 6(b)(1)— Timely Notice Given
1. $50 limit applies. The basic liability lim il
is $50. For example, the consumer’s card is
lost or stolen on Monday and the consumer
learns of the loss or theft on Wednesday. If
the consumer notifies the financial institution
within two business days of learning of the
loss or theft (by midnight Friday), the con­
sum er’s liability is limited to $50 or the
amount of the unauthorized transfers that oc­
curred before notification, whichever is less.
2. Knowledge o f loss or theft o f access de­
vice. The fact that a consumer has received a
periodic statement that reflects unauthorized
transfers may be a factor in determ ining
whether the consumer had knowledge of the
loss or theft, but cannot be deemed to re­
present conclusive evidence that the consumer
had such knowledge.
Paragraph 6(b)(2)— Timely Notice Not Given
1. $500 limit applies. The second tier of lia­
bility is $500. For example, the consumer’s
card is stolen on Monday and the consumer
learns of the theft that same day. The con­
sumer reports the theft on Friday. The $500
limit applies because the consumer failed taf
notify the financial institution within two busi™
ness days of learning of the theft (which
would have been by midnight Wednesday).
How much the consumer is actually liable for,
however, depends on when the unauthorized
transfers take place. In this example, assume a
$100 unauthorized transfer was made on Tues­
day and a $600 unauthorized transfer on
Thursday. Because the consumer is liable for
the amount of the loss that occurs within the
first two business days (but no more than
$50), plus the amount of the unauthorized
transfers that occurs after the first two busi­
ness days and before the consumer gives no­
tice, the consumer’s total liability is $500
($50 of the $100 transfer plus $450 of the
$600 transfer, in this example). But if $600
was taken on Tuesday and $100 on Thursday,
the consumer’s maximum liability would be
$150 ($50 of the $600 plus $100).

§ 205.7

Regulation E (Official Staff Commentary)
Paragraph 6(b)(3)—Periodic Statement;
Timely Notice Not Given
1. Unlimited liability applies. The standard of
^ B u n lim ite d liability applies if unauthorized
transfers appear on a periodic statement, and
may apply in conjunction with the first two
tiers of liability. If a periodic statement shows
an unauthorized transfer made with a lost or
stolen debit card, the consumer must notify
the financial institution within 60 calendar
days after the periodic statement was sent;
otherwise, the consumer faces unlimited liabil­
ity for all unauthorized transfers made after
the 60-day period. The consumer’s liability
for unauthorized transfers before the statement
is sent, and up to 60 days following, is deter­
mined based on the first two tiers of liability:
up to $50 if the consumer notifies the finan­
cial institution within two business days of
learning of the loss or theft of the card and up
to $500 if the consumer notifies the institution
after two business days of learning of the loss
or theft.
2. Transfers not involving access device. The
first two tiers of liability do not apply to un­
authorized transfers from a consumer’s ac­
count made without an access device. If, how­
ever, the consum er fails to report such
unauthorized transfers within 60 calendar days
^ ^ p f the financial institution’s transmittal of the
^ ^ p e r io d ic statement, the consumer may be lia­
ble for any transfers occurring after the close
of the 60 days and before notice is given to
the institution. For example, a consumer’s ac­
count is electronically debited for $200 with­
out the consum er’s authorization and by
means other than the consumer’s access de­
vice. If the consumer notifies the institution
within 60 days of the transmittal of the peri­
odic statement that shows the unauthorized
transfer, the consumer has no liability. How­
ever, if in addition to the $200, the con­
sumer’s account is debited for a $400 unau­
thorized transfer on the 61st day and the
consumer fails to notify the institution of the
first unauthorized transfer until the 62nd day,
the consumer may be liable for the full $400.
Paragraph 6(b)(4)—Extension o f Time Limits
1. Extenuating circumstances. Examples of

circumstances that require extension of the no­
tification periods under this section include the
consumer’s extended travel or hospitalization.
Paragraph 6(b)(5)—Notice to Financial
Institution
1. Receipt o f notice. A financial institution is
considered to have received notice for pur­
poses of limiting the consumer’s liability if
notice is given in a reasonable manner, even
if the consumer notifies the institution but
uses an address or telephone number other
than the one specified by the institution.
2. Notice by third party. Notice to a financial
institution by a person acting on the con­
sumer’s behalf is considered valid under this
section. For example, if a consumer is hospi­
talized and unable to report the loss or theft
of an access device, notice is considered given
when someone acting on the consumer’s be­
half notifies the bank of the loss or theft. A
financial institution may require appropriate
documentation from the person representing
the consumer to establish that the person is
acting on the consumer’s behalf.
3. Content o f notice. Notice to a financial in­
stitution is considered given when a consumer
takes reasonable steps to provide the institu­
tion with the pertinent account information.
Even when the consumer is unable to provide
the account number or the card number in re­
porting a lost or stolen access device or an
unauthorized transfer, the notice effectively
limits the consumer’s liability if the consumer
otherwise identifies sufficiently the account in
question. For example, the consumer may
identify the account by the name on the ac­
count and the type of account in question.

SECTION 205.7— Initial Disclosures
7(a) Timing o f Disclosures
1. Early disclosures. Disclosures given by a
financial institution earlier than the regulation
requires (for example, when the consumer
opens a checking account) need not be re­
peated when the consumer later enters into an
agreement with a third party who will initiate
preauthorized transfers to or from the con7

§ 205.7
sumer’s account, unless the terms and condi­
tions differ from those that the institution pre­
viously disclosed. On the other hand, if an
agreement is directly between the consumer
and the account-holding institution, disclosures
must be given in close proximity to the event
requiring disclosure, for example, when the
consumer contracts for a new service.
2. Lack o f prenotification o f direct deposit. In
some instances, before direct deposit of gov­
ernment payments such as Social Security
takes place, the consumer and the financial in­
stitution both will complete Form 1199A (or a
comparable form providing notice to the insti­
tution) and the institution can make disclo­
sures at that time. If an institution has not
received advance notice that direct deposits
are to be made to a consumer’s account, the
institution must provide the required disclo­
sures as soon as reasonably possible after the
first direct deposit is made, unless the institu­
tion has previously given disclosures.
3. Addition o f new accounts. If a consumer
opens a new account permitting EFTs at a fi­
nancial institution, and the consumer already
has received Regulation E disclosures for an­
other account at that institution, the institution
need only disclose terms and conditions that
differ from those previously given.
4. Addition o f EFT services. If an EFT ser­
vice is added to a consumer’s account and is
subject to terms and conditions different from
those described in the initial disclosures, dis­
closures for the new service are required. The
disclosures must be provided when the con­
sumer contracts for the new service or before
the first EFT is made using the new service.
5. Addition o f service in interchange systems.
If a financial institution joins an interchange
or shared network system (which provides ac­
cess to terminals operated by other institu­
tions), disclosures are required for additional
EFT services not previously available to con­
sumers if the terms and conditions differ from
those previously disclosed.
6. Disclosures covering all EFT services of­
fered. An institution may provide disclosures
covering all EFT services that it offers, even
8

Regulation E (Official Staff Commentary)
if some consumers have not arranged to use
all services.

7(b) Content o f Disclosures
Paragraph 7(b)(1)—Liability o f Consumer
1. No liability imposed by financial institu­
tion. If a financial institution chooses to im­
pose zero liability for unauthorized EFTs, it
need not provide the liability disclosures. If
the institution later decides to impose liability,
however, it must first provide the disclosures.
2. Preauthorized transfers. If the only EFTs
from an account are preauthorized transfers,
liability could arise if the consumer fails to
report unauthorized transfers reflected on a pe­
riodic statement. To impose such liability on
the consumer, the institution must have dis­
closed the potential liability and the telephone
number and address for reporting unauthorized
transfers.
3. Additional information. At the institution’s
option, the summary of the consumer’s liabil­
ity may include advice on promptly reporting
unauthorized tranfers or the loss or theft of
the access device.
Paragraph 7(b)(2)— Telephone Number and
Address
1. Disclosure o f telephone numbers. An in s t i^ ^ ^
tution may use the same or different t e l e p h o n ^ ^
numbers in the disclosures for the purpose
of—
1.

reporting the loss or theft of an access de­
vice or possible unauthorized transfers;
ii. inqu irin g about the receip t o f a
preauthorized credit;
iii. stopping payment of a preauthorized debit;
iv. giving notice of an error.
2. Location o f telephone number. The tele­
phone number need not be incorporated into
the text of the disclosure; for example, the
institution may instead insert a reference to a
telephone number that is readily available to
the consumer, such as “Call your branch of­
fice. The number is shown on your periodic
statement.” However, an institution must pro­
vide a specific telephone number and address,
on or with the disclosure statement, for report-

§ 205.7

Regulation E (Official Staff Commentary)
ing a lost or stolen access device or a possible
unauthorized transfer.
Paragraph 7(b)(4)— Types o f Transfers;
imitations
1. Security limitations. Information about lim­
itations on the frequency and dollar amount of
transfers generally must be disclosed in detail,
even if related to security aspects of the sys­
tem. If the confidentiality of certain details is
essential to the security of an account or sys­
tem, these details may be withheld (but the
fact that limitations exist must still be dis­
closed). For example, an institution limits cash
ATM withdrawals to $100 per day. The insti­
tution may disclose that daily withdrawal limi­
tations apply and need not disclose that the
limitations may not always be in force (such
as during periods when its ATMs are off-line).
2. Restrictions on certain deposit accounts. A
limitation on account activity that restricts the
consumer’s ability to make EFTs must be dis­
closed even if the restriction also applies to
transfers made by nonelectronic means. For
example, Regulation D (12 CFR 204) restricts
the number of payments to third parties that
may be made from a money market deposit
account; an institution that does not execute
fund transfers in excess of those limits must
disclose the restriction as a limitation on the
^ ^ ^ freq u en cy of EFTs.
3. Preauthorized transfers. Financial institu­
tions are not required to list preauthorized
transfers among the types of transfers that a
consumer can make.
Paragraph 7(b)(5)—Fees
1. Disclosure o f EFT fees. An institution is
required to disclose all fees for EFTs or the
right to make them. Other fees (for example,
minimum-balance fees, stop-payment fees, or
account overdrafts) may, but need not, be dis­
closed (but see Regulation DD, 12 CFR 230).
An institution is not required to disclose fees
for inquiries made at an ATM since no trans­
fer of funds is involved.
2. Fees also applicable to non-EFT. A peritem fee for EFTs must be disclosed even if
the same fee is imposed on nonelectronic

transfers. If a per-item fee is imposed only
under certain conditions, such as when the
transactions in the cycle exceed a certain
number, those conditions must be disclosed.
Itemization of the various fees may be pro­
vided on the disclosure statement or on an ac­
companying document that is referenced in
the statement.
3. Interchange system fees. Fees paid by the
account-holding institution to the operator of a
shared or interchange ATM system need not
be disclosed, unless they are imposed on the
consumer by the account-holding institution.
Fees for use of an ATM that are debited di­
rectly to the consumer’s account by an institu­
tion other than the account-holding institution
(for example, fees included in the transfer
amount) need not be disclosed.
Paragraph 7(b)(9)— Confidentiality
1. Information provided to third parties. An
institution must describe the circumstances
under which any information relating to an ac­
count to or from which EFTs are permitted
will be made available to third parties, not
just information concerning those EFTs. The
term “third parties” includes affiliates such as
o ther su bsidiaries o f the sam e holding
company.
Paragraph 7(b)(10)—Error Resolution
1. Substantially similar. The error-resolution
notice must be substantially similar to the
model form in appendix A of part 205. An
institution may use different wording so long
as the substance of the notice remains the
same, may delete inapplicable provisions (for
example, the requirement for written confirma­
tion of an oral notification), and may substi­
tute substantive state law requirements afford­
ing g reater consum er pro tectio n than
Regulation E.
2. Exception from provisional crediting. To
take advantage of the longer time periods for
resolving errors under section 205.11(c)(3)
(for transfers initiated outside the United
States, or resulting from POS debit-card trans­
actions), a financial institution must have dis­
closed these longer time periods. Similarly, an
institution that relies on the exception from
9

§ 205.7
provisional crediting in section 205.11(c)(2)
for accounts subject to Regulation T (12 CFR
220) must disclose accordingly.

Regulation E (Official Staff Commentary)

SECTION 205.9— Receipts at Electronic
Terminals; Periodic Statements
9(a) Receipts at Electronic Terminals

SECTION 205.8— Change-in-Terms
Notice; Error-Resolution Notice
8(a) Change-in-Terms Notice
1. Form o f notice. No specific form or word­
ing is required for a change-in-terms notice.
The notice may appear on a periodic state­
ment, or may be given by sending a copy of a
revised disclosure statement, provided atten­
tion is directed to the change (for example, in
a cover letter referencing the changed term).
2. Changes not requiring notice. The follow­
ing changes do not require disclosure:
i. closing some of an institution’s ATMs
ii. cancellation of an access device
3. Limitations on transfers. When the initial
disclosures omit details about limitations be­
cause secrecy is essential to the security of
the account or system, a subsequent increase
in those limitations need not be disclosed if
secrecy is still essential. If, however, an insti­
tution had no limits in place when the initial
disclosures were given and now wishes to im­
pose limits for the first time, it must disclose
at least the fact that limits have been adopted.
(See also section 205.7(b)(4) and the related
commentary.)
4. Change in telephone number or address.
When a financial institution changes the tele­
phone number or address used for reporting
possible unauthorized transfers, a change-interms notice is required only if the institution
will impose liability on the consumer for un­
authorized transfers under section 205.6. (See
also section 205.6(a) and the related
commentary.)

|

1. Receipts furnished only on request. The
regulation requires that a receipt be “made
available.” A financial institution may pro­
gram its electronic terminals to provide a re­
ceipt only to consumers who elect to receive
one.
2. Third party providing receipt. An accountholding institution may make terminal receipts
av ailab le through third p arties such as
merchants or other financial institutions.
3. Inclusion o f promotional material. A finan­
cial institution may include promotional mate­
rial on receipts if the required information is
set forth clearly (for example, by separating it
from the promotional material). In addition, a
consumer may not be required to surrender
the receipt or that portion containing the re­
quired disclosures in order to take advantage
o f a promotion.
4. Transfer not completed. The receipt re­
quirement does not apply to a transfer that is
initiated but not completed (for example, if
the ATM is out of currency or the consumer
decides not to complete the transfer).
5. Receipts not furnished due to inadvertentU
error. If a receipt is not provided to the co n !
sumer because of a bona fide unintentional er­
ror, such as when a terminal runs out of paper
or the mechanism jams, no violation results if
the financial institution maintains procedures
reasonably adapted to avoid such occurrences.
6. Multiple transfers. If the consumer makes
multiple transfers at the same time, the finan­
cial institution may document them on a sin­
gle or on separate receipts.
Paragraph 9(a)(1)—Amount

8(b) Error-Resolution Notice
1. Change between annual and periodic no­
tice. If an institution switches from an annual
to a periodic notice, or vice versa, the first
notice under the new method must be sent no
later than 12 months after the last notice sent
under the old method.
10

1. Disclosure o f transaction fee. The required
display of a fee amount on or at the terminal
may be accomplished by displaying the fee on
a sign at the terminal or on the terminal
screen for a reasonable duration. Displaying
the fee on a screen provides adequate notice,
as long as consumers are given the option to

§ 205.9

Regulation E (Official Staff Commentary)

1. Calendar date. The receipt must disclose
the calendar date on which the consumer uses
the electronic terminal. An accounting or busi­
ness date may be disclosed in addition if the
dates are clearly distinguished.

5. Point-of-sale transactions. There is no pre­
scribed terminology for identifying a transfer
at a merchant’s POS terminal. A transfer may
be identified, for example, as a purchase, a
sale of goods or services, or a payment to a
third party. When a consumer obtains cash
from a POS terminal in addition to purchasing
goods, or obtains cash only, the documenta­
tion need not differentiate the transaction from
one involving the purchase of goods.

Paragraph 9(a)(3)— Type

Paragraph 9(a)(5)— Terminal Location

1. Identifying transfer and account. Examples
identifying the type of transfer and the type of
the consumer’s account include “withdrawal
from checking,” “ transfer from savings to
checking,” or “payment from savings.”

1. Location code. A code or terminal number
identifying the terminal where the transfer is
initiated may be given as part of a transaction
code.

cancel the transaction after receiving notice of
a fee.
^ ^ a r a g r a p h 9(a)(2)—Date

2. Exception. Identification of an account is
not required when the consumer can access
only one asset account at a particular time or
terminal, even if the access device can nor­
mally be used to access more than one ac­
count. For example, the consumer may be
able to access only one particular account at
terminals not operated by the account-holding
institution, or may be able to access only one
particular account when the terminal is off­
line. The exception is available even if, in ad­
dition to accessing one asset account, the con­
sumer also can access a credit line.
Access to multiple accounts. If the con^ ^ u m e r can use an access device to make trans­
fers to or from different accounts of the same
type, the terminal receipt must specify which
account was accessed, such as “withdrawal
from checking I” or “withdrawal from check­
ing n .” If only one account besides the pri­
mary checking account can be debited, the re­
ceipt can identify the account as “withdrawal
from other account.”
4. Generic descriptions. Generic descriptions
may be used for accounts that are similar in
function, such as share draft or NOW ac­
counts and checking accounts. In a shared
system, for example, when a credit union
member initiates transfers to or from a share
draff account at a terminal owned or operated
by a bank, the receipt may identify a with­
drawal from the account as a “ withdrawal
from checking.”

2. Omission o f city name. The city may be
omitted if the generally accepted name (such
as a branch name) contains the city name.
Paragraph 9(a)(5)(i)
1. Street address. The address should include
number and street (or intersection); the num­
ber (or intersecting street) may be omitted if
the street alone uniquely identifies the termi­
nal location.
Paragraph 9(a)(5)(ii)
1. Generally accepted name. Examples of a
generally accepted name for a specific loca­
tion include a branch of the financial institu­
tion, a shopping center, or an airport.
Paragraph 9(a)(5)(iii)
1. Name o f owner or operator o f terminal.
Examples of an owner or operator of a termi­
nal are a financial institution or a retail
merchant.
Paragraph 9(a)(5)(iv)
1. Omission o f a state. A state may be omit­
ted from the location information on the re­
ceipt if—
i.

all the terminals owned or operated by the
financial institution providing the state­
ment (or by the system in which it partici­
pates) are located in that state or
ii. all transfers occur at terminals located
11

Regulation E (Official Staff Commentary)

§ 205.9

within 50 miles of the financial institu­
tion’s main office.
2. Omission o f a city and state. A city and
state may be omitted if all the terminals
owned or operated by the financial institution
providing the statement (or by the system in
which it participates) are located in the same
city.

or rate information, the institution must com­
ply with Regulation DD, 12 CFR 230.6.
3. Inactive accounts. A financial institution
need not send statements to consumers w h o ^
accounts are inactive as defined by th™
institution.
4. Customer pickup. A financial institution
may permit, but may not require, consumers
to call for their periodic statements.

Paragraph 9(a)(6)—Third-Party Transfer
1. Omission o f third-party name. The receipt
need not disclose the third-party name if the
name is provided by the consumer in a form
that is not machine readable (for example, if
the consumer indicates the payee by deposit­
ing a payment stub into the ATM). If, on the
other hand, the consumer keys in the identity
o f the payee, the receipt must identify the
payee by name or by using a code that is
explained elsewhere on the receipt.
2. Receipt as proof o f payment. Documenta­
tion required under the regulation constitutes
prima facie proof of a payment to another
person, except in the case of a terminal re­
ceipt documenting a deposit.

9(b) Periodic Statements
1. Periodic cycles. Periodic statements may
be sent on a cycle that is shorter than
monthly. The statements must correspond to
periodic cycles that are reasonably equal, that
is, do not vary by more than four days from
the regular cycle. The requirement of reasona­
bly equal cycles does not apply when an insti­
tution changes cycles for operational or other
reasons, such as to establish a new statement
day or date.
2. Interim statements. Generally, a financial
institution must provide periodic statements
for each monthly cycle in which an EFT oc­
curs, and at least quarterly if a transfer has
not occurred. Where EFTs occur between reg­
ularly scheduled cycles, interim statements
must be provided. For example, if an institu­
tion issues quarterly statements at the end of
March, June, September, and December, and
the consumer initiates an EFT in February, an
interim statement for February must be pro­
vided. If an interim statement contains interest
12

5. Periodic statements limited to EFT activity.
A financial institution that uses a passbook as
the primary means for displaying account ac­
tivity, but also allows the account to be deb­
ited electronically, may provide a periodic
statement requirement that reflects only the
EFTs and other required disclosures (such as
charges, account balances, and address and
telephone number for inquiries). (See section
205.9(c)(l)(i) for the exception applicable to
preauthorized transfers for passbook accounts.)
6. Codes and accompanying documents. To
meet the documentation requirements for peri­
odic statements, a financial institution may—
i.

include copies of terminal receipts to re­
flect transfers initiated by the consumer at
electronic terminals;
ii. enclose posting memos, deposit slips, and
other documents that, together with the
statement, disclose all the required infor­
mation;
M
iii. use codes for names of third parties o r
terminal locations and explain the infor­
mation to which the codes relate on an
accompanying document.
Paragraph 9(b)(1)— Transaction Information
1. Information obtained from others. While fi­
nancial institutions must maintain reasonable
procedures to ensure the integrity of data ob­
tained from another institution, a merchant, or
other third parties, verification of each transfer
that appears on the periodic statement is not
required.
Paragraph 9(b)(l)(i)
1. Incorrect deposit amount. If a financial in­
stitution determines that the amount actually
deposited at an ATM is different from the

Regulation E (Official Staff Commentary)
amount entered by the consumer, the institu­
tion need not immediately notify the consumer
of the discrepancy. The periodic statement re­
- e l e c t i n g the deposit may show either the cor^ J e c t amount of the deposit or the amount en­
tered by the consum er along w ith the
institution’s adjustment.

§ 205.9
4. Account-holding institution as third party.
Transfers to the account-holding institution
(by ATM, for example) must show the institu­
tion as the recipient, unless other information
on the statement (such as, “ loan payment
from checking” ) clearly indicates that the
paym ent w as to the account-holding
institution.

Paragraph 9(b)(l)(iii)
1. Type o f transfer. There is no prescribed ter­
minology for describing a type of transfer.
Placement of the amount of the transfer in the
debit or the credit column is sufficient if other
information on the statement, such as a termi­
nal location or third-party name, enables the
consumer to identify the type of transfer.

Paragraph 9(b)(l)(iv)
1. Nonproprietary terminal in network. An in­
stitution need not reflect on the periodic state­
ment the street addresses, identification codes,
or terminal numbers for transfers initiated in a
shared or interchange system at a terminal op­
erated by an institution other than the accountholding institution. The statement must, how­
ever, specify the entity that owns or operates
the terminal, plus the city and state.
Paragraph 9(b)(l)(v)
Recurring payments by government agency.
^ ^ w h e third-party name for recurring payments
from federal, state, or local governments need
not list the particular agency. For example,
“ U.S. gov’t” or “N.Y. sal” will suffice.
2. Consumer as third-party payee. If a con­
sumer makes an electronic fund transfer to an­
other consumer, the financial institution must
identify the recipient by name (not just by an
account number, for example).
3. Terminal location/third party. A single en­
try may be used to identify both the terminal
location and the name of the third party to or
from whom funds are transferred. For exam­
ple, if a consumer purchases goods from a
merchant, the name o f the party to whom
funds are transferred (the merchant) and the
location of the terminal where the transfer is
initiated will be satisfied by a disclosure such
as “ XYZ Store, Anytown, Ohio.”

5. Consistency in third-party identity. The pe­
riodic statement must disclose a third-party
name as it appeared on the receipt, whether it
was, for example, the “dba” (doing business
as) name of the third party or the parent cor­
poration’s name.
6. Third-party identity on deposits at elec­
tronic terminal. A financial institution need
not identify third parties whose names appear
on checks, drafts, or similar paper instruments
deposited to the consumer’s account at an
electronic terminal.
Paragraph 9(b)(3)—Fees
1. Disclosure o f fees. The fees disclosed may
include fees for EFTs and for other non-electronic services, and both fixed fees and peritem fees; they may be given as a total or
may be itemized in part or in full.
2. Fees in interchange system. An accountholding institution must disclose any fees it
imposes on the consumer for EFTs, including
fees for ATM transactions in an interchange or
shared ATM system. Fees for use of an ATM
imposed on the consumer by an institution
other than the account-holding institution and
included in the amount of the transfer by the
terminal-operating institution need not be sep­
arately disclosed on the periodic statement.
3. Finance charges. The requirement to dis­
close any fees assessed against the account
does not include a finance charge imposed on
the account during the statement period.
Paragraph 9(b)(4)—Account Balances
1. Opening and closing balances. The open­
ing and closing balances must reflect both
EFTs and other account activity.
13

§ 205.9
Paragraph 9(b)(5)—Address and Telephone
Number fo r Inquiries
1. Telephone number. A single telephone
number, preceded by the “direct inquiries to”
language, will satisfy the requirements of sec­
tion 205.9(b)(5) and (6).
Paragraph 9(b)(6)—Telephone Number fo r
Preauthorized Transfers
1. Telephone number. See comment 9(b)(5)-1.

9(c) Exceptions to the Periodic
Statement Requirements for Certain
Accounts
1. Transfers between accounts. The regulation
provides an exception from the periodic state­
ment requirement for certain intra-institutional
transfers between a consumer’s accounts. The
financial institution must still comply with the
applicable periodic-statement requirements for
any other EFTs to or from the account. For
example, a Regulation E statement must be
provided quarterly for an account that also re­
ceives payroll deposits electronically, or for
any month in which an account is also ac­
cessed by a withdrawal at an ATM.

9(d) Documentation for Foreign-Initiated
Transfers
1. Foreign-initiated transfers. An institution
must make a good faith effort to provide all
required inform ation for foreign-initiated
transfers. For example, even if the institution
is not able to provide a specific terminal loca­
tion, it should identify the country and city in
which the transfer was initiated.

SECTION 205.10— Preauthorized
Transfers
10(a)— Preauthorized Transfers to
Consumer’s Account
Paragraph 10(a)(1)—Notice by Financial
Institution
1. Content. No specific language is required
14

Regulation E (Official Staff Commentary)
for notice regarding receipt of a preauthorized
transfer. Identifying the deposit is sufficient;
however, simply providing the current account
balance is not.
^
2. Notice o f credit. A financial institution may
use different methods of notice for various
types or series of preauthorized transfers, and
the institution need not offer consumers a
choice of notice methods.
3. Positive notice. A periodic statement sent
within two business days of the scheduled
transfer, showing the transfer, can serve as no­
tice of receipt.
4. Negative notice. The absence of a deposit
entry (on a periodic statement sent within two
business days of the scheduled transfer date)
will serve as negative notice.
5. Telephone notice. If a financial institution
uses the telephone-notice option, it should be
able in most instances to verify during a con­
sumer’s initial call whether a transfer was re­
ceived. The institution must respond within
two business days to any inquiry not an­
swered immediately.
6. Phone number fo r passbook accounts. The
financial institution may use any reasonable
means necessary to provide the telephonB
number to consumers with passbook accounS
that can only be accessed by preauthorized
credits and that do not receive periodic state­
ments. For example, it may print the tele­
phone number in the passbook or include the
num ber w ith the annual error-resolution
notice.
7. Telephone line availability. To satisfy the
readily available standard, the financial institu­
tion must provide enough telephone lines so
that consumers get a reasonably prompt re­
sponse. The institution need only provide tele­
phone service during normal business hours.
Within its primary service area, an institution
must provide a local or toll-free telephone
number. It need not provide a toll-free number
or accept collect long-distance calls from
outside the area where it normally conducts
business.

Regulation E (Official Staff Commentary)

10(b) Written Authorization for
Preauthorized Transfers from
Consumer’s Account
Preexisting authorizations. The financial intitution need not require a new authorization
before changing from paper-based to elec­
tronic debiting when the existing authorization
does not specify that debiting is to occur elec­
tronically or specifies that the debiting will
occur by paper means. A new authorization
also is not required when a successor institu­
tion begins collecting payments.
2. Authorization obtained by third party. The
account-holding financial institution does not
violate the regulation when a third-party payee
fails to obtain the authorization in writing or
fails to give a copy to the consumer; rather, it
is the third-party payee that is in violation of
the regulation.
3. W ritten authorization fo r preauthorized
transfers. The requirement that preauthorized
EFTs be authorized by the consumer “only by
a writing” cannot be met by a payee’s signing
a written authorization on the consumer’s be­
half with only an oral authorization from the
consumer. A tape recording of a telephone
conversation with a consumer who agrees to
preauthorized debits also does not constitute
w ritten authorization for purposes of this
^ ■r a r o vision.
Use o f confirmation form. A financial insti­
tution or designated payee may comply with
the requirements of this section in various
ways. For example, a payee may provide the
consumer with two copies of a preauthoriza­
tion form and ask the consumer to sign and
return one and to retain the second copy.
5. Similarly authenticated. An example of a
consumer’s authorization that is not in the
form of a signed writing but is instead “simi­
larly authenticated” is a consumer’s authoriza­
tion via a home banking system. To satisfy
the requirements of this section, there must be
some means to identify the consumer (such as
a security code) and to make available a paper
copy of the authorization (automatically or
upon request). The text of the electronic au­
thorization would have to be displayed on a
computer screen or other visual display which

§ 205.10
enables the consumer to read the communica­
tion. Only the consumer may authorize the
transfer and not, for example, a third-party
merchant on behalf of the consumer.
6. Requirements o f an authorization. An au­
thorization is valid if it is readily indentifiable
as such and the terms of the preauthorized
transfer are clear and readily understandable.

10(c) Consumer’s Right to Stop
Payment
1. Stop-payment order. The financial institu­
tion must honor an oral stop-payment order
made at least three business days before a
scheduled debit. If the debit item is resubmit­
ted, the institution must continue to honor the
stop-paym ent order (for example, by sus­
pending all subsequent payments to the payeeoriginator until the consumer notifies the insti­
tution that payments should resume).
2. Revocation o f authorization. Once a finan­
cial institution has been notified that the con­
sumer’s authorization is no longer valid, it
must block all future payments for the particu­
lar debit transmitted by the designated payeeoriginator. The institution may not wait for
the payee-originator to terminate the automatic
debits. The institution may confirm that the
consumer has informed the payee-originator of
the revocation (for example, by requiring a
copy of the consumer’s revocation as written
confirmation to be provided within 14 days of
an oral notification). If the institution does not
receive the required w ritten confirm ation
within the 14-day period, it may honor subse­
quent debits to the account.

10(d) Notice o f Transfers Varying in
Amount
Paragraph 10(d)(1)—Notice
1. Preexisting authorizations. A financial in­
stitution holding the consumer’s account does
not violate the regulation if the designated
payee fails to provide notice o f varying
amounts.
Paragraph 10(d)(2)—Range
1. Range. A financial institution or designated
15

§ 205.10
payee that elects to offer the consumer a spec­
ified range of amounts for debiting (in lieu of
providing the notice of transfers varying in
amount) must provide an acceptable range that
could be anticipated by the consumer. For ex­
ample, if the transfer is for payment of a gas
bill, an appropriate range might be based on
the highest bill in winter and the lowest bill in
summer.

10(e) Compulsory Use
Paragraph 10(e)(1)— Credit
1. Loan payments. Creditors may not require
repayment of loans by electronic means on a
preauthorized, recurring basis. A creditor may
offer a program with a reduced annual per­
centage rate or other cost-related incentive for
an automatic repayment feature, provided the
program with the automatic payment feature is
not the only loan program offered by the cred­
itor for the type of credit involved. Examples
include—
1.

mortgages with graduated payments in
which a pledged savings account is auto­
matically debited during an initial period
to supplement the monthly payments made
by the borrower;
ii. mortgage plans calling for preauthorized
biweekly payments that are debited elec­
tronically to the consumer’s account and
produce a lower total finance charge.
2. Overdraft. A financial institution may re­
quire the automatic repayment of an overdraft
credit plan even if the overdraft extension is
charged to an open-end account that may be
accessed by the consumer in ways other than
by overdrafts.
Paragraph 10(e)(2)—Employment or
Government Benefit
1. Payroll. A financial institution (as an em­
ployer) may not require its employees to re­
ceive their salary by direct deposit to that
same institution or to any other particular in­
stitution. An employer may require direct de­
posit of salary by electronic means if employ­
ees are allowed to choose the institution that
will receive the direct deposit. Alternatively,
an employer may give employees the choice
16

Regulation E (Official Staff Commentary)
of having their salary deposited at a particular
institution, or receiving their salary by check
or cash.

SECTION 205.11— Procedures for
Resolving Errors
11(a) Definition o f Error
1. Terminal location. With regard to deposits
at an ATM, a consumer’s request for the ter­
minal location or other information triggers
the error-resolution procedures, but the finan­
cial institution need only provide the ATM lo­
cation if it has captured that information.
2. Verifying account deposit. If the consumer
merely calls to ascertain whether a deposit
made via ATM, preauthorized transfer, or any
other type of EFT was credited to the account,
without asserting an error, the error-resolution
procedures do not apply.
3. Loss or theft o f access device. A financial
institution is required to comply with the er­
ror-resolution procedures when a consumer re­
ports the loss or theft of an access device if
the consumer also alleges possible unautho­
rized use as a consequence of the loss or
theft.
4. Error asserted after account closed. The fig
nancial institution must comply with the e r r a l
resolution procedures when a consumer prop­
erly asserts an error, even if the account has
been closed.
5. Request fo r documentation or information.
A request for documentation or other informa­
tion must be treated as an error unless it is
clear that the consumer is requesting a dupli­
cate copy for tax or other recordkeeping
purposes.

11(b) Notice of Error from Consumer
Paragraph 11(b)(1)—Timing; Contents
1. Content o f error notice. The notice of error
is effective even if it does not contain the
consumer’s account number, so long as the
financial institution is able to identify the ac­
count in question. For example, the consumer

Regulation E (Official Staff Commentary)
could provide a Social Security number or
other unique means of identification.

•

2. Investigation pending receipt o f informa­
tion. While a financial institution may request
a written, signed statement from the consumer
relating to a notice of error, it may not delay
initiating or completing an investigation pend­
ing receipt of the statement.

3. Statement held fo r consumer. When a con­
sumer has arranged for periodic statements to
be held until picked up, the statement for a
particular cycle is deemed to have been trans­
mitted on the date the financial institution first
m akes the statem en t av ailab le to the
consumer.
4. Failure to provide statement. When a fi­
nancial institution fails to provide the con­
sumer with a periodic statement, a request for
a copy is governed by this section if the con­
sumer gives notice within 60 days from the
date on which the statement should have been
transmitted.
5. Discovery o f error by institution. The errorresolution procedures o f this section apply
when a notice of error is received from the
consumer, and not when the financial institu­
tion itself discovers and corrects an error.
^ ^ 6 . Notice at particular phone number or ad^ J J lre ss. A financial institution may require the
consumer to give notice only at the telephone
number or address disclosed by the institution,
provided the institution maintains reasonable
procedures to refer the consumer to the speci­
fied telephone number or address if the con­
sumer attempts to give notice to the institution
in a different manner.

§ 205.11

11(c) Time Limits and Extent of
Investigation
1. Notice to consumer. Unless otherwise indi­
cated in this section, the financial institution
may provide the required notices to the con­
sumer either orally or in writing.
2. Written confirmation o f oral notice. A fi­
nancial institution must begin its investigation
promptly upon receipt of an oral notice. It
may not delay until it has received a written
confirmation.
3. Charges fo r error resolution. If a billing
error occurred, whether as alleged or in a dif­
ferent amount or manner, the financial institu­
tion may not impose a charge related to any
aspect of the error-resolution process (includ­
ing charges for documentation or investiga­
tion). Since the act grants the consumer errorresolution rights, the institution should avoid
any chilling effect on the good-faith assertion
of errors that might result if charges are as­
sessed when no billing error has occurred.
4. Correction without investigation. A finan­
cial institution may make, without investiga­
tion, a final correction to a consumer’s ac­
count in the amount or manner alleged by the
consumer to be in error, but must comply
with all other applicable requirements of sec­
tion 205.11.

Paragraph 11(b)(2)— Written Confirmation

5. Correction notice. A financial institution
may include the notice of correction on a pe­
riodic statement that is mailed or delivered
within the 10-business-day or 45-calendar-day
time limits and that clearly identifies the cor­
rection to the consumer’s account. The institu­
tion must determine whether such a mailing
will be prompt enough to satisfy the require­
ments of this section, taking into account the
specific facts involved.

1. Written confirmation-of-ermr notice. If the
consumer sends a written confirmation of er­
ror to the wrong address, the financial institu­
tion must process the confirmation through
normal procedures. But the institution need
not provisionally credit the consumer’s ac­
count if the written confirmation is delayed
beyond 10 business days in getting to the
right place because it was sent to the wrong
address.

6. Correction o f an error. If the financial in­
stitution determines an error occurred, within
either the 10-day or 45-day period, it must
correct the error (subject to the liability provi­
sions of sections 205.6(a) and (b)) including,
where applicable, the crediting of interest and
the refunding of any fees imposed by the in­
stitution. In a combined credit/EFT transac­
tion, for example, the institution must refund
any finance charges incurred as a result of the
17

§ 205.11
error. The institution need not refund fees that
would have been imposed whether or not the
error occurred.
7. Extent o f required investigation. A financial
institution complies with its duty to investi­
gate, correct, and report its determination re­
g arding an error describ ed in section
205.1 l(a)(l)(vii) by transmitting the requested
information, clarification, or documentation
within the time limits set forth in section
205.11(c). If the institution has provisionally
credited the consumer’s account in accordance
with section 205.11(c)(2), it may debit the
amount upon transmitting the requested infor­
mation, clarification, or documentation.
Paragraph ll(c)(2)(i)
1. Compliance with all requirements. Finan­
cial institutions exempted from provisionally
crediting a consumer’s account under section
205.1 l(c)(2)(i)(A) and (B) must still comply
with all other requirements of section 205.11.

Paragraph 11(c)(3)—Extension o f Time
Periods
1. POS debit card transactions. The extended
deadlines for investigating errors resulting
from POS debit card transactions apply to all
debit card transactions, including those for
cash only, at merchants’ POS terminals, and
also including mail and telephone orders. The
deadlines do not apply to transactions at an
ATM, however, even though the ATM may be
in a merchant location.

Regulation E (Official Staff Commentary)
exists between the institution and the third
party concerning the bill-payment service.
3. POS transfers. When a consumer alleges
an error involving a transfer to a merchant v i
a POS terminal, the institution must verify th ?
information previously transmitted when exe­
cuting the transfer. For example, the financial
institution may request a copy of the sales re­
ceipt to verify that the amount of the transfer
correctly corresponds to the amount of the
consumer’s purchase.
4. Agreement. An agreement that a third party
will honor an access device is an agreement
for purposes of this paragraph. A financial in­
stitution does not have an agreement for pur­
poses of section 205.1 l(c)(4)(ii) solely be­
cause it participates in transactions that occur
under the federal recurring payments pro­
grams, or that are cleared through an ACH or
similar arrangement for the clearing and set­
tlement of fund transfers generally, or because
it agrees to be bound by the rules of such an
arrangement.

11(d) Procedures I f F inancial Institution
D eterm ines N o E rro r o r D ifferent E rror
O ccurred
1. Error different from that alleged. When a
financial institution determines that an erro^
occurred in a manner or amount d iffe re n
from that described by the consumer, it m usr
comply with the requirements of both section
205.11(c) and (d), as relevant. The institution
may give the notice of correction and the ex­
planation separately or in a combined form.

Paragraph 11(c)(4)—Investigation

Paragraph 11(d)(1)— Written Explanation

1. Third parties. When information or docu­
mentation requested by the consumer is in the
possession of a third party with whom the fi­
nancial institution does not have an agree­
ment, the institution satisfies the error-resolu­
tion requirement by so advising the consumer
within the specified time period.

1. Request fo r documentation. When a con­
sumer requests copies of documents, the fi­
nancial institution must provide the copies in
an understandable form. If an institution relied
on magnetic tape it must convert the applica­
ble data into readable form, for example, by
printing it and explaining any codes.

2. Scope o f investigation. When an alleged er­
ror involves a payment to a third party under
the financial institution’s telephone bill-payment plan, a review of the institution’s own
records is sufficient, assuming no agreement
18

Paragraph 11(d)(2)—Debiting Provisional
Credit
1. A lternative procedure fo r debiting o f
credited funds. The financial institution may

§ 205.12

Regulation E (Official Staff Commentary)
comply with the requirements of this section
by notifying the consumer that the consumer’s
account will be debited five business days
^ • o m the transmittal of the notification, speci^ H ^ 'in g the calendar date on which the debiting
will occur.

provisions apply, as well as sections 226.13(d)
and (g) of Regulation Z. In such a transaction,
the consumer might be liable for up to $50
under Regulation Z (12 CFR 226) and, in ad­
dition, for $50, $500, or an unlimited amount
under Regulation E.

2. Fees fo r overdrafts. The financial institu­
tion may not impose fees for items it is re­
quired to honor under section 205.11 of this
section. It may, however, impose any normal
transaction or item fee that is unrelated to an
overdraft resulting from the debiting. If the
account is still overdrawn after five business
days, the institution may impose the fees or
finance charges to which it is entitled, if any,
under an overdraft credit plan.

2. Issuance rules. For access devices that also
constitute credit cards, the issuance rules of
Regulation E apply if the only credit feature
is a preexisting credit line attached to the as­
set account to cover overdrafts (or to maintain
a specified minimum balance). Regulation Z
(12 CFR 226) rules apply if there is another
type of credit feature, for example, one per­
mitting direct extensions of credit that do not
involve the asset account.

11(e) Reassertion o f Error

12(b) Preemption o f Inconsistent State
Laws

1. Withdrawal o f error; right to reassert. The
financial institution has no further error-reso­
lution responsibilities if the consumer volunta­
rily withdraws the notice alleging an error. A
consumer who has withdrawn an allegation of
error has the right to reassert the allegation
unless the financial institution had already
complied with all of the error-resolution re­
quirements before the allegation was with­
drawn. The consumer must do so, however,
within the original 60-day period.

^ fc iC T I O N 205.12— Relation to Other
Laws
12(a) Relation to Truth in Lending
1. D eterm ining applicable regulation. For
transactions involving access devices that also
constitute credit cards, whether Regulation E
or Regulation Z (12 CFR 226) applies, de­
pends on the nature of the transaction. For
example, if the transaction is purely an exten­
sion of credit, and does not include a debit to
a checking account (or other consumer asset
account), the liability limitations and error-res­
olution requirements of Regulation Z apply. If
the transaction only debits a checking account
(with no credit extended), the provisions of
Regulation E apply. Finally, if the transaction
debits a checking account but also draws on
an overdraft line of credit, the Regulation E

1. Specific determ inations. The regulation
prescribes standards for determining whether
state laws that govern EFTs are preempted by
the act and the regulation. A state law that is
inconsistent may be preempted even if the
Board has not issued a determination. How­
ever, nothing in section 205.12(b) provides a
financial institution with immunity for viola­
tions of state law if the institution chooses not
to make state disclosures and the Board later
determines that the state law is not preempted.
2. Preemption determination. The Board de­
termined that certain provisions in the state
law of Michigan are preempted by the federal
law, effective March 30, 1981:
i.

Definition of unauthorized use. Section
5(4) is preempted to the extent that it re­
lates to the section of state law governing
consumer liability for unauthorized use of
an access device.
ii. Consumer liability for unauthorized use of
an account. Section 14 is inconsistent with
section 205.6 and is less protective of the
consumer than the federal law. The state
law places liability on the consumer for
the unauthorized use of an account in
cases involving the consum er’s negli­
gence. Under the federal law, a consum­
er’s liability for unauthorized use is not
related to the consumer’s negligence and
depends instead on the co n su m er’s
19

§ 205.12

promptness in reporting the loss or theft
of the access device.
iii. Error resolution. Section 15 is preempted
because it is inconsistent with section
205.11 and is less protective of the con­
sumer than the federal law. The state law
allows financial institutions up to 70 days
to resolve errors, whereas the federal law
generally requires errors to be resolved
within 45 days.
iv. Receipts and periodic statements. Sections
17 and 18 are preempted because they are
inconsistent with section 205.9. The state
provisions require a different disclosure of
information than does the federal law. The
receipt provision is also preempted be­
cause it allow s the consum er to be
charged for receiving a receipt if a ma­
chine cannot furnish one at the time of a
transfer.

SECTION 205.13— Administrative
Enforcement; Record Retention

Regulation E (Official Staff Commentary)
another institution, it does not qualify for the
treatment accorded by section 205.14. For ex­
ample, this section does not apply to an insti­
tution that initiates preauthorized payroll de^
posits to consumer accounts on behalf of dM
employer. By contrast, section 205.14 can ap­
ply to an institution that issues a code for ini­
tiating telephone transfers to be carried out
through the ACH from a consumer’s account
at another institution. This is the case even if
the consumer has accounts at both institutions.
2. ACH agreements. The ACH rules generally
do not constitute an agreement for purposes of
this section. However, an ACH agreement
under which members specifically agree to
honor each other’s debit cards is an “agree­
ment,” and thus this section does not apply.

14(b) Compliance by Electronic Fund
Transfer Service Provider
1. Liability. The service provider is liable for
unauthorized EFTs that exceed limits on the
consumer’s liability under section 205.6.

13(b) Record Retention
1. Requirements. A financial institution need
not retain records that it has given disclosures
and documentation to each consumer; it need
only retain evidence demonstrating that its
procedures reasonably ensure the consumers’
receip t o f required disclo su res and
documentation.

SECTION 205.14— Electronic Fund
Transfer Service Provider Not Holding
Consumer’s Account
14(a) Electronic Fund Transfer Service
Providers Subject to Regulation
1. Applicability. This section applies only
when a service provider issues an access de­
vice to a consumer for initiating transfers to
or from the consumer’s account at a financial
institution and the two entities have no agree­
ment regarding this EFT service. If the service
provider does not issue an access device to
the consumer for accessing an account held by
20

Paragraph 14(b)(1)—Disclosures and
Documentation
1. Periodic statements from electronic fu nd
transfer service provider. A service provider
that meets the conditions set forth in th f l
paragraph does not have to issue p erio di?
statements. A service provider that does not
meet the conditions need only include on peri­
odic statements information about transfers in­
itiated with the access device it has issued.

Paragraph 14(b)(2)—Error Resolution
1. Error resolution. When a consumer notifies
the service provider of an error, the EFT ser­
vice provider must investigate and resolve the
error in compliance with section 205.11 as
modified by section 205.14(b)(2). If an error
occurred, any fees or charges imposed as a
result of the error, either by the service pro­
vider or by the account-holding institution (for
example, overdraft or dishonor fees) must be
reimbursed to the consumer by the service
provider.

Regulation E (Official Staff Commentary)

14(c) Compliance by Account-Holding
Institution
jParagraph. 14(c)(1)
1. Periodic statements from account-holding
institution. The periodic statement provided by
the account-holding institution need only con­
tain the inform ation required by section
205.9(b)(1).

APPENDIX A— Model Disclosure
Clauses and Forms
1. Review o f form s. The Board will not re­
view or approve disclosure forms or state­
ments for financial institutions. However, the
Board has issued model clauses for institu­
tions to use in designing their disclosures. If
an institution uses these clauses accurately to
reflect its service, the institution is protected
from liability for failure to make disclosures
in proper form.
2. Use o f the form s. The appendix contains
model disclosure clauses for optional use by
financial institutions to facilitate compliance

Appendix A
with the disclosure requirements of sections
205.5(b)(2) and (b)(3), 205.6(a), 205.7,
205.8(b), 205.14(b)( l)(ii) and 205.15(d)(7)
and (d)(2). The use of appropriate clauses in
making disclosures will protect a financial in­
stitution from liability under sections 915 and
916 of the act provided the clauses accurately
reflect the institution’s EFT services.
3. Altering the clauses. Financial institutions
may use clauses of their own design in con­
junction with the Board’s model clauses. The
inapplicable words or portions of phrases in
parentheses should be deleted. The catchlines
are not part of the clauses and need not be
used. Financial institutions may make altera­
tions, substitutions, or additions in the clauses
to reflect the services offered, such as techni­
cal changes (including the substitution of a
trade name for the word “card,” deletion of
inapplicable services, or substitution of lesser
liability limits). Several of the model clauses
include references to a telephone number and
address. Where two or more of these clauses
are used in a disclosure, the telephone number
and address may be referenced and need not
be repeated.

21

Board o f Governors of the Federal Reserve System

Securities Credit Transactions
Regulation G
12 CFR 207; as revised effective October 11, 1991

Regulation T
12 CFR 220; as revised effective July 1, 1996

Regulation U
12 CFR 221; as revised effective October 11, 1991

Regulation X
12 CFR 224; as revised effective January 23, 1984

Any inquiry relating to Regulations G, U, and X should be addressed to the Federal Reserve
Bank of the Federal Reserve District in which the inquiry arises. Any inquiry relating to
Regulation T should be addressed to a national securities exchange or a national securities
association of which the person making the inquiry is a member or the facilities of which
are used for that person’s transactions, or, if this is not practicable, the inquiry should be
addressed to the Federal Reserve Bank of the District in which the inquiry arises.
The forms furnished with these regulations are reduced in size and are for information
only. Copies of these forms for actual use and other forms required by the regulations can
be obtained from any Federal Reserve Bank.
August 1996

Contents

Page

REGULATION G— SECURITIES
CREDIT BY PERSONS OTHER
THAN BANKS, BROKERS, OR
DEALERS
Section 207.1—Authority, puipose, and
scope .......................................................
(a) Authority..........................................
0)) Purpose and sc o p e .........................
Section 207.2—D efinitions......................
Section 207.3—General requirements . . .
(a) Registration; termination of
registration......................................
(b) Limitation on extending purpose
cred it................................................
(c) Maintaining c re d it.........................
(d) Arranging c r e d it............................
(e) Puipose statem ent.........................
(f) Puipose statement for revolving
credit or multiple-draw
agreem ents.....................................
(g) Single-credit ru le ............................
(h) Mixed-collateral loans ..................
(i) Withdrawals and substitutions . . .
(j) Exchange offers..............................
(k) Renewals and extensions of
m aturity...........................................
(0 Transfers of cred it.........................
(m) Action for lender’s protection . . .
(n) Mistakes in good faith ..................
(o) Annual re p o rt.................................
(p) Where to register and file
applications and re p o rts...............
(q) Lack of notice of NMS security
designation......................................
Section 207.4— Credit to broker-dealers
(a) Emergency lo a n s ............................
(b) Capital-contribution loans...............
Section 207.5—Employee stock option,
purchase, and ownership plans.............
(a) Plan-lender, eligible p la n ...............
(b) Credit to exercise rights under or
finance an eligible p la n ..................
(c) Credit to ESOPs ............................
Section 207.6—Requirements for the
list of OTC margin s to c k s ..................
(a) Requirements for inclusion on the
l i s t .....................................................
(b) Requirements for continued
inclusion on the l i s t ......................

..

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4
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4

(c) Removal from the list....................
(d) Discretionary authority of Board. .
(e) Unlawful representations...............
Section 207.7—Supplement: Maximum
loan value of stock and other
collateral..................................................
(a) Maximum loan value of a
margin s to c k ...................................
(b) Maximum loan value of
nonmaigin stock and all other
collateral..........................................
(c) Maximum loan value of options
Form G - l.....................................................
Form G -2.....................................................
Form G -3.....................................................
Form G -4.....................................................

Page
6
.. 6
6

6
6

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.. 6
.. 7
. 11
. 13
15

REGULATION T— CREDIT BY
BROKERS AND DEALERS

.. 5

Section 220.1—Authority, purpose, and
scope .......................................................
(a) Authority and purpose....................
(b) Scope ................................................
Section 220.2—D efinitions......................
Section 220.3—General provisions..........
(a) Records.............................................
(b) Separation of acco u n ts..................
(c) Maintenance of cred it....................
(d) Guarantee of accounts....................
(e) Receipt of funds or securities . . . .
(f) Exchange of securities ..................
(g) Valuing securities............................
(h) Innocent m istakes............................
(i) Foreign currency ............................
Section 220.4— Margin account...............
(a) Margin transactions.........................
(b) Required m argin..............................
(c) When additional margin is
required.............................................
(d) Liquidation in lieu of deposit. . . .
(e) Withdrawals of cash or securities .
(f) Interest, service charges, etc...........
Section 220.5— Special memorandum
account..................................................... .

.. 5

(a) ......................................................
(b) ......................................................

26
76
77

.. 6

Section 220.6—Government securities
account..................................................... .

27

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5
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73
73
73
73
23
73
73
73
74
74
74
74
75
76
26
76

Contents
Page
Section 220.7—Arbitrage a c c o u n t............. 27
Section 220.8— Cash a c c o u n t.................... 27
(a) Permissible transactions.................... 27
(b) Time periods for payment;
cancellation or liquidation............... 27
(c) 90-day freeze...................................... 28
(d) Extension of time periods;
transfers ............................................. 28
Section 220.9—Nonsecurities credit and
employee stock ownership account. . . . 29
(a) ............................................................ 29
(b) ............................................................ 29
Section 220.10—Omnibus account............. 29
(a) ............................................................ 29
(b) ............................................................ 29
Section 220.11—Broker-dealer credit
account....................................................... 29
(a) Permissible transactions.................... 29
(b) Affiliated corporations....................... 29
Section 220.12—Market functions
account....................................................... 30
(a) Requirements...................................... 30
(b) Specialists.......................................... 30
(c) Underwriters and distributors.......... 31
(d) OTC market makers and thirdmarket m akers................................... 31
(e) Odd-lot dealers................................... 31
Section 220.13— Arranging for loans by
others.......................................................... 31
Section 220.14— Clearance of securities,
options and futures................................... 31
(a) Credit for clearance of securities . 31
(b) Deposit of securities with a
clearing a g e n c y ................................. 31
Section 220.15—Borrowing by creditors . 31
(a) Restrictions on borrow ing............... 31
(b) Agreements of nonmember banks . 31
Section 220.16—Borrowing and lending
securities..................................................... 32
(a) ............................................................ 32
(b) ............................................................ 32
Section 220.17—Requirements for the
list of marginable OTC stocks and
the list of foreign margin s to c k s.......... 32
(a) Requirements for inclusion on the
list of marginable OTC stocks . . . . 32
(b) Requirements for continued
inclusion on the list of
marginable OTC stocks.................... 32
(c) Requirements for inclusion on the
list of foreign margin s to c k s.......... 33
(d) Requirements for continued

Page
inclusion on the list of foreign
margin stocks......................................
(e) Removal from the lis ts ....................
(f) Discretionary authority of Board. . .
(g) Unlawful representations..................
Section 220.18— Supplement: Margin
requirem ents.............................................
(a) Margin equity security, except for
an exempted security money
market mutual fund or exempted
securities mutual fund, warrant
on a securities index or foreign
currency, or a long position in
an option.............................................
(b) Exempted security, registered
nonconvertible debt security or
OTC margin bond, money
market mutual fund, or exempted
securities mutual fu n d .......................

33
33
33
33
34

34

34

(c) Short sale of a nonexempted
security, except for a registered
noncovertible debt security or
OTC margin b o n d ............................

34

(d) Short sale of an exempted
security, registered noncovertible
debt security, or OTC margin
bond.....................................................
(e) Nonmargin, nonexempted security .

34
34

(f) Put or call on a security,
certificate of deposit, securities
index or foreign currency, or a
warrant on a securities index or
foreign currency.................................
Form T -l, T - 2 .............................................
Form T -4 .......................................................

34
35
37

REGULATION U— CREDIT BY
BANKS FOR THE PURPOSE OF
PURCHASING OR CARRYING
MARGIN STOCKS
Section 221.1—Authority, purpose, and
sc o p e ..........................................................

39

(a) Authority.............................................

39

(b) Purpose and sc o p e ............................
Section 221.2—D efinitions.........................
Section 221.3— General requirements . . . .
(a) Extending, maintaining, and
arranging c r e d it.................................
(b) Purpose statement..............................

39
39
41
41
41

Contents
Page
(c) Puipose statement for revolvingcredit or multiple-draw
agreements........................................... 41
(d) Single-credit r u l e ............................. 41
(e) Mixed-collateral lo a n s..................... 41
(f) Withdrawals andsubstitutions........... 42
(g) Exchange o ffe rs............................... 42
(h) Renewals and extensions of
maturity ............................................. 42
(i) Transfers of c r e d it..........................
42
42
(j) Action for bank’s p ro tectio n ........
(k) Mistakes in good f a it h ..................
42
(0 Lack of notice of NMS security
designation ........................................ 42
Section 221.4— Agreements of
nonmember b a n k s ................................... 42
Section 221.5—Special-purpose loans to
brokers and d e a le rs ................................. 43
(a) Special-purpose lo a n s .....................
43
43
(b) Written n o tic e .................................
(c) Types of special-purposecredit . . .
43
Section 221.6—Exemptedtransactions . . . 44
Section 221.7—Requirements for the
list of OTC margin s to c k s .................... 44
(a) Requirements for inclusion on the
l i s t ....................................................... 44
(b) Requirements for continued
inclusion on the l i s t .........................
45
(c) Removal from the list.....................
45
(d) Discretionary authority of Board. . . 45
(e) Unlawful representations................
45
Section 221.8—Supplement: Maximum
loan value of stock and other
collateral..................................................... 45
(a) Maximum loan value of margin
stock....................................................
45
(b) Maximum loan value of
nonmaigin stock and all other
collateral............................................. 46
(c) Maximum loan value ofoptions . 46
Form U - l.....................................................
47

REGULATION X— BORROW ERS O F
SECURITIES CREDIT
Section 224.1—Authority, purpose, and
sc o p e .........................................................
(a) Authority and purpose......................

49
49

Page
(b) Scope and exemptions....................... 49
Section 224.2—D efinitions......................... 49
Section 224.3— Margin regulations to
be applied by nonexempted
borrow ers.................................................. 49
(a) Credit transactions outside the
United S tates...................................... 49
(b) Credit transactions within the
United S tates...................................... 50
(c) Inadvertent noncompliance............... 50

SECU RITIES EX CH A N G E A C T OF

1934
Section 3—Definitions and Application
Section 6—National Securities
Exchanges..................................................
(a) Registration; application....................
Section 7—Margin requirem ents...............
(a) Rules and regulations for
extension of credit; standard for
initial extension; undermaigined
acco u n ts.............................................
(b) Lower and higher margin
requirements ......................................
(c) Unlawful credit extension to
custom ers...........................................
(d) Unlawful credit extension in
violation of rules and regulations;
exception to application of rules,
etc........................................................
(e) Effective date......................................
(f) Unlawful receipt of credit;
exemptions ........................................
(g) ............................................................
Section 8—Restrictions on borrowing
by members, brokers, and dealers . . . .
(a)
Section 17—Records and reports...............
(g) Persons extending c re d it.................
Section 23— Rules, regulations, and
orders; annual reports..............................
(a) Power to make rules and
regulations; considerations; public
d isclo su re...........................................
Section 29—Validity of contracts...............
(b) Contract provisions in violation
of t i t l e ................................................

51
56
56
56

56
57
57

57
58
58
58
59
59
59
59
60

60
60
60

Regulation G
Securities Credit by Persons Other Than Banks, Brokers,
or Dealers
12 CFR 207; as revised effective October 11, 1991

SECTION 207.1— Authority, Purpose,
and Scope
(a) Authority. Regulation G (this part*) is is­
sued by the Board of Governors of the Fed­
eral Reserve System (the Board) pursuant to
the Securities Exchange Act of 1934 (the act)
(15 USC 78a et seq.).
(b) Purpose and scope.
(1) This part applies to persons other than
banks, brokers or dealers, who extend or
maintain credit secured directly or indirectly
by margin stock and who are required to
register w ith the Board under section
207.3(a) of this part. Credit extended by
such persons is regulated by limiting the
loan value of the collateral securing the
credit, if the purpose of the credit is to buy
or carry margin stock.
(2) This part does not apply to clearing
agencies regulated by the Securities and Ex­
change Commission or the Commodity Fu­
tures Trading Commission that accept de­
posits of margin stock in connection with—
(i) the issuance of, or guarantee of, or
the clearance of transactions in, any se­
curity (including options on any security,
certificate of deposit, securities index or
foreign currency); or
(ii) the guarantee of contracts for the
purchase or sale of a commodity for fu­
tu re delivery or options on such
contracts.

SECTION 207.2— Definitions
The terms used in this part have the meanings
given them in section 3(a) of the act or as
defined in this section.
(a) “ Affiliate” means any person who, di­
rectly or indirectly, through one or more in­
termediaries, controls, or is controlled by, or
is under common control with the lender.
*
207.

Code o f Federal Regulations, title 12, chapter II, part

(b) “Carrying” credit is credit that enables a
customer to maintain, reduce, or retire indebt­
edness originally incurred to purchase a stock
that is currently a margin stock.
(c) “Current market value” of—
(1) a security means:
(i) if quotations are available, the closing
sale price of the security on the preced­
ing business day, as appearing in any
regularly published reporting or quotation
service; or
(ii) if there is no closing sale price, the
lender may use any reasonable estimate
of the market value of the security as of
the close of business on the preceding
business day; or
(iii) if the credit is used to finance the
purchase of the security, the total cost of
purchase, which may include any com­
missions charged.
(2) any other collateral means a value de­
termined by any reasonable method.
(d) “Customer” includes any person or per­
sons acting jointly, to or for whom a lender
extends or maintains credit.
(e) “Good faith” with respect to—
(1) the loan value of collateral means that
amount (not exceeding 100 percent of the
current m arket value o f the collateral)
which a lender, exercising sound credit
judgment, would lend without regard to the
customer’s other assets held as collateral in
connection with unrelated transactions;
(2) accepting a statement or notice from or
on behalf of a customer means that the
lender or its duly authorized representative
is alert to the circumstances surrounding the
credit, and if in possession of information
that would cause a prudent person not to
accept the notice or certification without in­
quiry, investigates and is satisfied that it is
truthful.
(f) “Indirectly secured”
(1) includes any arrangement with the cus­
tomer under which—

§ 207.2
(i) the customer’s right or ability to sell,
pledge, or otherwise dispose of margin
stock owned by the customer is in any
way restricted while the credit remains
outstanding; or
(ii) the exercise of such right is or may
be cause for accelerating the maturity of
the credit.
(2) does not include such an arrangement
if—
(i) after applying the proceeds of the
credit, not more than 25 percent of the
value of the assets subject to the arrange­
ment, as determined by any reasonable
method, are margin securities;
(ii) it is a lending arrangement that per­
mits accelerating the maturity of the
credit as a result of a default or renegoti­
ation of another credit to the customer by
another creditor that is not an affiliate of
the lender;
(iii) the lender holds the margin stock
only in the capacity of custodian, deposi­
tary, or trustee, or under similar circum­
stances and, in good faith, has not relied
upon the margin stock as collateral; or
(iv) if the lender, in good faith, has not
relied upon the margin stock as collateral
in extending or maintaining the credit.
(g) “ In the ordinary course of business”
means occurring or reasonably expected to oc­
cur in carrying out or furthering any business
purpose, or in the case of an individual, in the
course of any activity for profit or the man­
agement or preservation of property.
(h) “Lender” means any person subject to the
registration requirements of this part.
(i) “Margin stock” means
(1) any equity security registered or having
unlisted trading privileges on a national se­
curities exchange;
(2) any OTC margin stock;
(3) any OTC security designated as quali­
fied for trading in the National Market Sys­
tem under a designation plan approved by
the Securities and Exchange Commission
(NMS security);
(4) any debt security convertible into a
margin stock or carrying a warrant or right
to subscribe to or purchase a margin stock;
2

Regulation G
(5) any warrant or right to subscribe to or
purchase a margin stock; or
(6) any security issued by an investment
company registered under section 8 of the
Investment Company Act of 1940 (15 USC
80a-8), other than—
(i) a company licensed under the Small
Business Investm ent Company Act of
1958, as amended (15 USC 661); or
(ii) a company which has at least 95 per­
cent of its assets continuously invested in
exempted securities (as defined in 15
USC 78c(a)(12)); or
(iii) a com pany w hich issues faceamount certificates as defined in 15 USC
80a-2(a)(15), but only with respect of
such securities.
(j) “Maximum loan value” is the percentage
of current market value assigned by the Board
under section 207.7 of this part to specified
types of collateral. The maximum loan value
of margin stock is stated as a percentage of
current market value. All other collateral has
good faith loan value except that puts, calls,
and combinations thereof have no loan value.
(k) “OTC margin stock” means any equity
security not traded on a national securities ex­
change that the Board has determined has the
degree of national investor interest, the depth
and breadth of market, the availability of in­
formation respecting the security and its is­
suer, and the character and permanence of the
issuer to warrant being treated like an equity
security traded on a national securities ex­
change. An OTC stock is not considered to be
an “OTC margin stock” unless it appears on
the Board’s periodically published list of OTC
margin stocks.
(Z) “Purpose credit” is credit for the purpose,
whether immediate, incidental, or ultimate, of
buying or carrying a margin stock.

SEC T IO N 207.3— G eneral R equirem ents
(a) Registration; termination o f registration.
(1) Every person who, in the ordinary
course of business, extends or maintains
credit secured, directly or indirectly, by any
margin stock shall register on Federal Re­
serve Form FR G -l (OMB No. 7100-0011)

Regulation G
within 30 days after the end of any calen­
dar quarter during which (i) the amount of
credit extended equals $200,000 or more, or
(ii) the amount of credit outstanding at any
time during that calendar quarter equals
$500,000 or more.
(2) A registered lender may apply to termi­
nate its registration, by filing Federal Re­
serve Form FR G-2 (OMB No. 7100-0011),
if the lender has not, during the preceding
six calend ar m onths, had m ore than
$200,000 of such credit outstanding. Regis­
tration shall be deemed terminated when the
application is approved by the Board.
(b) Limitation on extending purpose credit.
No lender, except a plan-lender, as defined in
section 207.5(a)(1) of this part, shall extend
any purpose credit, secured directly or indi­
rectly by margin stock in an amount that ex­
ceeds the maximum loan value of the collat­
eral securing the credit, as set forth in section
207.7 of this part.
(c) Maintaining credit. A lender may continue
to maintain any credit initially in compliance
with this part, regardless of—
(1) reduction in the customer’s equity re­
sulting from change in market prices;
(2) change in the maximum loan value pre­
scribed by this part; or
(3) change in the status of the security
(from nonmaigin to margin) securing an ex­
isting purpose credit.
(d) Arranging credit. No lender may arrange
for the extension or m aintenance of any
credit, except upon the same terms and condi­
tions under which the lender itself may extend
or maintain credit under this part except this
limitation shall not apply with respect to the
arranging by a lender for a bank to extend or
maintain credit on margin stock or exempted
securities.
(e) Purpose statement. Except for credit ex­
tended under section 207.5 of this part, when­
ever a lender extends credit secured directly
or indirectly by any margin stock, the lender
shall require its customer to execute Form FR
G-3 (OMB No. 7100-0018), which shall be
signed and accepted by a duly authorized rep­
resentative of the lender acting in good faith.

§ 207.3
(f) Purpose statement fo r revolving-credit or
multiple-draw agreements.
(1) If a lender extends credit, secured di­
rectly or indirectly by any margin stock,
under a revolving-credit or other multipledraw agreement, Form FR G-3 can either
be executed each time a disbursement is
made under the agreement, or at the time
the cred it arrangem ent is o riginally
established.
(2) If a purpose statement executed at the
time the credit arrangement is initially made
indicates that the purpose is to purchase or
carry m argin stock, the credit w ill be
deemed in compliance with this part if the
maximum loan value of the collateral at
least equals the aggregate amount of funds
actually disbursed. For any purpose credit
disbursed under the agreement, the lender
shall obtain and attach to the executed
Form FR G-3 a current list of collateral
which adequately supports all credit ex­
tended under the agreement.
(g) Single-credit rule.
(1) All purpose credit extended to a cus­
tomer shall be treated as a single credit, and
all the collateral securing such credit shall
be considered in determining whether or not
the credit complies with this part.
(2) A lender that has extended purpose
credit secured by margin stock may not
subsequently extend unsecured purpose
credit to the same customer unless the com­
bined credit does not exceed the maximum
loan value of the margin stock securing the
prior credit.
(3) If a lender extended unsecured purpose
credit to a customer prior to the extension
of purpose credit secured by margin securi­
ties, the credits shall be combined and
treated as a single credit solely for the pur­
poses of the withdrawal and substitution
provision of paragraph (i) of this section.
(4) If a lender extends purpose credit se­
cured by any margin stock and nonpurpose
credit to the same customer, the lender shall
treat the credits as two separate loans and
may not rely upon the required collateral
securing the purpose credit for the nonpur­
pose credit.
(h) M ixed-collateral loans. A purpose credit
3

§ 207.3
secured in part by margin stock, and in part
by other collateral shall be treated as two sep­
arate loans, one secured by the margin stock
and one by all other collateral. A lender may
use a single credit agreement, if it maintains
records identifying each portion of the credit
and its collateral.
(i) Withdrawals and substitutions.
(1) A lender may permit any withdrawal or
substitution of cash or collateral by the cus­
tom er if the withdrawal or substitution
would not—
(i) cause the credit to exceed the maxi­
mum loan value of the collateral; or
(ii) increase the amount by which the
credit exceeds the maximum loan value
of the collateral.
(2) For purposes of this section, the maxi­
mum loan value of the collateral on the day
of the withdrawal or substitution shall be
used.
(j) Exchange offers. To enable a customer to
participate in a reorganization, recapitalization,
or exchange offer that is made to holders of
an issue of margin stock a lender may permit
substitution o f the securities received. A
nonmargin nonexempted security acquired in
exchange for a margin stock shall be treated
as if it is margin stock for a period of 60 days
following the exchange.
(k) Renewals and extensions o f maturity. A
renewal or extension of the maturity of a
credit need not be considered a new extension
of credit if the amount of the credit is in­
creased only by the addition of interest, ser­
vice charges, or taxes with respect to the
credit.

Regulation G
(iv) the collateral for the credit is not
changed.
(2) Any transfer between customers at the
same lender shall be accompanied by a
statem ent by the tran sfero r custom er
describing the circumstances giving rise to
the transfer and shall be accepted and
signed by a duly authorized representative
o f the lender acting in good faith. The
lender shall keep such statement with its
records of the transferee account.
(3) When a transfer is made between lend­
ers or between a lender and a bank, the
transferee lender shall obtain a copy of the
Form FR G-3 or Form FR U -l originally
filed with the transferor lender and retain
the copy with its records of the transferee
account. If no form was originally filed
with the transferor, the transferee may ac­
cept in good faith a statement from the
transferor describing the purpose of the loan
and the collateral securing it.
(m) Action fo r lender’s protection. Nothing in
this part shall require a lender to waive or
forego any lien, or prevent a lender from tak­
ing any action it deems necessary for its
protection.
(n) Mistakes in good faith. A mistake in good
faith in connection with the extension or
maintenance of credit shall not be a violation
of this part.
(o) Annual report. Every registered lender
shall, within 30 days following June 30 of
every year, file Form FR G-4 (OMB No.
7100-0011).

(p) Where to register and file applications
and reports. Registration statements, applica­
(/) Transfers o f credit.
tions to terminate registration, and annual re­
(1) A transfer of a credit between custom­
ports shall be filed with the Federal Reserve
ers or lenders or between a lender and a
Bank of the District in which the principal
bank shall not be considered a new exten­
office of the lender is
located.
sion of credit if—
(i) the original credit was extended by a (q) Lack o f notice o f
NMS security designa­
lender in compliance with this part or tion. Failure to treat an NMS security as a
was extended by a bank in a manner that margin stock in connection with an extension
would have complied with this part;
of credit shall not be
deemed a violation of
(ii) the transfer is not made to evade this this part if the designation is made between
part or part 221 of this chapter;
quarterly publications of the Board’s list of
(iii) the am ount of credit is not in­
OTC margin stocks and the lender does not
creased; and
have actual notice of the designation.

4

Regulation G

SECTION 207.4— Credit to BrokerDealers
No lender shall extend or maintain credit se­
cured, directly or indirectly, by any margin
stock to a creditor who is subject to part 220
o f this chapter except in the follow ing
circumstances:
(a) Emergency loans. Credit extended in good
faith reliance upon a certification from the
customer that the credit is essential to meet
emergency needs arising from exceptional cir­
cumstances. Any collateral for such credit
shall have good faith loan value.
(b) Capital-contribution loans. Credit that the
Board has exempted by order upon a finding
that the exemption is necessary or appropriate
in the public interest or for the protection of
investors, provided the Securities Investor Pro­
tection Corporation certifies to the Board that
the exemption is appropriate.

SECTION 207.5— Employee Stock
Option, Purchase, and Ownership Plans
(a) Plan-lender; eligible plan.
(1) Plan-lender means any corporation, (in­
cluding a wholly owned subsidiary, or a
lender that is a thrift organization whose
membership is limited to employees and
former employees of the corporation, its
subsidiaries, or affiliates) that extends or
maintains credit to finance the acquisition
o f margin stock of the corporation, its sub­
sidiaries, or affiliates under an eligible plan.
(2) Eligible plan. An eligible plan means
any employee stock option, purchase, or
ownership plan adopted by a corporation
and approved by its stockholders that pro­
vides for the purchase of margin stock of
the corporation, its subsidiaries, or affiliates.
(b) Credit to exercise rights under or finance
an eligible plan.
(1) If a plan-lender extends or maintains
credit under an eligible plan, any margin
security that directly or indirectly secures
that credit shall have good faith loan value.
(2) Credit extended under this section shall
be treated separately from credit extended
under any other section of this part except
sections 207.3(a) and 207.3(o) of this part.

§ 207.6
(c) Credit to ESOPs. A lender may extend
and maintain purpose credit without regard to
the provisions of this part, except for sections
207.3(a) and 207.3(o), if such credit is ex­
tended to an employee stock ownership plan
(ESOP) qualified under section 401 of the In­
ternal Revenue Code, as amended (26 USC
401).

SECTION 207.6— Requirements for the
List o f OTC Margin Stocks
(a) Requirements fo r inclusion on the list. Ex­
cept as provided in paragraph (d) of this sec­
tion, an OTC margin stock shall meet the fol­
lowing requirements:
(1) Four or more dealers stand willing to,
and do in fact, make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) The minimum average bid price of such
stock, as determined by the Board, is at
least $5 per share;
(3) The stock is registered under section 12
of the act, is issued by an insurance com­
pany subject to section 12(g)(2)(G) of the
act, is issued by a closed-end investment
management company subject to registra­
tion pursuant to section 8 of the Investment
Company Act of 1940 (15 USC 80a-8), is
an American Depositary Receipt (ADR) of
a foreign issuer whose securities are regis­
tered under section 12 of the act, or is a
stock of an issuer required to file reports
under section 15(d) of the act;
(4) Daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) The stock has been publicly traded for
at least six months;
(6) The issuer has at least $4 million of
capital, surplus, and undivided profits;
(7) There are 400,000 or more shares of
such security outstanding in addition to
shares held beneficially by officers, direc­
tors, or beneficial owners of more than 10
percent of the stock;
(8) There are 1,200 or more holders of re­
cord, as defined in SEC Rule 12g5-l (17
CFR 240.12g5-l), of the stock who are not
5

§ 207.6
officers, directors, or beneficial owners of
10 percent or more of the stock, or the av­
erage daily trading volume of such a stock,
as determined by the Board, is at least 500
shares; and
(9) The issuer or a predecessor in interest
has been in existence for at least three
years.
(b) Requirements fo r continued inclusion on
the list. Except as provided in paragraph (d)
of this section, an OTC margin stock shall
meet the following requirements:
(1) Three or more dealers stand willing to,
and do in fact, make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) The minimum average bid price of such
security, as determined by the Board, is at
least $2 per share;
(3) The security is registered as specified in
paragraph (a)(3) of this section;
(4) Daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) The issuer has at least $1 million of
capital, surplus, and undivided profits;
(6) There are 300,000 or more shares of
such stock outstanding in addition to shares
held beneficially by officers, directors, or
beneficial owners of more than 10 percent
of the stock; and
(7) There continue to be 800 or more hold­
ers of record, as defined in SEC Rule
12g5-l (17 CFR 240.12g5-l), of the stock
who are not officers, directors, or beneficial
owners of 10 percent or more of the stock,
or the average daily trading volume of such
stock, as determined by the Board, is at
least 300 shares.
(c) Removal from the list o f OTC margin
stocks. The Board shall periodically remove
from the list any stock that—

Regulation G
(1) ceases to exist or of which the issuer
ceases to exist, or
(2) no longer substantially meets the provi­
sions of paragraph (b) of this section or
section 207.2(k).
(d) Discretionary authority o f Board. Without
regard to the other paragraphs of this section,
the Board may add to, or omit or remove
from, the OTC margin stock list any equity
security, if in the judgment of the Board, such
action is necessary or appropriate in the public
interest.
(e) Unlawful representations. It shall be un­
lawful for any lender to make, or cause to be
made, any representation to the effect that the
inclusion of a security on the list of OTC
margin stocks is evidence that the Board or
the SEC has in any way passed upon the mer­
its of, or given approval to, such security or
any transactions therein. Any statement in an
advertisement or other similar communication
containing a reference to the Board in connec­
tion with the list or securities on that list shall
be an unlawful representation.

SECTION 207.7— Supplement:
Maximum Loan Value o f Margin Stock
and Other Collateral
(a) Maximum loan value o f a margin stock.
The maximum loan value of any margin
stock, except options, is 50 percent of its cur­
rent market value.
(b) Maximum loan value o f nonmargin stock
and all other collateral. The maximum loan
value of a nonmargin stock and all other col­
lateral except puts, calls, or combinations
thereof is their good faith loan value.
(c) Maximum loan value o f options. Whether
they are margin stock or not, puts, calls, and
combinations thereof have no loan value.

Regulation G (Form G -l)

W
01

OMB No. 7 1 0 0 -0 0 1 1
Apptdwai •■(M M Ju ly 31.

BOARD O f GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Registration Statement For Persons Who Extend Credit Secured by
Margin Stock (Other Than Banks, Brokers or Dealers)
(Federal Reserve Form G-1)
I N n g iM iM an
C F .H. 2 0 7 1 ..

K M n g lu w w iiw lo t i educing th is burdon. 10 S ecretary, Board
o f G overnors of th e Fodatai Rasorve S y iu m . 20M and C S t tN ti. M W ..
W arfw ngran. D.C 2 0 * » 1 ; and to itw O lhco o f Mw i g w u r l and Budget.
P ip er* , oik ftoduetion Protect 17100 0 0 1 U . W asfengton. O C 7 0 5 0 1

Name of registrant: _
Name under which business is conducted, if different from above:
Address of principal place of business:
(Do not use P.O. Box No.)

County

s,f“ *
C*Y

S ta ia

ZIP Cod*

Mailino address, if different from above:
S trew

GENERAL INSTRUCTIONS
Who m utt fBi: Section 207.3(a) of Federe!
Regulation G require* that FR Form G-1 be completed by
every person (other than commercial bank*, brokers or
dealers) who during any calendar quarter extends a total of
$20 0,0 00 or more, or has outstanding a total of 1 50 0,0 00 or
more, in credit secured directly or indirectly, in whole or in
part, by coOataral that includes any margin stock.
When and where to He: The form should be filed in duplicate
with the Federal Reserve Bank of the district in which the
principal office of subject person is located within 30 days
following the end of such quarter in which credit has been
extended or is outstanding in accordance with Section
2 07.3(a). This registration statement wiH remain in effect
until a FR Form G-2 (deregistration statement) is approved by
the Board of Governors of the Federal Reserve System.
What to file: All persons subject to the registration
requirements of Section 207.3(a) should (i) supply the
background information specified below; (S) complete
Schedule A; and ( I ) sum bit tw o copies of a balance sheet,
certified by an independant public accountant, for the
registrant's latest fiscal year. If the registrant is subject to
supervision by a State or Federal regulatory authority, a copy
of the latest balance sheet filed w ith such authority may be
used. If neither is available, the registrant should complete
Schedule B on page 4 .
« required to d isclose h is or her Sooiai

Registration form s w it be returned to registrants fo r
corrections i f att item s have n o t been answered in the manner
required o r i f th e form s are otherw ise unacceptable fo r filing.

Terms used in this form ere explained below. Precise
definitions mey be found in Section 2 07 .2 of Reguattion G.
Person: Any individual, corporation, partnership, association,
joint stock company, business trust, or unincorporated
organization.
Purpose credH: Credit extended for the purpose of purchasing
or carrying margin stock, o r to reduce or retire indebtedness
previously incurred fo r that purpose.
In the ordinary course of business: Occuring or reasonably
expected to occur from time to tim e in the course of any
activity of a person for profit or the management and
preservation of property or, in the case of a person other
than an individual, carrying out or in furtherance of any
business purpose.
Margin stock: Includes (1) stocks registered on a national
securities exchange, stocks on the Federal Reserve Board's
List of Marginable OTC Stocks, or any OTC security
designated for trading in the Naiional Market System, (2)
debt securities that are convertible into, or carry a warrant or
right to subscribe to or purchase margin stock, (3 ) any such
warrant or right, and (4) shares of most mutual funds.
Indirectly secured: In general, credit is indirectly secured by
margin stock if there is an understanding between the
borrower and the lender ( I I which is designated to make the
margin stock more available to the lender in case of default
than to the borrower's other creditors, or (2) which limits the
borrower from exercising fufl dominion over the margin stock
to sell, pledge, or donate them , or determining where they
shall be placed physically.

7

Regulation G (Form G-1)

FRG-1
Pa<p2o4 4

Background Information
1. Principal line* of business:

2. Registrant is: (check one)

0
0

Sole proprietorship
Partnership
Corporation

0 Private investor
0 Other (specify)

a. If registrant ii a sole proprietor, private investor, or other, slate fu l residence address:

b. If registrant is a corporation, state date and place of incorporation:
D a te:_____________________

Place:________________________________________________________________________

c. Person responsible for maintaining records in connection with Regulation G:
N am e:_____________________________________________

T itle :_______________________________________________

Telephone Number (include area co d el:________________________________________________________________________
3. If any of the accounts or records of registrant are kept or maintained by anyone other than the person named in 2(c). furnish
the name and address of the other individual, firm, or organization:

a. Does any person not named in items 2(c) or 3 above exercise or have power to exercise a controling influence over the
management or policies of registrant, directly or indirectly, through stock ownership, agreement, or otherwise?
O Yea

0

No

b. If 'yes'', state the name of such person and describe the agreement, arrangement, or nature of the controlling influence:

5. a. Does the registrant extend credit in connection with an employee stock option or stock purchase plan pursuant to the
special ‘ plan-lender* provision set forth in Section 207.5(a) of Regulation 6? If so, submit tw o copies of documents
establishing the plan, a prospectus, and other information which supports adherence to plan-lender limitations.
O

Yes

0

No

6. b. Does the registrant extend credit to an employee stock ownership plan (ESOP) qualified under section 401 of the Internal
Revenue Code (26 U.S.C. 401), as set forth in Section 207.5(c) of Regulaiton G? If so, submit tw o copies of documents
establishing the plan and any other pertinent supporting information.
0

8

Yes

O

No

Regulation G (Form G-1)

Regulation G (Form G-1)

FN 0-1
h g * 4 * l4

Schedule B—Balance Sheet
A * o f ____________________________ _ 19 _______
This schedule is to be completed only by lenders not submitting corporate balance sheets certified by an independent public
accountant or used to meet reporting requirements of a State or Federal regulatory authority.

1$ Thousands!
ASSETS

LIABILITIES AND NET WORTH

Cash and bank deposits

Short-term bank borrowings

Trade accounts and notes receivable
(net allowance for bad debts of
)

Other notes and accounts payable

Other accounts and notes receivable
(include credit to executives and
employees)

All other liabilities
TOTAL LIABILITIES

Marketable securities

Capital stock

Long-term dabt

Inventories

Additional paid-in capital

Investments in non-consolidated
subsidiaries

Retained earning*/undivided profits
Total Equity Capital'

Fixed assets (net of depreciation)
All other assets
TOTAL ASSETS

TOTAL LIABILITIES AND
EQUITY CAPITAL

1. R aflfev an tt n o t reporting c ap ital stock, additional paid-in-capital o r m i n e d earnings/undivided profits m ust ne v erth eless indicate to tal equity capital.

Certification
The registrant filing this registration form ar>d any attachments thereto and the person by whom it is executed represent hereby
that aH information contained therein is true and complete.

Signature o t io ta proprietor, general p artner, m anaging a g en t, or principal o
<t iincludng a ia a code)

This mandatory report is needed to elicit certain background end financial information about a Regulation G lender and the
types and amount of credit activities engaged in that are secured by margin stock.

Honest, accurate, and timely statements are required by law
(15 U.S.C. !78ff; 18 U.S.C. 11001)

Regulation G (Form G-2)

FR G-2
OMfl No. 7 1 0 0 -0 0 1 1
A pproval expiree July 31 . 1S9S

BOARD OF GOVERNORS OF THE FEOERAL RESERVE SYSTEM

Deregistration Statement For
Persons Registered Pursuant to Regulation G
(Federal Reserve Form G-2)
A. For use by Noncorporate Registrants
Thi» dorepietTerion etotom ont i t required b y law |I 6 U .S.C . 7 ig an d 7S*r: 12
C.F.FL 2 0 7 ).

an d com pleting and review ing th e coOtction o f *form »iion. Sond cw iw w r t i
regeidm g M e burden e u im e te or any other a tpac? o» tte a coOacikm of
•nform etion. In cM ing M w nM ra fo> <«Ouc«« tta a OuhMr. to Secretary. Board
o f G o M in o n of lh a Federal W iia rw Syetem . JO tt and C S treet*. N W .
W ash n g to n . D C 2 0 5 5 1 ; and to th e O fte a o f M anagem ent and Budget.
Paperw ork R eduction Project < 710000111. WaelMngton. D C 2 0 5 0 3 .

Certificate
I (W e), doing business under the name

hereby certify that I (we) have not, during the preceding six
calendar months, had a total of 1200,000 or more of credit
outstanding secured directly or indirectly by margin stock.
I (We) understand that if I (w e), in the future, extend a total
of 1200,000 or more during any calendar quarter, or have

outstanding at any tim e during a calendar quarter a total of
$ 5 0 0,0 00 or more, in credit that is secured directly or
indirectly by collateral that includes any margin stock, I (we)
shall within 30 days following the end of such calendar
quarter reregister and remain registered for at least six
months w ith the Board of Governors of the Federal Reserve
System by filing Federal Reserve Form G-1 w ith the Federal
Reserve Bank of the district in which my (ourl principal office
is located.
This certification is given in connection with an application
for termination of registration pursuant to Section 207.3(a) of
Regulation G of the 8oard of Governors of the Federal
Reserve System.

Print or typo namoiat and iHMs)

e ■ an inrftviduei ia not required to dactoM ha or her Social Security number.

Honest, accurate, and timely statements are required by la
(IS U.S.C. I78ff; 18 U.S.C. 11001)

11

Regulation G (Form G-2)

Fit 0-2
OMB No 7 1 0 0 -0 0 1 1
Approval i« p « M Mdv 3 1 . IM S

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Deregistration Statement For
Persons Registered Pursuant to Regulation G
(Federal Reserve Form G-2)
B. For use by Corporate Registrants

roganbriQ thm bu rton mitnmtm or any M hat a ip a c t o f tfna coB adion af
inform ation. n c titfn Q WQQeeihine lo t iv d u o iQ ftwa b u d a n , to S ocietery, Ooavtf
oS G o v e m c a t tk a FaOacai Reserve System. N M and C S tre ets. N W ,
W ashington. D C 2 0 M 1 ; an* to th e O fhee o f Manepem ent and B udget.
Paperw ork Reduction f to p c t 17100-0011). W eeN ngton. O C 2 0 5 0 1

Officer's Certificate
I hereby certify that

('Corporation”) has not. during the preceding six calender
months, hod a totel of $ 2 0 0,0 00 or more of credit
outstending secured directly or indirectly by mergin stock.
It is understood that if the Corporation shal. in the future,
extend e total of $ 20 0,0 00 or more during any calender

quarter, or has outstanding a t any tim a during a calendar
quarter a total of $500,000 or more, in credit that is secured
directly or indirectly by coiateraJ that includes any margin
stock, the Corporation shal within 30 days foSowing the end
of such calendar quarter reregister and remain registered for
at least six months with the Board of Governors of the
Federal Reserve System by filing Federal Reserve Form G-1
with the Federal Reserve Bonk of the district in which the
principal office of the corporation is located.
This certHicetion is given in connection w ith an application
for termination o f registration purauant to Section 207.3(a) of
Regulation G of the Board of Governors of the Federal
Reserve System.

Dta
a

Honest accurate, and timely state ments are required by law
(16 U.S.C. *76ff; I t U.S.C. 110011

12

Regulation G (Form G-3)

FB G -3
0 M 6 No 7 1 0 0 -0 0 1 8
Approval e ip ire s July 31 . 1 9 3 8

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Statement of Purpose for an Extension of Credit Secured by Margin
Stock by a Person Subject to Registration Under Regulation G
(Federal Reserve Form G-3)
Nam e ol Land**
T his form is required by

k* (15 U S

C. 7 8 g e n d 78w ; 12 C.F.R 207).

Pubfcc reporting burden for th is coSection of inform ation is estim ated to everege
1 0 m inutes per responee. including th e tim e for reviewing instructions,
searching existing d a ta so u rces, gathering end m am teinng the d a ta needed.

and co m p etin g and review ing th e eole c tio n of mform eiioo. Send com m ent*
regarding th is burden e stim a te or a ny o ther esp ect o t th is collection of
inform ation, including su ggestions for re d u c n g ttne burden, to Secretary. Board
Ot G overnors of th e Federei Reserve S ystem . 20 tn end C S tre ets. N.W..
W ashington. D.C. 305 5 1 : end to th e O ffice o f M anagem ent end Budget.
Paperw ork R eduction Protect 17100-0011). W ashington. D.C. 20603.

Instructions
1. This form must bn completed when a lender subject to registration under Regulation G extends credit secured directly or
indirectly, in whole or in pan, by any margin stock.
2. The term ‘ margin stock" is defined in Regulation G (12 CFR 2 07) and includes, principally: (1) stocks that are registered on
a national securities exchange, stocks that are on the Federal Reserve Board's List of Marginable OTC Stocks, or eny OTC
security designated for trading in the National Market System; (2) debt securities (bondsl that are convertible into margin stock;
and 13) shares of most mutual funds.
3. Please print or type (if space is inadequate, attach separate sheet).

Part

I To be completed by borrowers)

1. What is the amount of the credit being extended?_________________________________________
2 . Win any part of this credit be used to purchase or carry margin securities?

Q

Yes

Q No

If the answer is " n o / describe the specific purpose of the credit _______________________________

1 (We) have read this form and certify that to the best of my lour) knowledge and belief the information given is true, eccurate,
end complete.
Signed:

Signed:

B orrow er's signature

Print or ty p e n am e

D ele

B orrow er's signature

D ue

Print o r ty p e n am e

This form should not be signed if blank.

A borrower who falsely certifies the purpose of a credit on this form or otherwise wilfully or intentionaly evades
the proviaiona of Regdatkm G wH also violate Federal Reserve Regulation X. ‘ Borrowers of Securities Credh*.
I

13

Regulation G (Form G-3)

r*o-i
Part II

To bo complattd by lender only if the purpooo of the credit is to purcheee or carry margin securities IPart
answered "yes")

1
(2)

1. List the margin stock securing this cretft; do not indude debt securities convertible into margin stock. The maximum loan
value of margin etock is 60 per cent of its current market value under the current Supplement to Regulation 6 .
No. of
tharaa

Msrfcet price
per mare

Issus

Dete end source
of vsiustion
(See note bslow)

Total market
value per issue

2. List the debt securities convertible into margin stock securing this credit. The maximum loan value of such debt securities is
6 0 per cent of the current market value under the current Supplement to Rsgulstion Q.

3 . List other colataral including non-margin securities securing this credit.
Market pries

Data end source
of vsiustion
(See note bslow)

n
jj

Describe briefly

■ of valuation* if « • m a riu t <twkm w m oM ainad from ragiiarty puMMwri intormaOon in a j o u n l o f g

Part III

To be signed by an authorized representative of the lender in a l instances

I am a duly authorized representative of the lender end understand that this credit secured by margin stock may be subject to
the cretfit restrictions of Regulation G . I have reed this form and any attachments, and I have accepted the customer's
statement in Part I in good faith aa required by Regulation G \ and I certify that to the best of my knowledge and beBef, a l the
Information given is true, accurate, and complete.
Signed:

• T e ao ca p t e ra r u w a n r 'a wa w m w n in g o o d tatth , th a ax h o ffae d rap iaaam a tiva o f Oia Im d ar m m So am lo e ra eke
po—— law o f a n y M e n ta tio n fe a t wsuM c au sa a pru d an t p arso n n o t to ao ca p t f t a a tatam e m w tim * inquiry, m ust Ii
M aiaraant ia a u S iU . A m one S ta fac ta w M ch «M iad raeuira a ueh m v eaiisatio a a n raooipt o f tfto M aiam aM SwouBh th a ewN o r from a O iM party.

This form muet be retained by the lender for three years after the credit ia extinguished.

14

Regulation G (Form G-4)

n 0 -4
OMB He. 7 1 0 0 -0 0 1 1
Approval expires JU y 3 1 . 1 *

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Annual Report
(Federal Reserve Form G-4)
For the year ended June 3 0, 1 9 ------------

Thia report ■» required b y U w IIS l i S C t l g a n d 78w ; 12 C F R 20 ? )
The Fade** Reserve Board regards th e n form atm n provided by eac h respondent
a s confidential. N it should bo determ m ed su b se q u en t* th a t any n to rm etio n
collect ad o n th is to m m ust bo rete a sa d. respo nd ents w«a b o notified.

P uM c reporting b urd en lor this codection of intorm enon is e sw n e te d to overage
2 houra per resp on se. m ctuding th e tu n e lo r revie w ing instructions. searching
e x istin g d a ta tou rco s. g athering and ma»m»n»ng th e d a te n eeded , and
com pleting a n d review ing th a coftection of m lorm atnn. Send com m ents
regsrdm g th is burden estim ate of any o th er asp ec t o t th is coSection of
inform ation, including tu p g a stio n s to r 'Oducmg th is burden, to S ecretary . Board
ot G overnors ot th e Federal R eserve S ystem . 20 th end C S tre e ts. M.W..
W ashington. D C 20 55 1 an d to th a O llico o f M anagem ent and Sudgei.
Paperw ork Reduction Project (71 004)0111. W ashin gton D C. 2 0 5 0 3

Nome of regislrent: _
A S Identification Mo *

Addtess of principal office:
S treet

City

County

S tate

ZIP C ode

GENERAL INSTRUCTIONS

DEFINITIONS

Who must fie : Section 2 07 .3lo) of the Federal Reserve
Regulation G requites a report on Form G-4 to be filed by
every person subject to the registration requirement of
Section 207.3(a) of the rule. Any person registered under the
regulation may apply for termination of registration by fiSng
FR Form G-2 (see Section 207.3(e)!. if such person has not.
during the preceding six calender months, hod a total of
$ 20 0,0 00 or more o f credit outst anding secured directly or
indirectly by margin stock.

Terms used in this form sre explained below. Precise
definitions may be found in Section 2 0 7 .2 o f Reguettion G.

When end where to file: Form G-4 shall be filed, in duphcttm .
w ith the Federal Reserve Bonk of the district in which the
regtstrent‘s principal place of business is located, within 30
days following June 3 0 o f each calendar year.

Purpose credit: Credit extended for the purpose of purchasing
or carrying margin stock, or to reduce or retire indebtedness
previously incurred for that purpose.

What to fie : Tha registrant is required to file with this report
tw o copies of the registrant's balance sheet, certified by an
independent public accountant, as of the end o f its most
recent fiscal year. If a certified balance sheet is not available,
registrsnt should file w ith this report a balance sheet in the
form prescribed by Schedule B on FR Form G -1, or if subject
to supervision by a State or Federal regulatory agency, the
letest balance sheet filed w ith such agency.

•A roetatnm t w ho to a n iodiwdiial to n o t required 10 Oiacto aa Ms o r her Social
Security num ber.

Person: Any individual, corporation, partnership, association,
joint stock company, business trust, or unincorporated
organization.
Registrant: Any person who is subject to the registration
requirement of Section 207.3(a).

Margin stock: Includes 11) stocks registered on a national
securities exchange, stocks on the Federal Reserve Board's
List of Marginable OTC Stocks, or any OTC security
designated for trading in the National Market System, (2)
debt securities thet ere convertible into, or carry a warrant or
right to subscribe to or purchase margin stock, (3) any such
w arrant or right, and (4) shares o f most mutual funds.
IncRroctiy eocured: In general, credit is indirectly secured by
mergin stock if there is an understending between the
borrower and the lender (1) which is designated to make the
margin stock more eveileble to the lender in case of default
than to the borrower's other creditors, or 12) which Kmits the
borrower from exercising fu l dominion over the mergin stock
to sett, pledge, or donete them , or determining where they
shad be placed physically.

15

Regulation G (Form G-4)

FH 0 - 4

*0>a«i4
Instructions for Completing Schedule of Securities Credit
A . Report M Purpose Credit secured by margin stock
extended during the reporting period, es w e* as all purpose
credit sscured by mergin stock outstanding as of June 3 0, on
Pert A of the Schedule of Securities Credit.
B. Registrants reporting Purpose Credit secured by mergin
stock in Part A must also complete Pert B if any nonpurpose
credit wes extended during the reporting period or is
outstanding ss of June 30.
C. Registrants n o t reporting Purpose Credh in Pert A must

complete Psrt B if any nonpurpose credit was extended
during the reporting period or is outstanding as o f June 3 0.
O. Registrants who maintain records based upon fiscal quar­
ters that do not coincide w ith calendar quarters have an
option of reporting credit outstanding and extended in e
slightly different manner. These registrants may report the
annual data requried by FR Form G-4 as of the yeer ended on
either April 30 or May 31. A registrant reporting m this
manner should change the dete in Column I of the Schedule
o f Securities Credit to reflect the year end data used.

Employee Stock Option, Purchase, and Ownership Plan Credit
1. Is part or aM of the credit extended pursuant to an employee stock option, purchase, or ownership plan?
□

Yes

□

No

2 . A. If 'y e s ,' does ths credit qualify under the special provisions set forth in Section 2 07,5 of Reguketion G?
□

Yes

□

No

B. H credit reported in Column I of the Schedule of Securities Credit includes outstanding employee stock option, purchese.

i.

Outstanding 'Ptan-Lender' credit pursuant to Section 207.5(a)

a. Outstanding credit to an ESOP pursuant to Section 207.5(c)

♦_
$_

3 . Has any o f the credit reported above been extended pursuant to e plan adopted since the submission of the leet ennuel
report?
□

Yee

□

No

If yes. please submit tw o copies of the plan and any supporting documents.

16

Regulation G (Form G-4)

FA G-4
F a g a Jo M

Schedule of Securities Credit
1
*
Totel credit outstanding
es of June 30.
(dollars)
M4

| Thou | DoKara

Credit to purchase or carry margin stock (Purpose Loans):

»■
Credit extended during
reporting penod
IdoHars)
Mi

The

Oollan

Ii!

1. Sacurad directly by margin stock:

b. Debt securities convertible into mergin sto ck....................................
c. Mutual funds and other margin stock.................................................
2. Secured indirectly by mergin stock............................................................
3. TOTAL (Purpose C redit)...............................................................................

Other cradit (Nonpurpose Loans):
1. Secured directly by mergin stock:

inp
ii

I Imi lilt
I

e. Listed stocks end OTC mergin stocks.................................................
b. Debt securities convertible into mergin sto ck....................................
c. Mutual 1unds and other margin stock.................................................

3. TOTAL (Nonpurpose C redit)...................... ..................................................

1. 'O w t t O utstanding* (Column I) I n d u d n cradit ar t andad by lh a ragiatrant during th a yoat covarad by IMa isp o n , and during previous yaara, th a t h a a n o t boon
aatinguiahad bafora th a and o f th o y oai covarod b y tN a raport.
2 . "C radit aatandad* (Column ■> is cradH ar t a ndad a t any tin s during th a v w covaiad by tN a ra p o rt Column N todudoa aH naw cradit a ita n d a d during th a yaar
ragardlaaa o f vnhothor auoh c rad it w aa axtinguiehad a t th a and o f d w y aar. An incraaaa in a n axiotlng loan la n a w c ra d it

17

Regulation G (Form G-4)

FH G-4
Pag* 4 o f 4

Changes in Background Information
For material included in beckground information, see the second page of FR Form G-1 Registration Statement

Have there been any changes in beckground information since the previous G-4 report (G-1 report for e registrant filing its first
G-4 report)?
□

Yes

Q

No

If yes. describe any such changes pertaining to name, address. IRS Identification No., organizational structure (e.g., e sole
proprietorship becoming incorporated), name of person responsible tor mainteining Regulation G records, control, or location
of records.

Certification
The registrant filing this annual report and any attachment thereto end the person by whom it is executed represent hereby that
a l information contained therein is true and complete.

Sig natu re o f a e is proprietor. g a a a t* p artnar, m anaging ag an t. ot principal offiear

This mandatory report is needed to elicit certain background and financial information about a Regulation G lender and the
types and amount of credit activities engaged in that are secured by margin stock.

Honest, accurate, and timely statements are required by lew
(IS U.S.C. «78ff; I t U.S.C. 11001)

18

Regulation T
Credit by Brokers and Dealers
12 CFR 220; as amended effective July 1, 1996

SE C T IO N 220.1— A uthority, Purpose,
and Scope
(a) Authority and purpose. Regulation T (this
part)* is issued by the Board of Governors of
the Federal Reserve System (the Board) pur­
suant to the Securities Exchange Act of 1934
(the act) (15 USC 78a et seq.). Its principal
purpose is to regulate extensions of credit by
and to brokers and dealers; it also covers re­
lated transactions within the Board’s authority
under the act. It imposes, among other obliga­
tions, initial margin requirements and payment
rules on securities transactions.
(b) Scope.
(1) This part provides a margin account
and eight special-purpose accounts in which
to record all financial relations between a
customer and a creditor. Any transaction
not specifically permitted in a special ac­
count shall be recorded in a m argin
account.
(2) This part does not preclude any ex­
change, national securities association, or
creditor from imposing additional require­
m ents or taking action for its own
protection.
(3) This part does not apply to transactions
between a customer and a broker or dealer
registered only under section 15C of the
act.

S E C T IO N 220.2— D efinitions
The terms used in this part have the meanings
given them in section 3(a) of the act or as
defined in this section.
Cash equivalent means securities issued or
guaranteed by the United States or its agen­
cies, negotiable bank certificates of deposit,
banker’s acceptances issued by banking insti­
tutions in the United States and payable in the
United States, or money market mutual funds.
Covered option transaction means—
* Code o f Federal Regulations, title 12, chapter II, part
220.

(1) in the case of a short call, the underly­
ing asset (or a security immediately con­
vertible into the underlying asset, without
the payment of money) is held in or pur­
chased for the account on the same day,
and the option premium is held in the ac­
count until cash payment for the underlying
asset or convertible security is received; or
(2) in the case of a short put, the creditor
obtains cash in an amount equal to the ex­
ercise price or holds in the account cash
equivalents with a current market value at
least equal to the exercise price and, except
in the case of money market mutual funds,
with one year or less to maturity; or
(3) in the case of a short put or short call,
the creditor verifies that the appropriate es­
crow agreement will be delivered to the
creditor promptly and the option premium
is held in the account until such delivery is
made; or
(4) beginning June 1, 1997, any other
transaction involving options or warrants in
which the customer’s risk is limited and all
elements of the transaction are subject to
contemporaneous exercise if—
(i) the amount at risk is held in the ac­
count in cash, cash equivalents, or via an
escrow receipt; and
(ii) the transaction is eligible for the cash
account by the rules of the registered na­
tional securities exchange authorized to
trade the option or warrant or by the
rules of the creditor’s examining author­
ity in the case of an unregistered option,
provided that all such rules have been ap­
proved or amended by the SEC.
Credit balance means the cash amount due
the customer in a margin account after debit­
ing amounts transferred to the special memo­
randum account.
Creditor means any broker or dealer (as de­
fined in sections 3(a)(4) and 3(a)(5) of the
act), any member of a national securities ex­
change, or any person associated with a bro­
ker or dealer (as defined in section 3(a)(18) of
the act), except for business entities control19

§ 220.2
ling or under com mon control w ith the
creditor.
Customer includes—
(1) any person or persons acting jointly—
(i) to or for whom a creditor extends, ar­
ranges, or maintains any credit; or
(ii) who would be considered a customer
of the creditor according to the ordinary
usage of the trade;
(2) any partner in a firm who would be
considered a customer of the firm absent
the partnership relationship; and
(3) any joint venture in which a creditor
participates and which would be considered
a customer of the creditor if the creditor
were not a participant.
Debit balance means the cash amount owed to
the creditor in a margin account after debiting
amounts transferred to the special memoran­
dum account.
Delivery against payment, paym ent against
delivery, or a COD transaction refers to an
arrangement under which a creditor and a cus­
tomer agree that the creditor will deliver to, or
accept from, the customer, or the customer’s
agent, a security against full payment of the
purchase price.
Equity means the total current market value of
security positions held in the margin account
plus any credit balance less the debit balance
in the margin account.

Regulation T
(2) if a member of more than one self-regulatory organization, the organization desig­
nated by the SEC as the examining author­
ity for the creditor.
Exempted securities mutual fu nd means any
security issued by an investment company
registered under section 8 of the Investment
Company Act of 1940 (15 USC 80a-8), pro­
vided the company has at least 95 percent of
its assets continuously invested in exempt se­
curities (as defined in section 3(a)(12) of the
act).
Foreign margin stock means a foreign security
that is an equity security and that appears on
the Board’s periodically published list of for­
eign margin stocks.
Foreign person means a person other than a
United States person as defined in section 7(f)
of the act.
Foreign security means a security issued in a
jurisdiction other than the United States.
Good faith margin means the amount of mar­
gin which a creditor, exercising sound credit
judgment, would customarily require for a
specified security position and which is estab­
lished without regard to the customer’s other
assets or securities positions held in connec­
tion with unrelated transactions.
In or at the money means, until June 1, 1997,
the current market price of the underlying se­
curity is not more than one standard exercise
interval below (with respect to a call option)
or above (with respect to a put option) the
exercise price of the option.

Escrow agreement means any agreement is­
sued in connection with a call or put option
under which a bank or any person designated
as a control location under paragraph (c) of
SEC Rule 15c3-3 (17 CFR 240.15c3-3(c)),
holding the underlying asset or required cash
or cash equivalents, is obligated to deliver to
the creditor (in the case of a call option) or
accept from the creditor (in the case of a put
option) the underlying asset or required cash
or cash equivalent against payment of the ex­
ercise price upon exercise of the call or put.

In the money means the current market price
of the underlying asset or index is not below
(with respect to a call option) or above (with
respect to a put option) the exercise price of
the option.

Examining authority means—
(1) the national securities exchange or na­
tional securities association of which a
creditor is a member; or

Margin call means a demand by a creditor to
a customer for a deposit of additional cash or
securities to eliminate or reduce a margin defi­
ciency as required under this part.

20

Regulation T
Margin deficiency means the amount by which
the required margin exceeds the equity in the
margin account.
Margin excess means the amount by which
the equity in the margin account exceeds the
required margin. When the margin excess is
represented by securities, the current value of
the securities is subject to the percentages set
forth in section 220.18 (the supplement).
Margin security means—
(1) any registered security;
(2) any OTC margin stock;
(3) any OTC margin bond;
(4) any OTC security designated asquali­
fied for trading in the nationalmarket sys­
tem under a designation plan approved by
the Securities and Exchange Commission
(NMS security);
(5) any security issued by either an openend investment company or unit investment
trust which is registered under section 8 of
the Investment Company Act of 1940 (15
USC 80a-8);
(6) any foreign margin stock; or
(7) any debt security convertible into a
margin security.
Money market mutual fun d means any security
issued by an investment company registered
under section 8 of the Investment Companany
Act of 1940 (15 USC 80a-8) that is consid­
ered a money market fund under SEC Rule
2a-7 (17 CFR 270.2a-7).
Nonexem pted security means any security
other than an exempted security (as defined in
section 3(a)(12) of the act).
Nonmember bank means a bank that is not a
member of the Federal Reserve System.
Non-U.S.-traded foreign security means a for­
eign security that is neither a registered secur­
ity nor one listed on NASDAQ.
OTC margin bond means—
(1) a debt security not traded on a national
securities exchange which meets all of the
following requirements;
(i) at the time of the original issue, a
prin cip al am ount o f not less than
$25,000,000 of the issue was outstanding;
(ii) the issue was registered under section

§ 220.2
5 of the Securities Act of 1933 (15 USC
77e) and the issuer either files periodic
reports pursuant to section 13(a) or 15(d)
of the act or is an insurance company
which meets all of the conditions speci­
fied in section 12(g)(2)(G) of the act; and
(iii) at the time of the extension of
credit, the creditor has a reasonable basis
for believing that the issuer is not in de­
fault on interest or principal payments; or
(2) a private pass-through security (not
guaranteed by an agency of the U.S. gov­
ernm ent) m eeting all of the follow ing
requirements:
(i) an aggregate principal amount of not
less than $25,000,000 (which may be is­
sued in series) was issued pursuant to a
registration statement filed with the SEC
under section 5 of the Securities Act of
1933 (15 USC 77e);
(ii) current reports relating to the issue
have been filed with the SEC; and
(iii) at the time of the credit extension,
the creditor has a reasonable basis for be­
lieving that mortgage interest, principal
payments and other distributions are be­
ing passed through as required and that
the servicing agent is meeting its material
obligations under the terms of the offer­
ing; or
(3) a mortgage-related security as defined
in section 3(a)(41) of the act; or
(4) a debt security issued or guaranteed as
a general obligation by the government of a
foreign country, its provinces, states, or cit­
ies, or a supranational entity, if at the time
of the extension of credit one of the follow­
ing is rated in one of the two highest rating
categories by a nationally recognized statis­
tical rating organization:
(i) the issue,
(ii) the issuer or guarantor (implicitly), or
(iii) other outstanding unsecured long­
term debt securities issued or guaranteed
by the government or entity; or
(5) a foreign security that is a nonconvert­
ible debt security that meets all of the fol­
lowing requirements:
(i) at the time of original issue, a princi­
pal amount of at least $100,000,000 was
outstanding;
(ii) at the time of the extension of credit,
21

§ 220.2
the creditor has a reasonable basis for be­
lieving that the issuer is not in default on
interest or principal payments; and
(iii) at the time of the extension of
credit, the issue is rated in one of the
two highest rating categories by a nation­
ally recognized statistical rating organiza­
tion; or
(6) any nonconvertible debt security that
meets all of the following requirements:
(i) at the time of the extension of credit,
the creditor has a reasonable basis for be­
lieving that the issuer is not in default on
interest or principal payments; and
(ii) at the time of the extension of credit,
the issue is rated in one of the four high­
est rating categories by a nationally rec­
ognized statistical rating organization.
OTC margin stock means any equity security
traded over the counter that the Board has de­
termined has the degree of national investor
interest, the depth and breadth of market, the
availability of information respecting the se­
curity and its issuer, and the character and
permanence of the issuer to warrant being
treated like an equity security traded on a na­
tional securities exchange. An OTC stock is
not considered to be an OTC margin stock
unless it appears on the Board’s periodically
published list of OTC margin stocks.
Overlying option means—
(1) a put option purchased or a call option
written against a long position in an under­
lying asset in the specialist record in sec­
tion 220.12(b); or
(2) a call option purchased or a put option
written against a short position in an under­
lying asset in the specialist record in sec­
tion 220.12(b).
Payment period means the number of business
days in the standard securities settlement cycle
in the United States, as defined in paragraph
(a) of SEC Rule 15c6-l (17 CFR 240.15c61(a)), plus two business days.
Permitted offset position means, in the case of
an option in which a specialist makes a mar­
ket, a position in the underlying asset or other
related assets, and in the case of other securi­
ties in which a specialist makes a market, a
position in options overlying the securities in
22

Regulation T
which a specialist makes a market, provided
the positions qualify as permitted offsets
under the rules of the national securities ex­
change with which the specialist is registered,
and further provided all such rules have been
approved or amended by the SEC. Until June
1, 1997, permitted offsets are determined by
reference to section 220.12(b)(6).
Purpose credit means credit for the purpose
of—
(1) buying, carrying, or trading in securi­
ties; or
(2) buying or carrying any part of an in­
vestment contract security which shall be
deemed credit for the purpose of buying or
carrying the entire security.
Registered security means any security that—
(1) is registered on a national securities ex­
change; or
(2) has unlisted trading privileges on a na­
tional securities exchange.
Short call or short put means a call option or
a put option that is issued, endorsed, or guar­
anteed in or for an account.
(1) A short call that is not cash-settled ob­
ligates the customer to sell the underlying
asset at the exercise price upon receipt of a
valid exercise notice or as otherwise re­
quired by the option contract.
(2) A short put that is not cash-settled obli­
gates the customer to purchase the underly­
ing asset at the exercise price upon receipt
of a valid exercise notice or as otherwise
required by the option contract.
(3) A short call or a short put that is cashsettled obligates the customer to pay the
holder of an in-the-money long put or long
call who has, or has been deemed to have,
exercised the option the cash difference be­
tween the exercise price and the current as­
signed value of the option as established by
the option contract.
Specialist jo in t account means an account
which, by written agreement, provides for the
commingling of the security positions of the
participants and a sharing of profits and losses
from the account on some predetermined
ratio.
Underlying asset means—

Regulation T
(1) the security or other asset that will be
delivered upon exercise of an option; or
(2) in the case of a cash-settled option, the
securities or other assets which comprise
the index or other measure from which the
option’s value is derived.

SE C T IO N 220.3— G eneral P rovisions
(a) Records. The creditor shall maintain a re­
cord for each account showing the full details
of all transactions.
(b) Separation o f accounts. Except as pro­
vided for in the margin account and the spe­
cial memorandum account, the requirements
of an account may not be met by considering
items in any other account. If withdrawals of
cash or securities are permitted under the reg­
ulation, written entries shall be made when
cash or securities are used for purposes of
meeting requirements in another account.
(c) Maintenance o f credit. Except as prohib­
ited by this part, any credit initially extended
in compliance with this part may be main­
tained regardless of—
(1) reductions in the customer’s equity re­
sulting from changes in market prices;
(2) any security in an account ceasing to be
margin or exempted; or
(3) any change in the margin requirements
prescribed under this part.
(d) Guarantee o f accounts. No guarantee of a
customer’s account shall be given any effect
for purposes of this part.
(e) Receipt o f funds or securities.
(1) A creditor, acting in good faith, may
accept as immediate payment—
(i) cash or any check, draft, or order
payable on presentation; or
(ii) any security with sight draft attached.
(2) A creditor may treat a security, check,
or draft as received upon written notifica­
tion from another creditor that the specified
security, check, or draft has been sent.
(3) Upon notification that a check, draft, or
order has been dishonored or when securi­
ties have not been received within a reason­
able time, the creditor shall take the action

§ 220.3
required by this part when payment or se­
curities are not received on time.
(4) To temporarily finance a customer’s re­
ceipt of securities pursuant to an employee
benefit plan registered on SEC Form S-8 or
the withholding taxes for an employee stock
award plan, a creditor may accept, in lieu
of securities, a properly executed exercise
notice, where applicable, and instructions to
the issuer to deliver the stock to the credi­
tor. Prior to acceptance, the creditor must
verify that the issuer will deliver the securi­
ties promptly and the customer must desig­
nate the account into which the securities
are to be deposited.
(f) Exchange o f securities.
(1) To enable a customer to participate in
an offer to exchange securities which is
made to all holders of an issue of securities,
a creditor may submit for exchange any se­
curities held in a margin account, without
regard to the other provisions of this part,
provided the consideration received is de­
posited into the account.
(2) If a nonmargin, nonexempted security is
acquired in exchange for a margin security,
its retention, withdrawal, or sale within 60
days follow ing its acquisition shall be
treated as if the security is a margin
security.
(g) Valuing securities. The current market
value of a security shall be determined as fol­
lows:
(1) Throughout the day of the purchase or
sale of a security, the creditor shall use the
security’s total cost of purchase or the net
proceeds of its sale including any commis­
sions charged.
(2) At any other time, the creditor shall use
the closing sale price of the security on the
preceding business day, as shown by any
regularly published reporting or quotation
service. If there is no closing price, the
creditor may use any reasonable estimate of
the market value of the security as of the
close of business on the preceding business
day.
(h) Innocent mistakes. If any failure to com­
ply with this part results from a mistake made
in good faith in executing a transaction or cal­
23

§ 220.3
culating the amount
shall not be deemed
if, promptly after the
the creditor takes
action.

Regulation T
of margin, the creditor
in violation of this part
discovery of the mistake,
appropriate corrective

(i) Foreign currency. Freely convertible for­
eign currency may be treated at its U.S. dollar
equivalent, provided the currency is markedto-market daily.

SEC T IO N 220.4— M argin A ccount
(a) Margin transactions.
(1) All transactions not specifically author­
ized for inclusion in another account shall
be recorded in the margin account.
(2) A creditor may establish separate mar­
gin accounts for the same person to—
(i) clear transactions for other creditors
where the transactions are introduced to
the clearing creditor by separate credi­
tors; or
(ii) clear transactions through other cred­
itors if the transactions are cleared by
separate creditors; or
(iii) provide one or more accounts over
which the creditor or a third-party invest­
ment adviser has investment discretion.
(b) Required margin.
(1) Applicability. The required margin for
each long or short position in securities is
set forth in section 220.18 (the supplement)
and is subject to the following exceptions
and special provisions.
(2) Short sale against the box. A short sale
“against the box” shall be treated as a long
sale for the purpose of computing the eq­
uity and the required margin.
(3) W hen-issued securities. The required
margin on a net long or net short commit­
ment in a when-issued security is the mar­
gin that would be required if the security
were an issued margin security, plus any
unrealized loss on the commitment or less
any unrealized gain.
(4) Stock used as cover.
(i) When a short position held in the ac­
count serves in lieu of the required mar­
gin for a short put, the amount prescribed
by paragraph (b)(1) of this section as the
24

amount to be added to the required mar­
gin in respect of short sales shall be in­
creased by any unrealized loss on the
position.
(ii) When a security held in the account
serves in lieu of the required margin for
a short call, the security shall be valued
at no greater than the exercise price of
the short call.
(5) Accounts o f partners. If a partner of the
creditor has a margin account with the cred­
itor, the creditor shall disregard the part­
ner’s financial relations with the firm (as
shown in the partner’s capital and ordinary
drawing accounts) in calculating the margin
or equity of the partner’s margin account.
(6) Contribution to joint venture. If a mar­
gin account is the account of a joint venture
in which the creditor participates, any inter­
est of the creditor in the joint account in
excess of the interest which the creditor
would have on the basis of its right to share
in the profits shall be treated as an exten­
sion of credit to the joint account and shall
be margined as such.
(7) Transfer o f accounts.
(i) A margin account that is transferred
from one creditor to another may be
treated as if it had been maintained by
the transferee from the date of its origin,
if the transferee accepts, in good faith, a
signed statement of the transferor (or, if
that is not practicable, of the customer),
that any margin call issued under this
part has been satisfied.
(ii) A margin account that is transferred
from one customer to another as part of a
transaction, not undertaken to avoid the
requirements of this part, may be treated
as if it had been maintained for the trans­
feree from the date of its origin, if the
creditor accepts in good faith and keeps
w ith the transferee account a signed
statement of the transferor describing the
circumstances for the transfer.
(8) Credit denominated in foreign currency.
A creditor may extend credit denominated
in any freely convertible foreign currency.
(9) Options. The following provisions are
in force until June 1, 1997.
(i) Margin or cover fo r options on ex­
empted debt securities, certificates o f

Regulation T
deposit, stock indices, or securities
exch a n g e-tra d ed options on fo reig n
currencies. The required margin for each
transaction involving any short put or
short call on an exempted debt security,
certificate of deposit, stock index, or
foreign currency (if the option is traded
on a securities exchange), shall be the
amount or position in lieu of margin set
forth in section 220.18 (the supplement).
(ii) Margin fo r options on equity securi­
ties. The required margin for each trans­
action involving any short put or short
call on an equity security shall be the
amount set forth in section 220.18 (the
supplement).
(iii) Cover or positions in lieu o f margin.
No margin is required for an option writ­
ten on an equity security position when
the account holds any of the following:
(A) the underlying asset in the case of
a short call, or a short position in the
underlying asset in the case of a short
put;
(B) securities immediately convertible
into or exchangeable for the underlying
asset without the payment of money in
the case of a short call, if the right to
convert or exchange does not expire on
or before the expiration date of the
short call;
(C) an escrow agreement for the un­
derlying security or foreign exchange
(in the case of a short call) or cash (in
the case of a short put);
(D) a long call on the same number of
shares of the same underlying asset if
the long call does not expire before the
expiration date of the short call, and if
the amount (if any), by which the ex­
ercise price of the long call exceeds
the exercise price of the short call is
deposited in the account;
(E) a long put on the same number of
shares of the same underlying asset if
the long put does not expire before the
expiration date of the short put, and if
the amount (if any), by which the ex­
ercise price of the short put exceeds
the exercise price of the long put is
deposited in the account;
(F) a warrant to purchase the underly­

§ 220.4
ing asset, in the case of a short call, if
the warrant does not expire on or
before the expiration date of the short
call, and if the amount (if any), by
which the exercise price of the short
call is deposited in the account. A war­
rant used in lieu of the required margin
under this provision shall contribute no
equity to the account.
(iv) Straddles. When both a short put
and a short call are in a margin account
on the same number of shares of the
same underlying security, the required
margin shall be the margin on either the
short put or the short call, whichever is
greater, plus any unrealized loss on the
other option.
(v) Exclusive designation. The customer
may designate at the time the option or­
der is entered which security position
held in the account is to serve in lieu of
the required margin, if such service is of­
fered by the creditor; or the customer
may have a standing agreement with the
creditor as to the method to be used for
determining on any given day which se­
curity position will be used in lieu of the
margin to support an option transaction.
Any security held in the account which
serves in lieu of the required margin for
a short put or a short call shall be un­
available to support any other option
transaction in the account.
(c) When additional margin is required.
(1) Computing deficiency. All transactions
on the same day shall be combined to de­
termine whether additional margin is re­
quired by the creditor. For the purpose of
computing equity in an account, security
positions are established or eliminated and a
credit or debit created on the trade date of a
security transaction. Additional margin is
required on any day when the day’s trans­
actions create or increase a margin defi­
ciency in the account and shall be for the
amount of the margin deficiency so created
or increased.
(2) Satisfaction o f deficiency. The addi­
tional required margin may be satisfied by a
transfer from the special memorandum ac­
count or by a deposit of cash, margin secur­
25

§ 220.4
ities, exempted securities, or any combina­
tion thereof.
(3) Time limits.
(i) A margin call shall be satisfied within
one payment period after the margin defi­
ciency was created or increased.
(ii) The payment period may be extended
for one or more limited periods upon ap­
plication by the creditor to its examining
authority unless the examining authority
believes that the creditor is not acting in
good faith or that the creditor has not
sufficiently determined that exceptional
circumstances warrant such action. Appli­
cations shall be filed and acted upon
prior to the end of the payment period or
the exp iratio n o f any subsequent
extension.
(4) Satisfaction restriction. Any transaction,
position, or deposit that is used to satisfy
one requirement under this part shall be un­
available to satisfy any other requirement.
(d) Liquidation in lieu o f deposit. If any mar­
gin call is not met in full within the required
time, the creditor shall liquidate securities suf­
ficient to meet the margin call or to eliminate
any margin deficiency existing on the day
such liquidation is required, whichever is less.
If the margin deficiency created or increased
is $1,000 or less, no action need be taken by
the creditor.
(e) Withdrawals o f cash or securities.
(1) Cash or securities may be withdrawn
from an account, except if—
(i) additional cash or securities are re­
quired to be deposited into the account
for a transaction on the same or a previ­
ous day; or
(ii) the withdrawal, together with other
transactions, deposits, and withdrawals on
the same day, would create or increase a
margin deficiency.
(2) Margin excess may be withdrawn or
may be transferred to the special memoran­
dum account (§ 220.5) by making a single
entry to that account which will represent a
debit to the margin account and a credit to
the special memorandum account.
(3) If a creditor does not receive a distribu­
tion of cash or securities which is payable
with respect to any security in a margin ac­
26

Regulation T
count on the day it is payable and with­
drawal would not be permitted under para­
graph (e) of this section, a withdrawal
transaction shall be deemed to have oc­
curred on the day the d istribution is
payable.
(0 Interest, service charges, etc.
(1) Without regard to the other provisions
of this section, the creditor, in its usual
practice, may debit the following items to a
margin account if they are considered in
calculating the balance of such account:
(i) interest charged on credit maintained
in the margin account;
(ii) premiums on securities borrowed in
connection with short sales or to effect
delivery;
(iii) dividends, interest, or other distribu­
tions due on borrowed securities;
(iv) communication or shipping charges
with respect to transactions in the margin
account; and
(v) any other service charges which the
creditor may impose.
(2) A creditor may permit interest, divi­
dends, or other distributions credited to a
margin account to be withdrawn from the
account if—
(i) the withdrawal does not create or in­
crease a margin deficiency in the ac­
count; or
(ii) the current market value of any se­
curities withdrawn does not exceed 10
percent of the current market value of the
security with respect to which they were
distributed.

SE C T IO N 220.5— S pecial M em orandum
A ccount
(a) A special memorandum account (SMA)
may be maintained in conjunction with a mar­
gin account. A single entry amount may be
used to represent both a credit to the SMA
and a debit to the margin account. A transfer
between the two accounts may be effected by
an increase or reduction in the entry. When
computing the equity in a margin account, the
single entry amount shall be considered as a
debit in the margin account. A payment to the
customer or on the customer’s behalf or a

§ 220.8

Regulation T

•

transfer to any of the customer’s other ac­
counts from the SMA reduces the single entry
amount.
(b) The SMA may contain the following
entries:
(1) dividend and interest payments;
(2) cash not required by this part, including
cash deposited to meet a maintenance mar­
gin call or to meet any requirement of a
self-regulatory organization that is not im­
posed by this part;
(3) proceeds of a sale of securities or cash
no longer required on any expired or liqui­
dated security position that may be with­
drawn under section 220.4(e); and
(4) margin excess transferred from the mar­
gin account under section 220.4(e)(2).

SECTION 220.6— Government Securities
Account
In a government securities account, a creditor
may effect and finance transactions involving
government securities, provided the transac­
tion is not prohibited by section 15C of the
act or any rule thereunder.

SECTION 220.7— Arbitrage Account
In an arbitrage account a creditor may effect
and finance for any customer bona fide arbi­
trage transactions. For the purpose of this sec­
tion, the term “bona fide arbitrage” means—
(a) a purchase or sale of a security in one
market together with an offsetting sale or
purchase of the same security in a different
market at as nearly the same time as practi­
cable for the purpose of taking advantage of
a difference in prices in the two markets; or
(b) a purchase of a security which is, with­
out restriction other than the payment of
money, exchangeable or convertible within
90 calendar days of the purchase into a sec­
ond security together with an offsetting sale
of the second security at or about the same
time, for the purpose of taking advantage of
a concurrent disparity in the prices of the
two securities.

SECTION 220.8— Cash Account
(a) Permissible transactions. In a cash ac­
count, a creditor may—
(1) buy for or sell to any customer any se­
curity or other asset if—
(i) there are sufficient funds in the ac­
count; or
(ii) the creditor accepts in good faith the
customer’s agreement that the customer
will promptly make full cash payment for
the security or asset before selling it and
does not contemplate selling it prior to
making such payment;
(2) buy from or sell for any customer any
security or other asset if—
(i) the security is held in the account; or
(ii) the creditor accepts in good faith the
customer’s statement that the security is
owned by the customer or the customer’s
principal, and that it will be promptly de­
posited in the account;
(3) issue, endorse, or guarantee, or sell an
option for any customer as part of a cov­
ered option transaction; and
(4) use an escrow agreement in lieu of the
cash, cash equivalents, or underlying asset
position if—
(i) in the case of a short call or a short
put, the creditor is advised by the cus­
tomer that the required securities, assets,
or cash are held by a person authorized
to issue an escrow agreement and the
creditor independently verifies that the
appropriate escrow agreement will be de­
livered by the person promptly; or
(ii) in the case of a call issued, endorsed,
guaranteed, or sold on the same day the
underlying asset is purchased in the ac­
count and the underlying asset is to be
delivered to a person authorized to issue
an escrow agreement, the creditor verifies
that the appropriate escrow agreement
will be delivered by the person promptly.
(b) Time periods fo r payment; cancellation or
liquidation.
(1) Full cash payment. A creditor shall ob­
tain full cash paym ent for custom er
purchases—
(i) within one payment period of the
date—
27

§ 220.8

Regulation T

(A) any nonexempted security was
purchased;
(B) any w hen-issued security was
made available by the issuer for deliv­
ery to purchasers;
(C) any when-distributed security was
distributed under a published plan;
(D) a security owned by the customer
has matured or has been redeemed and
a new refunding security of the same
issuer has been purchased by the cus­
tomer, provided—
( /) the customer purchased the new
security no more than 35 calendar
days prior to the date of maturity or
redemption of the old security;
(2) the customer is entitled to the
proceeds of the redemption; and
(5) the delayed payment does not
exceed 103 percent of the proceeds
of the old security.
(ii) In the case of the purchase of a for­
eign security, within one payment period
of the trade date or within one day after
the date on which settlement is required
to occur by the rules of the foreign se­
curities market, provided this period does
not exceed the maximum time permitted
by this part for delivery-against-payment
transactions.
(2) Delivery against payment. If a creditor
purchases for or sells to a customer a secur­
ity in a delivery-against-payment transac­
tion, the creditor shall have up to 35 calen­
dar days to obtain payment if delivery of
the security is delayed due to the mechanics
of the transaction and is not related to the
customer’s willingness or ability to pay.
(3) Shipment o f securities; extension. If any
shipment of securities is incidental to con­
summation of a transaction, a creditor may
extend the payment period by the number
of days required for shipment, but not by
more than one additional payment period.
(4) C ancellation; liquidation; minimum
amount. A creditor shall promptly cancel or
otherwise liquidate a transaction or any part
of a transaction for which the customer has
not made full cash payment within the re­
quired time. A creditor may, at its option,

disregard any sum due from the customer
not exceeding $1,000.
(c) 90-day freeze.
(1) If a nonexempted security in the ac­
count is sold or delivered to another broker
or dealer without having been previously
paid for in full by the customer, the privi­
lege of delaying payment beyond the trade
date shall be withdrawn for 90 calendar
days following the date of sale of the secur­
ity. Cancellation of the transaction other
than to correct an error shall constitute a
sale.
(2) The 90-day freeze shall not apply if—
(i) within the period specified in para­
graph (b)(1) of this section, full payment
is received or any check or draft in pay­
ment has cleared and the proceeds from
the sale are not withdrawn prior to such
payment or check clearance; or
(ii) the purchased security was delivered
to another broker or dealer for deposit in
a cash account which holds sufficient
funds to pay for the security. The credi­
tor may rely on a written statement ac­
cepted in good faith from the other bro­
ker or dealer that sufficient funds are
held in the other cash account.
(d) Extension o f time periods; transfers.
(1) Unless the creditor’s examining author­
ity believes that the creditor is not acting in
good faith or that the creditor has not suffi­
ciently determined that exceptional circum­
stances warrant such action, it may, upon
application by the creditor—
(i) extend any period specified in para­
graph (b) of this section;
(ii) authorize transfer to another account
of any transaction involving the purchase
of a margin or exempted security; or
(iii) grant a waiver from the 90-day
freeze.
(2) Applications shall be filed and acted
upon prior to the end of the payment pe­
riod, or in the case of the purchase of a
foreign security within the period specified
in paragraph (b)(l)(ii) of this section, or the
expiration of any subsequent extension.

Regulation T

§ 220.11

SECTION 220.9— Nonsecurities Credit
and Employee Stock Ownership Account

SECTION 220.11— Broker-Dealer Credit
Account

(a) In a nonsecurities credit account a creditor
may—

(a) P erm issible transactions. In a brokerdealer credit account, a creditor may—

(1) effect and
commodities;

carry

tran sactio ns

in

(2) effect and carry transactions in foreign
exchange;
(3) extend and maintain secured or un­
secured nonpurpose credit, subject to the re­
quirements of paragraph (b) of this section;
and
(4) extend and maintain credit to employee
stock ownership plans without regard to the
other sections of this part.
(b) Every extension of credit, except as pro­
vided in paragraphs (a)(1) and (a)(2) of this
section, shall be deemed to be purpose credit
unless, prior to extending the credit, the credi­
tor accepts in good faith from the customer a
written statement that it is not purpose credit.
The statement shall conform to the require­
ments established by the Board. To accept the
customer’s statement in good faith, the credi­
tor shall be aware of the circumstances sur­
rounding the extension of credit and shall be
satisfied that the statement is truthful.

SECTION 220.10— Omnibus Account
(a) In an omnibus account, a creditor may ef­
fect and finance transactions for a broker or
dealer who is registered with the SEC under
section 15 of the act and who gives the credi­
tor written notice that—
(1) all securities will be for the account of
customers of the broker or dealer; and
(2) any short sales effected will be short
sales made on behalf of the customers of
the broker or dealer other than partners.
(b) The written notice required by paragraph
(a) of this section shall conform to any SEC
rule on the hypothecation of customers’ secur­
ities by brokers or dealers.

(1) purchase any security from or sell any
security to another creditor or person regu­
lated by a foreign securities authority under
a good faith agreement to promptly deliver
the security against full payment of the
purchase price.
(2) effect or finance transactions of any of
its owners if the creditor is a clearing and
servicing broker or dealer owned jointly or
individually by other creditors.
(3) extend and maintain credit to any part­
ner or stockholder of the creditor for the
purpose of making a capital contribution to,
or purchasing stock of, the creditor, affili­
ated corporation, or another creditor.
(4) extend and maintain, with the approval
of the appropriate examining authority—
(i) credit to meet the emergency needs of
any creditor; or
(ii) subordinated credit to another credi­
tor for capital purposes, if the other
creditor—
(A) is an affiliated corporation or
would not be considered a customer of
the lender apart from the subordinated
loan; or
(B) will not use the proceeds of the
loan to increase the amount of dealing
in securities for the account of the
creditor, its firm or corporation or an
affiliated corporation;
(5) effect transactions for a customer as
part of a prime-broker arrangement in con­
formity with SEC guidelines.
(b) Affiliated corporations. For purposes of
paragraph (a)(3) and (a)(4) of this section “af­
filiated corporation” means a corporation all
the common stock of which is owned directly
or indirectly by the firm or general partners
and employees of the firm, or by the corpora­
tion or holders of the controlling stock and
employees of the corporation and the affilia­
tion has been approved by the creditor’s ex­
amining authority.
29

§ 220.12

SECTION 220.12 — Market Functions
Account
(a) Requirements. In a market functions ac­
count, a creditor may effect or finance the
transactions of market participants in accor­
dance with the following provisions. A sepa­
rate record shall be kept for the transactions
specified for each category described in
paragraphs (b) through (e) of this section. Any
position in a separate record shall not be used
to m eet the requirem ents o f any other
category.
(b) Specialists.
(1) Applicability. A creditor may clear or
finance specialist transactions and permitted
offset positions for any specialist, or any
specialist joint account, in which all partici­
pants, or all participants other than the
creditor, are registered as specialists on a
national securities exchange that requires
regular reports on the use of specialist
credit from the registered specialists.
(2) Required margin. The required margin
for a specialist’s transactions shall be—
(i) good faith margin for—
(A) any long or short position in a se­
curity in which the specialist makes a
market;
(B) any wholly owned margin security
or exempted security; or
(C) any permitted offset position;
(ii) the margin prescribed by section
220.18 (the supplement) when a security
purchased or sold short in the account
does not qualify as a specialist or permit­
ted offset position.
(3) Additional margin; restriction on “
free­
riding. ”
(i) Except as required by paragraph
(b)(4) of this section, the creditor shall
issue a margin call on any day when ad­
ditional margin is required as a result of
specialist transactions. The creditor may
allow the specialist a maximum of one
payment period to satisfy a margin call.
(ii) If a specialist fails to satisfy a mar­
gin call within the period specified in
paragraph (b)(3) of this section (and the
creditor is required to liquidate securities
to satisfy the call), the creditor shall be
prohibited for a 15-calendar-day period
30

Regulation T
from extending any further credit to the
specialist to finance transactions in non­
specialty securities.
(iii) The restriction on “ free-riding”
shall not apply to—
(A) any specialist on a national securi­
ties exchange that has an SECapproved rule on “free-riding” by spe­
cialists; or
(B) the acquisition or liquidation of a
permitted offset position.
(4) Deficit status. On any day when a spe­
cialist’s separate record would liquidate to a
deficit, the creditor shall not extend any fur­
ther specialist credit in the account and
shall issue a margin call at least as large as
the deficit. If the call is not met by noon of
the following business day, the creditor
shall liquidate positions in the specialist’s
account.
(5) Withdrawals. Withdrawals may be per­
mitted to the extent that the equity exceeds
the margin requirements specified in para­
graph (b)(2) of this section.
(6) Permitted offset positions. Until June 1,
1997, a specialist in options may establish,
on a share-for-share basis, a long or short
position in the securities underlying the op­
tions in which the specialist makes a mar­
ket, and a specialist in securities other than
options may purchase or write options overlying the securities in which the specialist
makes a market, if the account holds the
following permitted offset positions:
(i) a short option position which is “in
or at the money” and is not offset by a
long or short option position for an equal
or greater number of shares of the same
underlying security which is “ in the
money” ;
(ii) a long option position which is “in
or at the money” and is not offset by a
long or short option position for an equal
or greater number of shares of the same
underlying security which is “ in the
money” ;
(iii) a short option position against which
an exercise notice was tendered;
(iv) a long option position which was
exercised;
(v) a net long position in a security

Regulation T
(other
cialist
(vi) a
(other
cialist

than an option) in which the spe­
makes a market; or
net short position in a security
than an option) in which the spe­
makes a market.

(c) Underwriters and distributors. A creditor
may effect or finance for any dealer or group
of dealers transactions for the purpose of fa­
cilitating the underwriting or distribution of all
or a part of an issue of securities with a good
faith margin.
(d) OTC m arket m akers and third-m arket
makers.
(1) A creditor may clear or finance with a
good faith margin, market-making transac­
tions for a creditor who is a registered
NASDAQ market maker or a qualified
third-market maker as defined in SEC Rule
3b-8 (17 CFR 240.3b-8).
(2) If the credit extended to a market
maker ceases to be for the purpose of mar­
ket making, or the dealer ceases to be a
market maker for an issue of securities for
which credit was extended, the credit shall
be subject to the margin specified in section
220.18 (the supplement).
(e) Odd-lot dealers. A creditor may clear and
finance odd-lot transactions for any creditor
who is registered as an odd-lot dealer on a
national securities exchange with a good faith
margin.

§ 220.15
rectly between members of a national securi­
ties exchange or association or through any
clearing agency registered with the SEC.
(b) D eposit o f securities with a clearing
agency. The provisions of this part shall not
apply to the deposit of securities with an op­
tions or futures clearing agency for the pur­
pose of meeting the deposit requirements of
the agency if—
(1) the clearing agency—
(i) issues, guarantees performance on, or
clears transactions in, any security (in­
cluding options on any security, certifi­
cate of deposit, securities index, or for­
eign currency); or
(ii) guarantees performance of contracts
for the purchase or sale of a commodity
for future delivery or options on such
contracts;
(2) the clearing agency is registered with
the Securities and Exchange Commission or
is the clearing agency for a contract market
regulated by the Commodity Futures Trad­
ing Commission; and
(3) the deposit consists of any margin se­
curity and complies with the rules of the
clearing agency that have been approved by
the Securities and Exchange Commission
or the C om m odity Futures T rading
Commission.

SECTION 220.15— Borrowing by
Creditors
SECTION 220.13— Arranging for Loans
by Others
A creditor may arrange for the extension or
maintenance of credit to or for any customer
by any person, provided the creditor does not
willfully arrange credit that violates parts 207,
221, or 224 of this chapter.

SECTION 220.14— Clearance of
Securities, Options, and Futures
(a) Credit fo r clearance o f securities. The
provisions of this part shall not apply to the
extension or maintenance of any credit that is
not for more than one day if it is incidental to
the clearance of transactions in securities di­

(a) Restrictions on borrowing. A creditor may
not borrow in the ordinary course of business
as a broker or dealer using as collateral any
registered nonexempted security, except—
(1) from or through a member bank of the
Federal Reserve System; or
(2) from any nonmember bank that has
filed with the Board an agreement as pre­
scribed in paragraph (b) of this section,
which agreement is still in effect; or
(3) from another creditor if the loan is per­
missible under this part.
(b) Agreements o f nonmember banks*
*
Federal Reserve Report K.22, an annual list of non­
member banks that have filed this agreement, and Report
Continued

§ 220.15
(1) A nonmember bank shall file an agree­
ment that conforms to the requirements of
section 8(a) of the act (see Form FR T -l,
T-2).
(2) Any nonmember bank may terminate its
agreement if it obtains the written consent
of the Board.

SECTION 220.16— Borrowing and
Lending Securities
(a) Without regard to the other provisions of
this part, a creditor may borrow or lend secur­
ities for the purpose of making delivery of the
securities in the case of short sales, failure to
receive securities required to be delivered, or
other similar situations. Each borrowing shall
be secured by a deposit of one or more of the
following: cash, cash equivalents, foreign sov­
ereign nonconvertible debt securities that are
margin securities, collateral acceptable for
borrowings of securities pursuant to SEC Rule
15c3-3 (17 CFR 240.15c3-3), or irrevocable
letters of credit issued by a bank insured by
the Federal Deposit Insurance Corporation or
a foreign bank that has filed an agreement
with the Board on Form FR T -l, T-2. Such
deposit made with the lender of the securities
shall have at all times a value at least equal to
100 percent of the market value of the securi­
ties borrowed, computed as of the close of the
preceding business day. If a creditor reasona­
bly anticipates a short sale, such borrowing
may be made up to one standard settlement
cycle in advance of trade date.
(b) A creditor may lend non-U.S.-traded for­
eign securities to a foreign person (or borrow
such securities for the purpose of relending
them to a foreign person) for any purpose
lawful in the country in which they are to be
used. Each borrowing shall be secured with
collateral having at all times a value at least
equal to 100 percent of the market value of
the securities borrowed, computed as of the
close of the preceding business day.
Continued
K.22A, a monthly update, are available from the Board’s
Publications Services (202-452-3245).

32

Regulation T

SECTION 220.17— Requirements for the
List o f Marginable OTC Stocks and the
List of Foreign Margin Stocks
(a) Requirements fo r inclusion on the list o f
marginable OTC stocks. Except as provided in
paragraph (f) of this section, OTC margin
stock shall meet the following requirements:
(1) four or more dealers stand willing to,
and do in fact, make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) the minimum average bid price of such
stock, as determined by the Board, is at
least $5 per share;
(3) the stock is registered under section 12
of the act, is issued by an insurance com­
pany subject to section 12(g)(2)(G) of the
Act, is issued by a closed-end investment
management company subject to registra­
tion pursuant to section 8 of the Investment
Company Act of 1940 (15 USC 80a-8), is
an American Depository Receipt (ADR) of
a foreign issuer whose securities are regis­
tered under section 12 of the act, or is a
stock of an issuer required to file reports
under section 15(d) of the act;
(4) daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) the stock has been publicly traded for at
least six months;
(6) the issuer has at least $4 million of
capital, surplus, and undivided profits;
(7) there are 400,000 or more shares of
such stock outstanding in addition to shares
held beneficially by officers, directors, or
beneficial owners of more than 10 percent
of the stock;
(8) there are 1,200 or more holders of rec
ord, as defined in SEC Rule 12g5-l (17
CFR 240.12g5-l), of the stock who are not
officers, directors, or beneficial owners of
10 percent or more of the stock, or the av­
erage daily trading volume of such stock as
determined by the Board, is at least 500
shares; and
(9) the issuer or a predecessor-in-interest
has been in existence for at least three
years.
(b) Requirements fo r continued inclusion on

Regulation T
the list o f marginable OTC stocks. Except as
provided in paragraph (0 of this section, OTC
m argin stock shall m eet the follow ing
requirements:
(1) three or more dealers stand willing to,
and do in fact, make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) the minimum average bid price of such
stocks, as determined by the Board, is at
least $2 per share;
(3) the stock is registered as specified in
paragraph (a)(3) of this section;
(4) daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) the issuer has at least $1 million of
capital, surplus, and undivided profits;
(6) there are 300,000 or more shares of
such stock outstanding in addition to shares
held beneficially by officers, directors, or
beneficial owners of more than 10 percent
of the stock; and
(7) there continue to be 800 or more hold­
ers of record, as defined in SEC Rule 12g51 (17 CFR 240.12g5-l), of the stock who
are not officers, directors, or beneficial
owners of 10 percent or more of the stock,
or the average daily trading volume of such
stock, as determined by the Board, is at
least 300 shares.
(c) Requirements fo r inclusion on the list o f
foreign margin stocks. Except as provided in
paragraph (f) of this section, a foreign margin
stock shall be a foreign security deemed to
have a “ready market” for purposes of SEC
Rule 15c3-l (17 CFR 240.15c3-l) or meet the
following requirements:
(1) the security is listed for trading on or
through the facilities of a foreign securities
exchange or a recognized foreign securities
market and has been trading on such ex­
change or market for at least six months;
(2) daily quotations for both bid and asked
or last sale prices for the security provided
by the foreign securities exchange or for­
eign securities market on which the security
is traded are continuously available to cred­
itors in the United States pursuant to an
electronic quotation system;

§ 220.17
(3) the aggregate market value of shares,
the ownership of which is unrestricted, is
not less than $1 billion;
(4) the average weekly trading volume of
such security during the preceding six
months is either at least 200,000 shares or
$1 million; and
(5) the issuer or a predecessor-in-interest
has been in existence for at least five years.
(d) Requirements fo r continued inclusion on
the list o f foreign margin stocks. Except as
provided in paragraph (f) of this section, a
foreign margin stock shall be a foreign secur­
ity deemed to have a “ready market” for pur­
poses of SEC Rule 15c3-l (17 CFR 240.15c31) or meet the following requirements:
(1) the security continues to meet the re­
quirements specified in paragraphs (c)(1)
and (2) of this section;
(2) the aggregate market value of shares,
the ownership of which is unrestricted, is
not less than $500 million; and
(3) the average weekly trading volume of
such security during the preceding six
months is either at least 100,000 shares or
$500,000.
(e) Removal from the lists. The Board shall
periodically remove from the lists any stock
that—
(1) ceases to exist or of which the issuer
ceases to exist; or
(2) no longer substantially meets the provi­
sions of paragraphs (b) or (d) of this sec­
tion or the definition of OTC margin stock.
(f) Discretionary authority o f Board. Without
regard to other paragraphs of this section, the
Board may add to, or omit or remove from
the list of marginable OTC stocks and the list
of foreign margin stocks any equity security,
if in the judgment of the Board, such action is
necessary or appropriate in the public interest.
(g) Unlawful representations. It shall be un­
lawful for any creditor to make, or cause to
be made, any representation to the effect that
the inclusion of a security on the list of
marginable OTC stocks or the list of foreign
margin stocks is evidence that the Board or
the SEC has in any way passed upon the mer­
its of, or given approval to, such security or
33

§ 220.17
any transactions therein. Any statement in an
advertisement or other similar communication
containing a reference to the Board in connec­
tion with the lists or stocks on those lists shall
be an unlawful representation.

SECTION 220.18— Supplement: Margin
Requirements
The required margin for each security position
held in a margin account shall be as follows:
(a) Margin equity security, except fo r an ex­
empted security money market mutual fu n d or
exempted securities mutual fund, warrant on a
securities index or foreign currency, or a long
position in an option: 50 percent of the cur­
rent market value of the security or the per­
centage set by the regulatory authority where
the trade occurs, whichever is greater.
(b) Exempted security, registered nonconvert­
ible debt security or OTC margin bond,
money market mutual fund, or exempted se­
curities mutual fund: the margin required by
the creditor in good faith or the percentage set
by the regulatory authority where the trade oc­
curs, whichever is greater.
(c) Short sale o f a nonexempted security, ex­
cept fo r a registered nonconvertible debt se­
curity or OTC margin bond: 150 percent of
the current market value of the security, or
100 percent of the current market value if a
security exchangeable or convertible within 90

Regulation T
calendar days without restriction other than
the payment of money into the security sold
short is held in the account.
(d) Short sale o f an exempted security, regis­
tered nonconvertible debt security, or OTC
margin bond: 100 percent of the current mar­
ket value of the security plus the margin re­
quired by the creditor in good faith.
(e) Nonmargin, nonexem pted security: 100
percent of the current market value.

(f) Put or call on a security, certificate o f de­
posit, securities index or foreign currency, or
a warrant on a securities index or foreign
currency:
(1) in the case of puts and calls issued by a
registered clearing corporation and listed or
traded on a registered national securities ex­
change or a registered securities association
and registered warrants on a securities in­
dex or foreign currency, the amount, or
other position (except in the case of an op­
tion on an equity security until June 1,
1997), specified by the rules of the regis­
tered national securities exchange or the
registered securities association authorized
to trade the option or warrant, provided that
all such rules have been approved or
amended by the SEC; or
(2) in the case of all other puts and calls,
the amount, or other position specified by
the maintenance rules of the creditor’s ex­
amining authority.

Regulation T (Form T -l, T-2)

Form T -l, T-2— Agreement o f Domestic and Foreign Nonmember Banks

r-». r-a
OMB N o. 7 1 0 0 -0 1 9 1
A pproval e xpires Juty 3 1 , I M S

BOARD OF GOVERNORS OF THE FEOERAL RESERVE SYSTEM
WASHINGTON. D C.

Agreement of Domestic (T-1) and Foreign (T-2) Nonmember Banks
(Federal Reserve Form T-1, T-2)
T hts raport is required b y section s 8 and 2 3 of
1 9 3 4 |1 6 U .S.C . I i7 8 h a n d 78*»l.

SacurM «s E xchange A ct o t

Pubbc reporting burd an fo r M a collection of inform ation • estim ated to average

and com pleting and review ing th a collection of infcxm Kion Send com m ents
ra^ardiog th is burden e stim a te or any oStar asp ec t of thie collection of
m form etion. includinB
for reducing tf ts burden. to S ecretary. Board
of G overnors of th e Federal Reaarv e System , 2 0 Ih and C S tre ets. N.W..
W ashington, O.C 2 0 6 5 1 ; and to th a OfHca o f I
Paperw ork R eduction Protect (7 1 0 0 4 )1 9 1 ). W ashington. D.C. 20 6 0 3

AGREEMENT
In order (1) to qualify under section 8(a) of the Securities
Exchange Act of 1934 as a bank from which it is lawful for
any member of a national securities exchange, or any broker
or dealer who transacts a business in securities through the
medium of any such member, to borrow, in ordinary course
of business as a broker or dealer, on securities (in addition to
exempted securities as defined in such Act) registered on a
national securities exchange, or (2) in the case of a foreign
bank, to issue irrevocable letters of credit as security for a
borrowing of securities pursuant to section 2 20 .16 of
Regulation T (12 CFR 220.16) the undersigned represents
and agrees as fotows:
1 • That it is 9 "bank* within the meaning of that term as
defined in the Securities Exchange Act of 1934; that it is
organized under the laws of

in the United States, the Federal Reserve Bank of the
district in which such bank has its principal place of
business, and (2) in the case of a nonmember bank with
its principal place of business outside the United States
and branches or egencies within the United States, to the
Federal Reserve Bank o f New York or the Federal Reserve
Bank of San Francisco.
4. That this agreement shaH be effective on the date of
issuance of the certificate issued by the appropriate
Federal Reserve Bank and shal thereafter be binding upon
the undersigned unti terminated as provided by law .
5. That upon the termination of this agreement it w ill
promptly surrender to the Board of Governors o f the
Federal Reserve System every certificate which shall have
been issued by the said Board or any agent thereof in
respect of such agreement.

{indicate s ta te for domestic bank or country to r foreign b a r* !

that it is not a member of the Federal Reserve System;
and that it has its principal place of business at

Executed in dupBcate this
_______________________day of

2 . That It w i* henceforth comply with aN provisions of the
Securities Exchange Act of 1934, the Federal Reserve
Act, as amended, and the Banking Act of 1933, which
are applicable to banks having membership in the Federal
Reserve System and which relate to the use of credit to
finance transactions in securities, and with such rules and
regulations as may be prescribed pursuant to such
provisions of law or for the purpose of preventing
evasions thereof.
3 . That this agreement shall be submitted to: (T | in the case
o f a non-member bank with its principal place of business

19 ,

ISEALI
B y ____________________________________________ _
A uthorized officer, a g en t or p artn er - indicate title o r designation

Print o r ty p e i

Attest:

Secretary

35

Regulation T (Form T -l, T-2)

R T -1, T-2
*9* 2 o l 2

RESOLUTION
(Inapplicable if qualifying bank it partnership)

Resolved that _

o _____
f
(hereinafter in this resolution refarrad to a t the 'Bank*) be
and hereby is authorized end directed, for and in the name of
the Bank to execute and file w ith the Board of Governors of
the Federal Reserve System an agreement in the form
prescribed by said Board pursuant to tha provisions of
section 8(a) of tha Securities Exchange A ct of 1934, in order
to qualify the Bank as a bank not having membership in tha

Federal Reserve System from which any member of a
national securities exchange or any broker or dealer who
transacts a business in securities through the medium o f any
such member may borrow, in tha ordinary course of business
as a broker or dealer, on securities (in addition to exempted
securities es defined in such Act) registered on a national
securities exchange.

CERTIFICATE
(Inapplicable if qualifying bank is partnership)

I hereby certify that tha foregoing is a true and correct copy of e resolution duly adopted by tha
___________________________________________________ o f _______________________________
. meeting duly celled and hekl at _
19____ , at which meeting e quorum waa present and acting throughout.

36

Regulation T (Form T-4)

Form T-4— Purpose Statement

M l T-4

OMB No. 7100-001»
Approval expiree Juty 31, I M S

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Statement of Purpose for an Extension of Credit by a Creditor
(Federal Reserve Form T-4)
N em o o t Creditor

TN« raport * iao u» ad by low I I S U S C . 7 8g and ?Sw : 12 CFN 2201
P u b ic reporting burden to r Owe ooeocb on a t inform ation M estim ated to average
1 0 *um «ee per reeponee. including th a to n e to g e * m end m aintain d a te in th e
reQuaed form and to m e w n ttru c tio n e and com plete the ntonw aoon

co^tcw ofl S in d c o m m m s regordeig lt* i tturtisn i p m k m or w y o ttm M poct
o t th a CO—c l ion o t eitorm otion. » K W » i w g d H tn m to r red uo ng thi» b u rd en
to S ecretary, Bow d ot G ovom on o t th e Federal ftaeerve S ystem . 2 0 th and C
S o m M . N .W .. W aehing'on. D C 20 5 5 1 ; and to th e O fftca o t Man agem ent and
Budget, Paperw ork R eduction P ro p e l 17 1 0 0-0 01 9). W aaN neton. D.C. 20503

Instructions
1. This form m utt be completed only if the purpose of tha cradit being extended is n o t to purchase, carry, or trade in securities
l t d tha credit is in excess of that otherwise permitted under Reguletion T. (Sea I 220.9(b)).
2. Please print or type (if space is inadequate, attach separate sheet).

Part I

To be completed by customer(s)

1. Whet te the emount of the credit being extended?______________________________________________________________
2 . Tha borrower acknowledges that no part of this cradit will be used to purchase, carry, or trade in securities. Tha purpose
of tha credfe is described in detail as follows:

3. Are any of the securities fisted in Part II to be delivered, or have any such securities bean delivered from a bank, broker,
dealer, or other parson on a "delivery against payment” basis?
□
Yes
□ No

t (We) have read this form and certify thet to the best of my (our) knowledge and belief the information given ia true, accurate,
and complete.
Signed:

Signed:

This form should not be signed If blank.

A borrower who falsely certifiea tha purpose of a credit on this form or otherwise willfuUy or intentionally evades
tha provisiona of Regulation T will also violate Federal Reserve Regulation X. "Borrowers of Securities Credit".

37

Regulation T (Form T-4)

FR T-4

Pat* 2 al 2

P a r t II To be completed by creditor
The following is a listing of colateral, if any, securing this credit.
1. Collateral consisting of securities w ith loen value under Regulation T (refer to the Supplement to Regulation T).
M arket price

D ate and source
of valuation
(S ee n o te below}

T otal m arket
value per issue

Item ize separately by issu e

M erkel price

D ate an d so urce
o f valuation
(See n o te below )

Total m arket
value p er issu e

item ize

No. of sh ares
or o th er unit

C urrent
m arket value

D ate end source
o f valuation
(S ee n o te below )

G ood feith
loan value

Item ize separately by issu e

2 . Collateral consisting of securities heving no loan value under Reguletion T.
No. of sh are s
or o th er unit

3. Other coflateral.

N otar Ctadito* m o d n o t com pfct* D im and a o tac a of valuation* H th a m aikat vaiua w aa ob tained Uom raguiarty publiahad o r diaaam ineted inform ation in afchar a
journal o l ganaral circulation o r a n a utom ated quot a tio n ayatam .

I am a duly authorized representative of the creditor. I have read this form and any attachments, and have accepted the
customer’s statement in Part I in good faith as defined below ,* and I certify that to the bast of my knowledge and belief, aR tha
information given is true, accurate, and complete.
Signed:

Thia form must be retained by tha lender for three years aftar the cretfit is extinguished.

38

Regulation U
Credit by Banks for the Purpose
of Purchasing or Carrying Margin Stocks
12 CFR 221; as revised effective October 11, 1991

SECTION 221.1— Authority, Purpose,
and Scope
(a) Authority. Regulation U (this part*) is is­
sued by the Board of Governors of the Fed­
eral Reserve System (the Board) pursuant to
the Securities Exchange Act of 1934 (the act)
(15 USC 78a et seq.).
(b) Purpose and scope. This part imposes
credit restrictions upon “banks” (as defined in
section 221.2(b) of this part) that extend credit
for the purpose of buying or carrying margin
stock if the credit is secured directly or indi­
rectly by margin stock. Banks may not extend
more than the maximum loan value of the
collateral securing such credit, as set by the
Board in section 221.8 (the supplement).

SECTION 221.2— Definitions
The terms used in this part have the meanings
given them in section 3(a) of the act or as
defined in this section.
(a) “Affiliate” means—
(1) any bank holding company of which a
bank is a subsidiary within the meaning of
the Bank Holding Company Act of 1956, as
amended (12 USC 1841(d));
(2) any other subsidiary of such bank hold­
ing company; and
(3) any other corporation, business trust,
association, or other similar organization
that is an affiliate as defined in section 2(b)
o f the Banking Act o f 1933 (12 USC
221a(c)).
(b) (1) “ Bank” has the meaning given to it in
section 3(a)(6) o f the act (15 USC
78c(a)(6)) and includes—
(i) any subsidiary of a bank;
(ii) any corporation organized under sec­
tion 25(a) of the Federal Reserve Act (12
USC 611); and
•C o d e o f Federal Regulations, title 12, chapter II, part
221 .

(iii) any agency or branch of a foreign
bank located within the United States.
(2) “ Bank” does not include—
(i) any savings and loan association,
(ii) any credit union,
(iii) any lending institution that is an in­
strumentality or agency of the United
States, or
(iv) any member of a national securities
exchange.
(c) “Carrying” credit is credit that enables a
customer to maintain, reduce, or retire indebt­
edness originally incurred to purchase a secur­
ity that is currently a margin stock.
(d) “Current market value” of—
(1) a security means—
(i) if quotations are available, the closing
sale price of the security on the preced­
ing business day, as appearing on any
regularly published reporting or quotation
service; or
(ii) if there is no closing sale price, the
bank may use any reasonable estimate of
the market value of the security as of the
close of business on the preceding busi­
ness day; or
(iii) if the credit is used to finance the
purchase of the security, the total cost of
purchase, which may include any com­
missions charged.
(2) any other collateral means a value de­
termined by any reasonable method in ac­
cordance with sound banking practices.
(e) “Customer” includes any person or per­
sons acting jointly, to or for whom a bank
extends or maintains credit.
(0 “Good faith” with respect to—
(1) the loan value of collateral, means that
amount (not exceeding 100 percent of the
current m arket value o f the collateral)
which a bank, exercising sound banking
judgment, would lend, without regard to the
customer’s other assets held as collateral in
connection with unrelated transactions;
39

§ 221.2
(2) accepting notice or certification from or
on behalf of a customer means that the
bank or its duly authorized representative is
alert to the circumstances surrounding the
credit, and if in possession of information
that would cause a prudent person not to
accept the notice or certification without in­
quiry, investigates and is satisfied that it is
truthful;
(g) “Indirectly secured”—
(1) includes any arrangement with the cus­
tomer under which—
(i) the customer’s right or ability to sell,
pledge, or otherwise dispose of margin
stock owned by the customer is in any
way restricted while the credit remains
outstanding; or
(ii) the exercise of such right is or may
be cause for accelerating the maturity of
the credit.
(2) does not include such an arrangement
if—
(i) after applying the proceeds of the
credit, not more than 25 percent of the
value (as determined by any reasonable
method) of the assets subject to the ar­
rangem ent is represented by margin
stock;
(ii) it is a lending arrangement that per­
mits accelerating the maturity of the
credit as a result of a default or renegoti­
ation of another credit to the customer by
another lender that is not an affiliate of
the bank;
(iii) the bank holds the margin stock
only in the capacity of custodian, deposi­
tary, or trustee, or under similar circum­
stances, and, in good faith, has not relied
upon the margin stock as collateral; or
(iv) the bank, in good faith, has not re­
lied upon the margin stock as collateral
in extending or maintaining the particular
credit.
(h) “Margin stock” means—
(1) any equity security registered or having
unlisted trading privileges on a national se­
curities exchange;
(2) any OTC margin stock;
(3) any OTC security designated as quali­
40

Regulation U
fied for trading in the National Market Sys­
tem under a designation plan approved by
the Securities and Exchange Commission
(NMS security);
(4) any debt security convertible into a
margin stock or carrying a warrant or right
to subscribe to or purchase a margin stock;
(5) any warrant or right to subscribe to or
purchase a margin stock; or
(6) any security issued by an investment
company registered under section 8 of the
Investment Company Act of 1940 (15 USC
80a-8), other than—
(i) a company licensed under the Small
Business Investm ent Act o f 1958, as
amended (15 USC 661); or
(ii) a company which has at least 95 per­
cent of its assets continuously invested in
exempted securities (as defined in 15
USC 78c(a)(12)); or
(iii) a com pany w hich issues faceamount certificates as defined in 15 USC
80a-2(a)(15), but only with respect of
such securities.
(i) “Maximum loan value” is the percentage
of current market value assigned by the Board
under section 221.8 of this part to specified
types of collateral. The maximum loan value
of margin stock is stated as a percentage of its
current market value. Puts, calls, and combi­
nations thereof have no loan value except for
purposes of section 221.5(c)(10) of this part.
All other collateral has good faith loan value.
(j) “OTC margin stock” is any equity secur­
ity not traded on a national security exchange
that the Board has determined has the degree
of national investor interest, the depth and
breadth of market, the availability of informa­
tion respecting the security and its issuer, and
the character and permanence of the issuer to
warrant being treated like an equity security
traded on a national securities exchange. An
OTC stock is not considered to be an “OTC
m argin stock” unless it appears on the
Board’s periodically published list of OTC
margin stocks.
(k) “Purpose credit” is any credit for the pur­

Regulation U
pose, whether immediate, incidental, or ulti­
mate, of buying or carrying margin stock.

SECTION 221.3— General Requirements
(a) Extending, maintaining, and arranging
credit.
(1) Extending credit. No bank shall extend
any purpose credit, secured directly or indi­
rectly by margin stock, in an amount that
exceeds the maximum loan value of the
collateral securing the credit. The maximum
loan value of margin stock (set forth in sec­
tion 221.8 of this part) is assigned by the
Board in terms of a percentage of the cur­
rent market value of the margin stock. All
other collateral has “ good faith” loan
value, as defined in section 221.2(f) of this
part.
(2) Maintaining credit. A bank may con­
tinue to maintain any credit initially ex­
tended in compliance with this part, regard­
less of—
(i) reduction in the customer’s equity re­
sulting from change in market prices;
(ii) change in the maximum loan value
prescribed by this part; or
(iii) change in the status of the security
(from nonmargin to margin) securing an
existing purpose credit.
(3) Arranging credit. No bank may arrange
for the extension or maintenance of any
purpose credit, except upon the same terms
and conditions under which the bank itself
may extend or maintain purpose credit
under this part.
(b) Purpose statement. Except for credit ex­
tended under paragraph (c) of this section,
whenever a bank extends credit secured di­
rectly or indirectly by any margin stock, in an
amount exceeding $100,000, the bank shall re­
quire 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 fo r revolving-credit or
multiple-draw agreements.
(1) If a bank extends credit, secured di­
rectly or indirectly by any margin stock, in
an amount exceeding $100,000, under a re­

§ 221.3
volving-credit or other multiple-draw agree­
ment, Form FR U -l can either be executed
each time a disbursement is made under the
agreement, or at the time the credit arrange­
ment is originally established.
(2) If a purpose statement executed at the
time the credit arrangement is initially made
indicates that the purpose is to purchase or
carry margin stock, the credit w ill be
deemed in compliance with this part if the
maximum loan value of the collateral at
least equals the aggregate amount of funds
actually disbursed. For any purpose credit
disbursed under the agreement, the bank
shall obtain and attach to the executed
Form FR U -l a current list of collateral
which adequately supports all credit ex­
tended under the agreement.
(d) Single-credit rule.
(1) All purpose credit extended to a cus­
tomer shall be treated as a single credit, and
all the collateral securing such credit shall
be considered in determining whether or not
the credit complies with this part.
(2) A bank that has extended purpose credit
secured by margin stock may not subse­
quently extend unsecured purpose credit to
the same customer unless the combined
credit does not exceed the maximum loan
value of the collateral securing the prior
credit.
(3) If a bank extended unsecured purpose
credit to a customer prior to the extension
of purpose credit secured by margin stock,
the credits shall be combined and treated as
a single credit solely for the purposes of the
withdrawal and substitution provision of
paragraph (f) of this section.
(4) If a bank extends purpose credit se­
cured by any margin stock and nonpurpose
credit to the same customer, the bank shall
treat the credits as two separate loans and
may not rely upon the required collateral
securing the purpose credit for the nonpur­
pose credit.
(e) Mixed-collateral loans. A purpose credit
secured in part by margin stock, and in part
by other collateral shall be treated as two sep­
arate loans, one secured by margin stock and
one by all other collateral. A bank may use a
single credit agreement, if it maintains records
41

§ 221.3
identifying each portion of the credit and its
collateral.
(f) Withdrawals and substitutions.
(1) A bank may permit any withdrawal or
substitution of cash or collateral by the cus­
tom er if the withdrawal or substitution
would not—
(i) cause the credit to exceed the maxi­
mum loan value of the collateral; or
(ii) increase the amount by which the
credit exceeds the maximum loan value
of the collateral.
(2) For purposes of this section, the maxi­
mum loan value of the collateral on the day
of the withdrawal or substitution shall be
used.
(g) Exchange offers. To enable a customer to
participate in a reorganization, recapitalization,
or exchange offer that is made to holders of
an issue of margin stock, a bank may permit
substitution of the securities received. A
nonmargin, nonexempted security acquired in
exchange for a margin stock shall be treated
as if it is margin stock for a period of 60 days
following the exchange.
(h) Renewals and extensions o f maturity. A
renewal or extension of maturity of a credit
need not be considered a new extension of
credit if the amount of the credit is increased
only by the addition of interest, service
charges, or taxes with respect to the credit.
(i) Transfers o f credit.
(1) A transfer of a credit between custom­
ers or banks or between a bank and a
lender subject to part 207 of this chapter
shall not be considered a new extension of
credit if—
(i) the original credit was extended by a
bank in compliance with this part or by a
lender subject to part 207 of this chapter
in a manner that would have complied
with this part;
(ii) the transfer is not made to evade this
part or part 207 of this chapter;
(iii) the am ount o f credit is not in­
creased; and
(iv) the collateral for the credit is not
changed.
(2) Any transfer between customers at the
42

Regulation U
same bank shall be accompanied by a state­
ment by the transferor customer describing
the circumstances giving rise to the transfer
and shall be accepted and signed by an of­
ficer of the bank acting in good faith. The
bank shall keep such statement with its
records of the transferee account.
(3) When a transfer is made between banks
or between a bank and a lender subject to
part 207 of this chapter, the transferee shall
obtain a copy of the Form FR U -l or Form
FR G-3 originally filed with the transferor
and retain the copy with its records of the
transferee account. If no form was origi­
nally filed with the transferor, the transferee
may accept in good faith a statement from
the transferor describing the purpose of the
loan and the collateral securing it.
(j) Action fo r bank’s protection. Nothing in
this part shall require a bank to waive or
forgo any lien or prevent a bank from taking
any action it deems necessary in good faith
for its protection.
(k) Mistakes in good faith. A mistake in good
faith in connection with the extension or
maintenance of credit shall not be a violation
of this part.
(/) Lack o f notice o f NMS security designa­
tion. Failure to treat an NMS security as a
margin stock in connection with an extension
of credit shall not be deemed a violation of
this part if the designation is made between
quarterly publications of the Board’s list of
OTC margin stocks and the bank does not
have actual notice of the designation.

SECTION 221.4— Agreements of
Nonmember Banks
(a) Banks that are not members of the Federal
Reserve System shall file an agreement that
conforms to the requirements of section 8(a)
of the act (see Form T -l for domestic non­
member banks and Form T-2 for all other
nonmember banks) prior to extending any
credit secured by any nonexempt security reg­
istered on a national securities exchange to
persons subject to part 220 of this chapter,

Regulation U
who are borrowing in the ordinary course of
business.*
(b) Any nonmember bank may terminate its
agreement upon written notification to the
Board.

SECTION 221.5— Special-Purpose Loans
to Brokers and Dealers
(a) Special-purpose loans. A member bank,
and a nonmember bank that is in compliance
with section 221.4 of this part, may extend
and maintain purpose credit to brokers and
dealers without regard to the limitations set
forth in sections 221.3 and 221.8 of this part,
if the credit is for any of the specific purposes
and meets the conditions set forth in para­
graph (c) of this section.
(b) Written notice. Prior to extending credit
for more than a day under this section, the
bank shall obtain and accept in good faith a
written notice or certification from the bor­
rower as to the purposes of the loan. The
written notice or certification shall be evi­
dence of continued eligibility for the special
credit provisions until the borrower notifies
the bank that it is no longer eligible or the
bank has information that would cause a rea­
sonable person to question whether the credit
is being used for the purpose specified.
(c) Types o f special-purpose credit. The types
of credit that may be extended and maintained
on a good faith basis are as follows:
(1) Hypothecation loans. Credit secured by
hypothecated customer securities that, ac­
cording to written notice received from the
broker or dealer, may be hypothecated by
the broker or dealer under Securities and
Exchange Commission (SEC) rules.
(2) Tem porary advances in paym entagainst-delivery transactions. Credit to fi­
nance the purchase or sale of securities for
prompt delivery, if the credit is to be repaid
upon completion of the transaction.
(3) Loans fo r securities in transit or trans­
fer. Credit to finance securities in transit or
* Federal Reserve Report K.22, an annual list o f non­
member banks that have filed this agreement, and Report
K.22A, a monthly update, are available from the Board's
Publications Services (202-452-3245).

§ 221.5
surrendered for transfer, if the credit is to
be repaid upon com pletion o f the
transaction.
(4) Intraday loans. Credit to enable a bro­
ker or dealer to pay for securities, if the
credit is to be repaid on the same day it is
extended.
(5) Arbitrage loans. Credit to finance pro­
prietary or customer bona fide arbitrage
transactions. For the purpose of this section
“bona fide arbitrage” means—
(i) purchase or sale of a security in one
market, together with an offsetting sale or
purchase of the same security in a differ­
ent market at nearly the same time as
practicable, for the purpose of taking ad­
vantage of a difference in prices in the
two markets; or
(ii) purchase of a security that is, without
restriction other than the payment of
m oney, exchangeable or convertible
within 90 calendar days of the purchase
into a second security, together with an
offsetting sale of the second security at
or about the same time, for the purpose
of taking advantage of a concurrent dis­
parity in the price of the two securities.
(6) Distribution loans. Credit to finance the
distribution of securities to customers.
(7) Odd-lot loans. Credit to finance the
odd-lot transactions of a person registered
as an odd-lot dealer on a national securities
exchange.
(8) Emergency loans. Credit that is essen­
tial to meet emergency needs of the brokerdealer business arising from exceptional
circumstances.
(9) Capital-contribution loans.
(i) Credit that the Board has exempted
by order upon a finding that the exemp­
tion is necessary or appropriate in the
public interest or for the protection of in­
vestors, provided the Securities Investor
Protection Corporation certifies to the
Board that the exemption is appropriate;
or
(ii) credit to a customer for the purpose
o f making a subordinated loan or capital
contribution to a broker or dealer in con­
formity with the SEC’s net capital rules
and the rules of the broker’s or dealer’s
examining authority, provided—
43

§ 221.5
(A) the customer reduces the credit by
the amount of any reduction in the
loan or contribution to the broker or
dealer; and
(B) the credit is not used to purchase
securities issued by the broker or
dealer in a public distribution.
(10) Loans to specialists. Credit extended
to finance the specialty security and permit­
ted offset positions of members of a na­
tional securities exchange who are regis­
tered and acting as specialists on the
exchange, provided the credit is extended
on a good faith loan value basis.
(11) OTC-market-maker credit. Credit to a
dealer who has given written notice to the
bank that it is a “qualified OTC market
maker” in an OTC margin security as de­
fined in SEC Rule 3b-8 (17 CFR 240.3b-8)
and that the credit will be used solely for
the purpose of financing the market-making
activity, provided the credit is extended on
a good faith loan value basis.
(12) Third-market maker loans. Credit to a
dealer who has given written notice to the
bank that it is a “qualified third-market
maker,” as defined in SEC Rule 3b-8 (17
CFR 240.3b-8), and that the credit will be
used solely for the purpose of financing po­
sitions in securities assumed as a “qualified
third-market maker,” provided the credit is
extended on a good faith loan value basis.
(13) Block-positioner credit. Credit to a
dealer who has given written notice to the
bank that it is a “ qualified block posi­
tioner” for a block of securities, as defined
in SEC Rule 3b-8 (17 CFR 240.3b-8), and
that the credit will be used to finance a po­
sition in that block, provided the credit is
extended on a good faith loan value basis.

SECTION 221.6— Exempted
Transactions
A bank may extend and maintain purpose
credit without regard to the provisions of this
part if such credit is extended—
(a) to any bank;
(b) to any foreign banking institution;
(c) outside the United States;
44

Regulation U
(d) to an employee stock ownership plan
(ESOP) qualified under section 401 of the In­
ternal Revenue Code (26 USC 401);
(e) to any “plan lender” as defined in part
207 of this chapter to finance such a plan,
provided the bank has no recourse to any se­
curities purchased pursuant to the plan;
(f) to any customer, other than a broker or
dealer, to temporarily finance the purchase or
sale of securities for prompt delivery, if the
credit is to be repaid in the ordinary course of
business upon completion of the transaction;
(g) against securities in transit, if the credit is
not extended to enable the customer to pay
for securities purchased in an account subject
to part 220 of this chapter; or
(h) to enable a customer to meet emergency
expenses not reasonably foreseeable, and if
the extension of credit is supported by a state­
ment executed by the customer and accepted
and signed by an officer of the bank acting in
good faith. For this purpose, emergency ex­
penses include expenses arising from circum­
stances such as the death or disability of the
customer, or some other change in circum­
stances involving extreme hardship, not rea­
sonably foreseeable at the time the credit was
extended. The opportunity to realize monetary
gain or to avoid loss is not a “change in cir­
cumstances” for this purpose.

SECTION 221.7— Requirements for the
List of OTC Margin Stocks
(a) Requirements fo r inclusion on the list. Ex­
cept as provided in paragraph (d) of this sec­
tion, an OTC margin stock shall meet the fol­
lowing requirements:
(1) Four or more dealers stand willing to,
and do in fact, make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) The minimum average bid price of such
stock, as determined by the Board, is at
least $5 per share;
(3) The stock is registered under section 12
of the act, is issued by an insurance com­
pany subject to section 12(g)(2)(G) of the

Regulation U
act, is issued by a closed-end investment
management company subject to registra­
tion pursuant to section 8 of the Investment
Company Act of 1940 (15 USC 80a-8), is
an American Depository Receipt (ADR) of
a foreign issuer whose securities are regis­
tered under section 12 of the act, or is a
stock of an issuer required to file reports
under section 15(d) of the act:
(4) Daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) The stock has been publicly traded for
at least six months;
(6) The issuer had at least $4 million of
capital, surplus, and undivided profits;
(7) There are 400,000 or more shares of
such stock outstanding in addition to shares
held beneficially by officers, directors, or
beneficial owners of more than 10 percent
of the stock;
(8) There are 1,200 or more holders of re­
cord, as defined in SEC Rule 12g5-l (17
CFR 240.12g5-l), of the stock who are not
officers, directors, or beneficial owners of
10 percent or more of the stock, or the av­
erage daily trading volume of such a stock
as determined by the Board is at least 500
shares; and
(9) The issuer or a predecessor in interest
has been in existence for at least three
years.
(b) Requirements fo r continued inclusion on
the list. Except as provided in paragraph (d)
of this section, an OTC margin stock shall
meet the following requirements:
(1) Three or more dealers stand willing to,
and do in fact make a market in such stock
and regularly submit bona fide bids and of­
fers to an automated quotations system for
their own accounts;
(2) The minimum average bid price of such
stocks, as determined by the Board, is at
least $2 per share;
(3) The stock is registered as specified in
paragraph (a)(3) of this section;
(4) Daily quotations for both bid and asked
prices for the stock are continuously avail­
able to the general public;
(5) The issuer has at least $1 million of
capital, surplus, and undivided profits.

§ 221.8
(6) There are 300,000 or more shares of
such stock outstanding in addition to shares
held beneficially by officers, directors, or
beneficial owners of more than 10 percent
of the stock; and
(7) There continue to be 800 or more hold­
ers of record, as defined in SEC Rule
12g5-l (17 CFR 240.12g5-l), of the stock
who are not officers, directors, or beneficial
owners of 10 percent or more of the stock,
or the average daily trading volume of such
stock, as determined by the Board, is at
least 300 shares.
(c) Removal from the list. The Board shall pe­
riodically remove from the list any stock
that—
(1) ceases to exist or of which the issuer
ceases to exist, or
(2) no longer substantially meets the provi­
sions of paragraph (b) of this section or
section 221.2(j).
(d) Discretionary authority o f Board. Without
regard to the other paragraphs of this section,
the Board may add to, or omit or remove
from, the OTC margin stock list any equity
security, if in the judgment of the Board such
action is necessary or appropriate in the public
interest.
(e) Unlawful representations. It shall be un­
lawful for any bank to make, or cause to be
made, any representation to the effect that the
inclusion of a security on the list of OTC
margin stocks is evidence that the Board or
the SEC has in any way passed upon the mer­
its of, or given approval to, such security or
any transactions therein. Any statement in an
advertisement or other similar communication
containing a reference to the Board in connec­
tion with the list or stocks on that list shall be
an unlawful representation.

SECTION 221.8— Supplement:
Maximum Loan Value o f Stock and
Other Collateral
(a) Maximum loan value o f margin stock. The
maximum loan value of any margin stock, ex­
cept options, is 50 percent of its current mar­
ket value.
45

§ 221.8
(b) Maximum loan value o f nonmargin stock
and all other collateral. The maximum loan
value of nonmargin stock and all other collat­
eral except puts, calls, or combinations thereof
is their good faith loan value.

46

Regulation U
(c) Maximum loan value o f options. Except
for purposes of section 221.5(c)(10) of this
part, puts, calls, and combinations thereof
have no loan value.

Regulation U (Form U -l)

Form U -l— Purpose Statement

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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

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(Federal Reserve Form U-1)
Bank
T wr p r r g a b l w( S US C * a d
h a o t a t* d y a
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aa a d d n o pa n n m a i g h oa t o
f om a n a d
c m a t u a irg ttm b r a Mk a a i c u i g a g a a a f r r d c n
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t a b r a . to S c a a y B a d o G v m r o t a F d r l R t r a S t a ,
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n
a fi a f
P b i t p n n b r a l r i < c S c i n o i f r a i nit a t m w t a th aa C S o t* NW, W s i g o , OC61 ; a d to th O f c o
u fe a o i g u d n o h * a a t a f n o m t o
a i a d o 20 a a n
v r gd
4 .2 m ua 0 .0 7 kun| p r r a o a , i c u i g t a t m f r r va n g a a a a t a d B d a . P tr o t N d c i n P o s t0 0 -0 1 1 S .
mt a(
a a p n a n l dn h i a o a t w n M n o m n n
u gt
ip w r
a u to
r f 71 (
c
I
f u r c i n . H t h n Ms i g d
e t u to a
ac i g i tn
au m t m g t e i g a d m i t i i g t t a i g o . OC5 0 3 .
uc , ah r n n
a na nn W h n t n . 0.
ta
a
2

Instructions
1. This form must be completed when a bank extends cradit in excess of 8100,000 sscured directly or indirectly, in whole or
in part, by any margin stock.
2. The term "margin stock” is defined in Regulation U 112 CFR 221) and includes, principally: (1) stocks that are registered on
a national securities exchange or that are on the Federal Reserve Boerd's List of Marginable OTC Stocks: (2) debt securities
(bonds) that are convertible into margin stocks; (3) any over-the-counter security designated as qualified for trading in the
National Market System under e designation plan approved by the Securities and Exchange Commission (NMS security); and (4)
shares of most mutual funds, unless 95 per csnt of the assets of the fund are continuously invested in U.S. government,
agency, state, or municipal obligations.
3. Please print or type (if space is inedequete, attach separate sheet).

Part

I To be completed by borrowers)

1. What is the emount of the credit being extended?_________________________________________________________________
2. Will any part of this credit be used to purchase or carry margin stock?

Q

Yes

Q

No

If tha answer is "no,” describe the specific purpose of the credit. ______________________________________________________

I (W e) have read this form and certify that to the best of my (our) knowledge end belief the information given is true, eccurate,
and complete, and that the margin stock and any other securities collateralizing this cradit are authentic, genuine, unaltered,
and not stolen, forged, or counterfeit.
Signed:

B n w r ag am
o o a 's i n t a

Pi to t p n r a
rn r y o a a

Signed:

Dt
aa

S r o a 'as g a u e
or w r i n t r

Dt
aa

P i to t p n m
rn r y o o a

This form should

not be signed

if blank.

A borrower who falsely certifies tha purpose of a credit on this form or otherwise wittfuHy or intentionaly evades
tha provisions of Regulation U wfll also violate Fadaral Reserve Regulation X. 'Borrowers of Securities Cradit”.

47

Regulation U (Form U -l)

FU
B -1
P *g *2 o i1 2

Part

II To be completed by bank only if tha purpose of the credit it to purchase or carry margin securities (Part 1(2)
answered "yea”)

1. List the mergin stock securing this credit; do not include debt securities convertible into mergin stock. The maximum ban
value of margin stock is SO per cent of its current merket value under the current Supplement to Regulation U.
No el
shares

Market price
per share

Issue

Date and source
ol valuation
(See nets below!

Total market
value psr issue

2. List the debt securities convertible into margin stock securing this credit. The maximum loan value of such debt securities
ia 5 0 per cant of the current market value under the current Supplement to Regulation U.
Principal
amount

Issue

Market price

Data end source
ol valuation
{See note below)

Total market
vatu* per issue

3 . List other collateral including nonmargin stock securing this credit.
Date end source

!

i
2

Describe briefly

<See note betow)

NMfc B ar* m M n o t com plete * 0 a te e nd n m

Part III

Good faith
loan value

of vafcotion* if th e m a rk * v tfu e w ee obtained to m regU arfy published inform ation in a journal o f Qoneral circulation

To be signed by e bank officer in ell instances.

I am a duly authorized representative of the bank and understand that this credit secured by margin stock may be subject to the
cretfit restrictions of Regulation U. I have read this form end any attachments, and I have accepted the customer's statement in
Part I in good faith as required by Regulation U *; and I certify that to the beat of my knowledge and befief. a l tha information
given is true, accurate, and complete. I also certify that if any securities that directly secure the credit are not or wiH not be
registered in the name of tha borrower or its nominee, I have or wM cauea to have examined the written consent of the
registered owner to pledge such securities. I further certify that any securities that have been or wfll be physicaly deSvered to
the bank in connection w ith tN a credit have been or wiH be exemined, that aU validation procedures required by bank policy and
the Securities Exchange Act of 1934 (section 17(f), as amended) have been or w ill be performed, and that I am satisfied to the
best of my knowledge and belief that such securities ere genuine and not stolen or forged and their feces have not been altered.
Signed:

♦ To accept the cuettxm r'i sts*amowt in good faith, the officer of tha benk m utt faa alert to #ie circumstance* surrounding tha cradit and. H in pon iisia n of any
information thet would ceuee e prudent person not to accept the «ts*smsm without inquiry, must hove mveetigsted end be satisfied th at d ie atetamsm is truthful.
Among the tacts which would require ouch mweetigadon ere receipt of the statem ent through 9m mafl or from e third party.

TO* form m utt b* racaiMd by the lender tor three y w i after tha cradit I* extinguished.

48

Regulation X
Borrowers of Securities Credit
12 CFR 224; as revised effective January 23, 1984

SECTION 224.1— Authority, Purpose,
and Scope
(a) Authority and purpose. Regulation X (this
part*) is issued by the Board of Governors of
the Federal Reserve System (the Board) under
the Securities Exchange Act of 1934, as
amended (the act) (15 USC 78a et seq.). This
part implements section 7(f) of the act (15
USC 78g(f)), the purpose of which is to re­
quire that credit obtained within or outside the
United States complies with the limitations of
the Board’s Margin Regulations G, T, and U
(12 CFR 207, 220, and 221, respectively).
(b) Scope and exemptions. The act and this
part apply the Board’s margin regulations to
United States persons and foreign persons
controlled by or acting on behalf of or in con­
junction with United States persons (hereinaf­
ter borrowers), who obtain credit outside the
United States to purchase or carry United
States securities, or within the United States
to purchase or carry any securities (both types
of credit are hereinafter referred to as purpose
credit). The following borrowers are exempt
from the act and this part:
(1) any borrow er who obtains purpose
credit within the United States, unless the
borrower willfully causes the credit to be
extended in contravention of Regulations G,
T, or U;
(2) any borrower whose permanent resi­
dence is outside the United States and who
does not obtain or have outstanding, during
any calendar year, a total of more than
$100,000 in purpose credit obtained outside
the United States; and
(3) any borrower who is exempt by order
upon terms and conditions set by the Board.

SECTION 224.2— Definitions
The terms used in this part have the meanings
given to them in sections 3(a) and 7(f) of the
*
224.

Code o f Federal Regulations, title 12, chapter II, part

act, and in Regulations G, T, and U. Section
7 (f) o f the act contains the follow ing
definitions;
(a) “United States person” includes a person
which is organized or exists under the laws of
any state or, in the case of a natural person, a
citizen or resident of the United States; a do­
mestic estate; or a trust in which one or more
of the foregoing persons has a cumulative di­
rect or indirect beneficial interest in excess of
50 per centum of the value of the trust.
(b) “United States security” means a security
(other than an exempted security) issued by a
person incorporated under the laws of any
state, or whose principal place of business is
within a state.
(c) “Foreign person controlled by a United
States person” includes any noncorporate en­
tity in which United States persons directly or
indirectly have more than a 50 per centum
beneficial interest, and any corporation in
which one or more United States persons, di­
rectly or indirectly, own stock possessing
more than 50 per centum of the total com­
bined voting power of all classes of stock en­
titled to vote, or more than 50 per centum of
the total value of shares of all classes of
stock.

SECTION 224.3— Margin Regulations to
Be Applied by Nonexempted Borrowers
(a) Credit transactions outside the United
States. No borrow er shall obtain purpose
credit from outside the United States unless it
conforms to the following margin regulations:
(1) Regulation T (12 CFR 220) if the credit
is obtained from a foreign branch of a broker-dealer;
(2) Regulation U (12 CFR 221) if the
credit is obtained from a foreign branch of
a bank, except for the requirement of a pur­
pose statement (12 CFR 221.3(b) and (c));
and
(3) Regulation G (12 CFR 207) if the
credit is obtained from any other lender
49

§ 224.3

Regulation X

outside the United States, except for the re­
quirement of a purpose statement (12 CFR
207.3(e) and (f)).

exempted by section 224.1(b)(1) of this part,
must conform the credit to the margin regula­
tion that applies to the lender.

(b) Credit transactions w ithin the United
States. Any borrower who willfully causes
credit to be extended in contravention of Reg­
ulations G, T, or U, and who, therefore, is not

(c) Inadvertent noncompliance. No borrower
who inadvertently violates this part and who
acts to remedy the violation as soon as practi­
cable shall be deemed in violation of this part.

Securities Exchange Act of 1934
15 USC 78 c-hh; 48 Stat. 881; Pub. L. 73-291 (June 6, 1934)

SECTION 3— Definitions and
Application (15 USC 78c)
(a) Definitions. When used in this title, unless
the context otherwise requires—
(1) The term “exchange” means any or­
ganization, association, or group of persons,
w hether incorporated or unincorporated,
which constitutes, maintains, or provides a
market place or facilities for bringing to­
gether purchasers and sellers of securities or
for otherwise performing with respect to se­
curities the functions commonly performed
by a stock exchange as that term is gener­
ally understood, and includes the market
place and the market facilities maintained
by such exchange.
*

*

*

*

*

(3) (A) The term “ member” when used
with respect to a national securities ex­
change means (i) any natural person per­
mitted to effect transactions on the floor
of the exchange without the services of
another person acting as broker, (ii) any
registered broker or dealer with which
such a natural person is associated, (iii)
any registered broker or dealer permitted
to designate as a representative such a
natural person, and (iv) any other regis­
tered broker or dealer which agrees to be
regulated by such exchange and with re­
spect to which the exchange undertakes
to enforce compliance with the provisions
of this title, the rules and regulations
thereunder, and its own rules. For pur­
poses of sections 6(b)(1), 6(b)(4), 6(b)(6),
6(b)(7), 6(d), 17(d), 19(d), 19(e), 19(g),
19(h), and 21 o f this title, the term
“member” when used with respect to a
national securities exchange also means,
to the extent of the rules of the exchange
specified by the Commission, any person
required by the Commission to comply
with such rules pursuant to section 6(f)
o f this title.
(B) The term “ member” when used with
respect to a registered securities associa­

tion means any broker or dealer who
agrees to be regulated by such associa­
tion and with respect to whom the asso­
ciation undertakes to enforce compliance
with the provisions of this title, the rules
and regulations thereunder, and its own
rules.
(4) The term “broker” means any person
engaged in the business of effecting trans­
actions in securities for the account of
others, but does not include a bank.
(5) The term “dealer” means any person
engaged in the business of buying and sell­
ing securities for his own account, through
a broker or otherwise, but does not include
a bank, or any person insofar as he buys or
sells securities for his own account, either
individual or in some fiduciary capacity, but
not as a part of a regular business.
(6) The term “bank” means (A) a banking
institution organized under the laws of the
United States, (B) a member bank of the
Federal Reserve System, (C) any other
banking institution, whether incorporated or
not, doing business under the laws of any
State or of the United States, a substantial
portion of the business of which consists of
receiving deposits or exercising fiduciary
powers similar to those permitted to na­
tional banks under the authority of the
Comptroller of the Currency pursuant to the
first section o f Public Law 87-722 (12
U.S.C. 92a), and which is supervised and
examined by State or Federal authority hav­
ing supervision over banks, and which is
not operated for the purpose of evading the
provisions of this title, and (D) a receiver,
conservator, or other liquidating agent of
any institution or firm included in clauses
(A), (B), or (C) of this paragraph.
*

*

*

*

*

(8) The term “issuer” means any person
who issues or proposes to issue any secur­
ity; except that with respect to certificates
of deposit for securities, voting-trust certifi­
cates, or collateral-trust certificates, or with
respect to certificates of interest or shares in
51

Securities Exchange Act
an unincorporated investment trust not hav­
ing a board of directors or of the fixed, re­
stricted management, or unit type, the term
“issuer” means the person or persons per­
forming the acts and assuming the duties of
depositor or manager pursuant to the provi­
sions of the trust or other agreement or in­
strument under which such securities are is­
sued; and except that w ith respect to
equipment-trust certificates or like securi­
ties, the term “ issuer” means the person by
whom the equipment or property is, or is to
be, used.
(9) The term “person” means a natural
person, company, government, or political
subdivision, agency, or instrumentality of a
government.
(10) The term “security” means any note,
stock, treasury stock, bond, debenture, cer­
tificate of interest or participation in any
profit-sharing agreement or in any oil, gas,
or other mineral royalty or lease, any collateral-trust certificate, preorganization certifi­
cate or subscription, transferable share, in­
vestment contract, voting-trust certificate,
certificate of deposit, for a security, any
put, call, straddle, option, or privilege on
any security, certificate of deposit, or group
or index of securities (including any interest
therein or based on the value thereof), or
any put, call, straddle, option, or privilege
entered into on a national securities ex­
change relating to foreign currency, or in
general, any instrument commonly known
as a “security” ; or any certificate of inter­
est or participation in, temporary or interim
certificate for, receipt for, or warrant or
right to subscribe to or purchase, any of the
foregoing; but shall not include currency or
any note, draft, bill o f exchange, or
banker’s acceptance which has a maturity at
the time of issuance of not exceeding nine
months, exclusive of days of grace, or any
renewal thereof the maturity of which is
likewise limited.
(11) The term “equity security” means any
stock or similar security; or any security
convertible, with or without consideration,
into such a security, or carrying any war­
rant or right to subscribe to or purchase
such a security; or any such warrant or
right; or any other security which the Com­

mission shall deem to be of similar nature
and consider necessary or appropriate, by
such rules and regulations as it may pre­
scribe in the public interest or for the pro­
tection of investors, to treat as an equity
security.
(12) (A) The term “exempted security” or
“exempted securities” includes—
(i) government securities, as defined in
paragraph (42) of this subsection;
(ii) municipal securities, as defined in
paragraph (29) of this subsection;
(iii) any interest or participation in any
common trust fund or similar fund
maintained by a bank exclusively for
the collective investment and reinvest­
ment of assets contributed thereto by
such bank in its capacity as trustee, ex­
ecutor, administrator, or guardian;
(iv) any interest or participation in a
single trust fund, or a collective trust
fund maintained by a bank, or any se­
curity arising out of a contract issued
by an insurance company, which inter­
est, participation, or security is issued
in connection with a qualified plan as
defined in subparagraph (C) of this
paragraph; and
(v) such other securities (which may
include, among others, unregistered se­
cu rities, the m arket in w hich is
predominantly intrastate) as the Com­
mission may, by such rules and regula­
tions as it deems consistent with the
public interest and the protection of in­
vestors, either unconditionally or upon
specified terms and conditions or for
stated periods, exempt from the opera­
tion of any one or more provisions of
this title which by their terms do not
apply to an “exempted security” or to
“exempted securities” .
(B) (i) N otw ithstanding subparagraph
(A)(i) of this paragraph, government
securities shall not be deemed to be
“exempted securities” for the purposes
of section 17A of this title.
(ii) N otw ithstanding subparagraph
(A)(ii) of this paragraph, municipal se­
curities shall not be deemed to be “ex­
empted securities” for the purposes of
sections 15 and 17A of this title.

Securities Exchange Act
(C) For purposes of subparagraph (A)(iv)
of this paragraph, the term “ qualified
plan” means (i) a stock bonus, pension,
or profit-sharing plan which meets the re­
quirements for qualification under section
401 of the Internal Revenue Code of
1954, (ii) an annuity plan which meets
the requirements for the deduction of the
em ployer’s contribution under section
404(a)(2) of such Code, or (iii) a govern­
mental plan as defined in section 414(d)
of such Code which has been established
by an employer for the exclusive benefit
of its employees or their beneficiaries for
the purpose of distributing to such em­
ployees or their beneficiaries the corpus
and income of the funds accumulated
under such plan, if under such plan it is
impossible, prior to the satisfaction of all
liabilities with respect to such employees
and their beneficiaries, for any part of the
corpus or income to be used for, or di­
verted to, purposes other than the exclu­
sive benefit of such employees or their
beneficiaries, other than any plan de­
scribed in clause (i), (ii), or (iii) of this
subparagraph which (I) covers employees
some or all o f whom are employees
within the meaning of section 401(c) of
such Code, or (II) is a plan funded by an
annuity contract described in section
403(b) of such Code.
(13) The terms “ buy” and “ purchase”
each include any contract to buy, purchase,
or otherwise acquire.
(14) The term “ sale” and “ sell” each in­
clude any contract to sell or otherwise dis­
pose of.
*

*

*

*

*

(16) The term “ State” means any State of
the United States, the District of Columbia,
Puerto Rico, the Virgin Islands, or any
other possession of the United States.
*

*

*

*

*

(18) The term “person associated with a
broker or dealer” or “associated person of
a broker or dealer” means any partner, of­
ficer, director, or branch manager of such
broker or dealer (or any person occupying a

similar status or performing similar func­
tions), any person directly or indirectly con­
trolling, controlled by, or under common
control with such broker or dealer, or any
employee of such broker or dealer, except
that any person associated with a broker or
dealer whose functions are solely clerical or
ministerial shall not be included in the
meaning of such term for purposes of sec­
tion 15(b) of this title (other than paragraph
(6) thereof).
(19) The terms “investment company” , af­
filiated “ person” , “ insurance com pany” ,
“separate account” , and “company” have
the same meanings as in the Investment
Company Act of 1940.
*

*

*

*

*

(21) The term “person associated with a
member” or “ associated person of a mem­
ber” when used with respect to a member
of a national securities exchange or regis­
tered securities association means any part­
ner, officer, director, or branch manager of
such member (or any person occupying a
similar status or performing similar func­
tions), any person directly or indirectly con­
trolling, controlled by, or under common
control with such member, or any employee
of such member.
*

*

*

*

*

(23) (A ) The term “ clearing ag en cy ”
means any person who acts as an in
termediary in making payments or deliv­
eries or both in connection with transac­
tions in securities or who provides facili­
ties comparison of data respecting the
terms of settlement of securities transac­
tions, to reduce the number of settle­
ments of securities transactions, or for
the allocation of securities settlement re­
sponsibilities. Such term also means any
person, such as a securities depository,
who (i) acts as a custodian of securities
in connection with a system for the cen­
tral handling of securities whereby all se­
curities of a particular class or series of
any issuer deposited within the system
are treated as fungible and may be trans­
ferred, loaned, or pledged by bookkeep­
53

Securities Exchange Act

ing entry without physical delivery of se­
curities certificates, or (ii) otherw ise
permits or facilitates the settlement of se­
curities transactions or the hypothecation
or lending of securities without physical
delivery of securities certificates.
(B) The term “clearing agency” does not
include (i) any Federal Reserve bank,
Federal home loan bank, or Federal land
bank; (ii) any national securities ex­
change or registered securities association
solely by reason of its providing facilities
for comparison of data respecting the
terms of settlement of securities transac­
tions effected on such exchange or by
means of any electronic system operated
or controlled by such association; (iii)
any bank, broker, dealer, building and
loan, savings and loan, or homestead as­
sociation, or cooperative bank if such
bank, broker, dealer, association, or coop­
erative bank would be deemed to be a
clearing agency solely by reason of func­
tions performed by such institution as
part of customary banking, brokerage,
dealing, association, or cooperative bank­
ing activities, or solely by reason of act­
ing on behalf of a clearing agency or a
participant therein in connection with the
furnishing by the clearing agency of ser­
vices to its participants or the use of ser­
vices of the clearing agency by its par­
ticipants, unless the Commission, by rule,
otherwise provides as necessary or appro­
priate to assure the prompt and accurate
clearance and settlement of securities
transactions or to prevent evasion of this
title; (iv) any life insurance company, its
registered separate accounts, or a subsidi­
ary of such insurance company solely by
reason of functions commonly performed
by such entities in connection with varia­
ble annuity contracts or variable life poli­
cies issued by such insurance company or
its separate accounts; (v) any registered
open-end investment company or unit in­
vestment trust solely by reason of func­
tions commonly performed by it in con­
nection with shares in such registered
open-end investment company or unit in­
vestment trust, or (vi) any person solely
by reason of its performing functions de­

scribed in paragraph 25(E) o f this
subsection.
*

*

*

*

*

(26) The term “ self-regulatory organiza­
tion” means any national securities ex­
change, registered securities association, or
registered clearing agency, or (solely for
purposes of sections 19(b), 19(c), and 23(b)
o f this title) the M unicipal Securities
Rulemaking Board established by section
15B of this title.
(27) The term “ rules of an exchange” ,
“rules of an association” , or “rules of a
clearing agency” means the constitution, ar­
ticles of incorporation, bylaws, and rules, or
instruments corresponding to the foregoing,
of an exchange, association of brokers and
dealers, or clearing agency, respectively,
and such of the stated policies, practices,
and interpretations of such exchange, asso­
ciation, or clearing agency as the Commis­
sion, by rule, may determine to be neces­
sary or appropriate in the public interest or
for the protection of investors to be deemed
to be rules of such exchange, association, or
clearing agency.
(28) The term “rules of a self-regulatory
organization” means the rules of an ex­
change which is a national securities ex­
change, the rules of an association of bro­
kers and dealers which is a registered
securities association, the rules of a clearing
agency w hich is a registered clearing
agency, or the rules of the Municipal Secur­
ities Rulemaking Board.
(29) The term “ m unicipal se cu ritie s”
means securities which are direct obliga­
tions of, or obligations guaranteed as to
principal or interest by, a State or any polit­
ical subdivision thereof, or any agency or
instrumentality of a State or any political
subdivision thereof, or any municipal corpo­
rate instrumentality of one or more States,
or any security which is an industrial devel­
opm ent bond (as defined in Section
103(c)(2) of the Internal Revenue Code of
1954) the interest on which is excludable
from gross income under section 103(a)(1)
of such Code if, by reason of the applica­
tion of paragraph (4) or (6) of section 103

Securities Exchange Act
(c) o f such C ode (determ ined as if
paragraphs (4)(A), (5), and (7) were not in­
cluded in such section 103(c)), paragraph
(1) of such section 103(c) does not apply to
such security.
*

*

*

*

*

(35) A person exercises “ investment discre­
tion” with respect to an account if, directly
or indirectly, such person (A) is authorized
to determine what securities or other prop­
erty shall be purchased or sold by or for the
account, (B) make decisions as to what se­
curities or other property shall be purchased
or sold by or for the account even though
some other person may have responsibility
for such investment decisions, or (C) other­
wise exercises such influence with respect
to the purchase and sale of securities or
other property by or for the account as the
Commission, by rule, determines, in the
public interest or for the protection of in­
vestors, should be subject to the operation
of the provisions of this title and the rules
and regulations thereunder.
*

*

*

*

*

(41) The term “mortgage related security”
means a security that is rated in one of the
two highest rating categories by at least one
nationally recognized statistical rating or­
ganization, and either:
(A) represents ownership of one or more
promissory notes or certificates of interest
or participation in such notes (including
any rights designed to assure servicing
of, or the receipt or timeliness of receipt
by the holders of such notes, certificates,
or participations o f amounts payable
under, such notes, certificates, or partici­
pations), which notes:
(i) are directly secured by a first lien
on a single parcel of real estate, in­
cluding stock allocated to a dwelling
unit in a residential cooperative hous­
ing corporation, upon which is located
a dwelling or mixed residential and
commercial structure, on a residential
manufactured home as defined in sec­
tion 603(6) of the National Manufac­
tured Housing Construction and Safety

Standards Act of 1974, whether such
manufactured home is considered real
or personal property under the laws of
the State in which it is to be located or
on one or more parcels of real estate
upon which is located one or more
commercial structures; and
(ii) were originated by a savings and
loan association, savings bank, com­
mercial bank, credit union, insurance
company, or similar institution which
is supervised and examined by a Fed­
eral or State authority, or by a mortga­
gee approved by the Secretary of
Housing and Urban Development pur­
suant to sections 203 and 211 of the
National Housing Act, or, where such
notes involve a lien on the manufac­
tured home, by any such institution or
by any financial institution approved
for insurance by the Secretary of
Housing and Urban Development pur­
suant to section 2 of the National
Housing Act; or
(B) is secured by one or more promis­
sory notes or certificates of interest or
participations in such notes (with or with­
out recourse to the issuer thereof) and, by
its terms, provides for payments of prin­
cipal in relation to payments, or reasona­
ble projections of payments, on notes
meeting the requirements of subpara­
graphs (A)(i) and (ii) or certificates of in­
terest or participations in promissory
notes meeting such requirements.
For the purpose of this paragraph, the term
“promissory note” , when used in connec­
tion with a manufactured home, shall also
include a loan, advance, or credit sale as
evidence by a retail installment sales con­
tract or other instrument.
(42) The term “ governm ent securities”
means—
(A) securities which are direct obliga­
tions of, or obligations guaranteed as to
principal or interest by, the United States;
(B) securities which are issued or guar­
anteed by corporations in which the
United States has a direct or indirect in­
terest and which are designated by the
Secretary of the Treasury for exemption
55

Securities Exchange Act
as necessary or appropriate in the public
interest or for the protection of investors;
(C) securities issued or guaranteed as to
principal or interest by any corporation
the securities of which are designated, by
statute specifically naming such corpora­
tion, to constitute exem pt securities
within the meaning of the laws adminis­
tered by the Commission; or
(D) for purposes of sections 15C and
17A, any put, call, straddle, option, or
privilege on a security described in subparagraph (A), (B), or (C) other than a
put, call, straddle, option, or privilege—
(i) that is traded on one or more na­
tional securities exchanges; or
(ii) for which quotations are dissemi­
nated through an automated quotation
system operated by a registered securi­
ties association.
*

*

*

*

*

(50) The term “foreign securities author­
ity” means any foreign government, or any
governmental body or regulatory organiza­
tion empowered by a foreign government to
administer or enforce its laws as they relate
to securities matters.
*

*

*

*

*

*

*

*

[15 USC 78c. Amended by acts o f Aug. 23, 1935 (49 Stat.
704); Aug. 20, 1964 (78 Stat. 565); Dec. 14, 1970 (84 Stat.
1435); Dec. 22, 1970 (84 Stat. 1499); June 4, 1975 (89
S ta t 97); May 21, 1978 (92 Stat. 274); Oct. 13, 1982 (96
Stat. 1409); Aug 10, 1984 (98 Stat. 1265); Oct 3, 1984 (98
Stat. 1689); Oct. 28, 1986 (100 Stat 3214-3216); Dec. 4,
1987 (101 Stat. 1253, 1254); Nov. 19, 1988 (102 Stat.
4681); Aug. 9, 1989 (103 Stat. 441); Oct. 15, 1990 (104
S ta t 952); Nov. 15, 1990 (104 S ta t 2717, 2718); Dec. 17,
1993 (107 S ta t 2350, 2352); and Sept. 23, 1994 (108 Stat.
2198, 2241). Acts o f June 25, 1959 (73 Stat. 142) and July
12, 1960 (74 Stat. 412) deleted the words “ Alaska” and

56

*

*

*

*

*

SECTION 6— National Securities
Exchanges (15 USC 78f)
(a) Registration; application. An exchange
may be registered as a national securities ex­
change under the terms and conditions herein­
after provided in this section and in accor­
dance with the provisions of section 19(a) of
this title, by filing with the Commission an
application for registration in such form as the
Commission, by rule, may prescribe contain­
ing the rules of the exchange and such other
information and documents as the Commis­
sion, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.
*

*

*

*

*

[15 USC 78f. This section became effective Sept. 1, 1934.
As amended by acts o f June 4, 1975 (89 Stat. 104); Dec. 4,
1987 (101 Stat. 1255, 1256); and Dec. 17, 1993 (107 Stat.
2365).]

*

(b) Power to define technical, trade, account­
ing, and other terms. The Commission and
the Board of Governors of the Federal Re­
serve System, as to matters within their re­
spective jurisdictions, shall have power by
rules and regulations to define technical, trade,
accounting, and other terms used in this title,
consistently with the provisions and purposes
of this title.
*

“ Hawaii,” respectively, from paragraph (16). The words
“ Philippine Islands” were deleted from the definition of
"State” in paragraph (16) under authority o f Proc. No.
2695, effective July 4, 1946, w hich recognized the
independence o f the Philippine Islands. The proclamation is
set out as a note under 22 USC 1394.]

SECTION 7— Margin Requirements
(15 USC 78g)
(a) Rules and regulations fo r extension o f
credit; standard fo r initial extension; un­
dermargined accounts. For the purpose of
preventing the excessive use of credit for the
purchase or carrying of securities, the Board
of Governors of the Federal Reserve System
shall, prior to the effective date of this section
and from time to time thereafter, prescribe
rules and regulations with respect to the
amount of credit that may be initially ex­
tended and subsequently maintained on any
security (other than an exempted security).
For the initial extension of credit, such rules
and regulations shall be based upon the fol­
lowing standard: An amount not greater than
whichever is the higher of—

Securities Exchange Act
(1) 55 per centum of the current market
price of the security, or
(2) 100 per centum of the lowest market
price of the security during the preceding
thirty-six calendar months, but not more
than 75 per centum of the current market
price.
Such rules and regulations may make appro­
priate provision with respect to the carrying of
undermargined accounts for limited periods
and under specified conditions; the withdrawal
of funds or securities; the substitution or addi­
tional purchases of securities; the transfer of
accounts from one lender to another; special
or different margin requirements for delayed
deliveries, short sales, arbitrage transactions,
and securities to which paragraph (2) of this
subsection does not apply; the bases and the
methods to be used in calculating loans, and
margins and market prices; and similar admin­
istrative adjustments and details. For the pur­
poses of paragraph (2) of this subsection, until
July 1, 1936, the lowest price at which a se­
curity has sold on or after July 1, 1933, shall
be considered as the lowest price at which
such security has sold during the preceding
thirty-six calendar months.
(b) Lower and higher margin requirements.
Notwithstanding the provisions of subsection
(a) of this section, the Board of Governors of
the Federal Reserve System, may, from time
to time, with respect to all or specified securi­
ties or transactions, or classes of securities, or
classes of transactions, by such rules and reg­
ulations (1) prescribe such lower margin re­
quirements for the initial extension or mainte­
nance of credit as it deems necessary or
appropriate for the accommodation of com­
merce and industry, having due regard to the
general credit situation of the country, and (2)
prescribe such higher margin requirements for
the initial extension or maintenance of credit
as it may deem necessary or appropriate to
prevent the excessive use of credit to finance
transactions in securities.
(c) Unlawful credit extension to customers. It
shall be unlawful for any member of a na­
tional securities exchange or any broker or
dealer, directly or indirectly, to extend or
maintain credit or arrange for the extension

or m aintenance o f credit to or for any
customer—
(1) on any security (other than an exempted
security), in contravention of the rules and
regulations which the Board of Governors
of the Federal Reserve System shall pre­
scribe under subsections (a) and (b) of this
section:
(2) without collateral or on any collateral
other than securities, except in accordance
with such rules and regulations as the
Board of Governors of the Federal Reserve
System may prescribe (A) to permit under
specified conditions and for a limited period
any such member, broker, or dealer to
maintain a credit initially extended in con­
formity with the rules and regulations of
the Board of Governors of the Federal Re­
serve System, and (B) to permit the exten­
sion or maintenance of credit in cases
where the extension or maintenance of
credit is not for the purpose of purchasing
or carrying securities or of evading or cir­
cumventing the provisions of paragraph (1)
of this subsection.
(d) Unlawful credit extension in violation o f
rules and regulations; exception to application
o f rules, etc. It shall be unlawful for any per­
son not subject to subsection (c) to extend or
maintain credit or to arrange for the extension
or maintenance of credit for the purpose of
purchasing or carrying any security, in contra­
vention of such rules and regulations as the
Board of Governors of the Federal Reserve
System shall prescribe to prevent the exces­
sive use of credit for the purchasing or carry­
ing of or trading in securities in circumven­
tion of the other provisions of this section.
Such rules and regulations may impose upon
all loans made for the purpose of purchasing
or carrying securities limitations similar to
those imposed upon members, brokers, or
dealers by subsection (c) of this section and
the rules and regulations thereunder. This sub­
section and the rules and regulations thereun­
der shall not apply (A) to a loan made by a
person not in the ordinary course of his busi­
ness, (B) to a loan on an exempted security,
(C) to a loan to a dealer to aid in the financ­
ing of the distribution of securities to custom­
ers not through the medium of a national se­
57

Securities Exchange Act
curities exchange, (D) to a loan by a bank on
a security other than an equity security, or (E)
to such other loans as the Board of Governors
of the Federal Reserve System shall, by such
rules and regulations as it may deem neces­
sary or appropriate in the public interest or for
the protection of investors, exempt, either un­
conditionally or upon specified terms and con­
ditions or for stated periods, from the opera­
tion of this subsection and the rules and
regulations thereunder.
(e) Effective date o f this section and rules
and regulations. The provisions of this section
or the rules and regulations thereunder shall
not apply on or before July 1, 1937, to any
loan or extension of credit made prior to the
enactment of this title or to the maintenance,
renewal, or extension of any such loan or
credit, except to the extent that the Board of
Governors of the Federal Reserve System may
by rules and regulations prescribe as necessary
to prevent the circumvention of the provisions
o f this section or the rules and regulations
thereunder by means of withdrawals of funds
or securities, substitutions of securities, or ad­
ditional purchases or by any other device.
(f) Unlawful receipt o f credit; exemptions.
(1) It is unlawful for any United States per­
son, or any foreign person controlled by a
United States person or acting on behalf of
or in conjunction with such person, to ob­
tain, receive, or enjoy the beneficial use of
a loan or other extension of credit from any
lender (w ithout regard to w hether the
lender’s office or place of business is in a
State or the transaction occurred in whole
or in part within a State) for the purpose of
(A) purchasing or carrying United States se­
curities, or (B) purchasing or carrying
within the United States of any other secur­
ities, if, under this section or rules and reg­
ulations prescribed thereunder, the loan or
other credit transaction is prohibited or
would be prohibited if it had been made or
the transaction had otherwise occurred in a
lender’s office or other place of business in
a State.
(2) For the purposes of this subsection—
(A) The term “United States person” in­
cludes a person which is organized or ex­
ists under the laws of any State or, in the
58

case of natural person, a citizen or resi­
dent of the United States; a domestic es­
tate; or a trust in which one or more of
the foregoing persons has a cumulative
direct or indirect beneficial interest in ex­
cess of 50 per centum of the value of the
trust.
(B) The term “ United States security”
means a security (other than an exempted
security) issued by a person incorporated
under the laws of any State, or whose
principal place of business is within a
State.
(C) The term “foreign person controlled
by a United States person” includes any
noncorporate entity in which U nited
States persons directly or indirectly have
more than a 50 per centum beneficial in­
terest, and any corporation in which one
or more United States persons, directly or
indirectly, own stock possessing more
than 50 per centum of the total combined
voting power of all classes of stock enti­
tled to vote, or more than 50 per centum
of the total value of shares of all classes
of stock.
(3) The Board of Governors of the Federal
Reserve System may, in its discretion and
with due regard for the purposes of this
section, by rule or regulation exempt any
class of United States persons or foreign
persons controlled by a United States per­
son from the application of this subsection.
(g) Subject to such rules and regulations as
the Board of Governors of the Federal Re­
serve System may adopt in the public interest
and for the protection of investors, no member
of a national securities exchange or broker or
dealer shall be deemed to have extended or
maintained credit or arranged for the exten­
sion or maintenance of credit for the purpose
of purchasing a security, within the meaning
of this section, by reason of a bona fide
agreement for delayed delivery of a mortgage
related security or a small business related se­
curity against full payment of the purchase
price thereof upon such delivery within one
hundred and eighty days after the purchase, or
within such shorter period as the Board of
Governors of the Federal Reserve System may
prescribe by rule or regulation.

Securities Exchange Act
[15 USC 78g. As amended by acts of July 29, 1968 (82
Stat 452); Oct. 26, 1970 (84 Stat. 1124); Oct. 3, 1984 (98
Stat. 1690); and Sept. 23, 1994 (108 Stat. 2199).]

SECTION 8— Restrictions on Borrowing
by Members, Brokers, and Dealers (15
USC 78h)
It shall be unlawful for any registered broker
or dealer, member of a national securities ex­
change, or broker or dealer who transacts a
business in securities through the medium of
any member of a national securities exchange,
directly or indirectly—
(a) To borrow in the ordinary course of busi­
ness as a broker or dealer on any security
(other than an exempted security) registered
on a national securities exchange except (1)
from or through a member bank of the Fed­
eral Reserve System, (2) from any nonmem­
ber bank which shall have filed with the
Board of Governors of the Federal Reserve
System an agreement, which is still in force
and which is in the form prescribed by the
Board, undertaking to comply with all provi­
sions of this Act, the Federal Reserve Act, as
amended, and the Banking Act of 1933, which
are applicable to member banks and which re­
late to the use of credit to finance transactions
in securities, and with such rules and regula­
tions as may be prescribed pursuant to such
provisions o f law or for the purpose of
preventing evasions thereof, or (3) in accor­
dance with such rules and regulations as the
Board of Governors of the Federal Reserve
System may prescribe to permit loans between
such members and/or brokers and/or dealers,
or to permit loans to meet emergency needs.
Any such agreement filed with the Board of
Governors of the Federal Reserve System
shall be subject to termination at any time by
order of the Board, after appropriate notice
and opportunity for hearing, because of any
failure by such bank to comply with the pro­
visions thereof or with such provisions of law
or rules or regulations; and, for any willful
violation of such agreement, such bank shall
be subject to the penalties provided for viola­
tions of rules and regulations prescribed under
this title. The provisions of sections 21 and 25
of this title shall apply in the case of any such
proceeding or order of the Board of Gover­
nors of the Federal Reserve System in the

same manner as such provisions apply in the
case of proceedings and orders of the Com­
mission. Subject to such rules and regulations
as the Board of Governors of the Federal Re­
serve System may adopt in the public interest
and for the protection of investors, no person
shall be deemed to have borrowed within the
ordinary course of business, within the mean­
ing of this subsection, by reason of a bona
fide agreement for delayed delivery of a mort­
gage related security or a small business re­
lated security against full payment of the
purchase price thereof upon such delivery
within one hundred and eighty days after the
purchase, or within such shorter period as the
Board of Governors of the Federal Reserve
System may prescribe by rule or regulation.
*

*

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*

*

[15 USC 78h. As amended by acts of June 4, 1975 (89
Stat. 109); Oct. 3, 1984 (98 Stat. 1690); and Sept. 23, 1994
(108 Stat 2199).]

*

*

*

*

*

SECTION 17— Records and Reports (15
USC 78q)
*

*

*

*

*

(g) Persons extending credit. Any broker,
dealer, or other person extending credit who is
subject to the rules and regulations prescribed
by the Board of Governors of the Federal Re­
serve System pursuant to this title shall make
such reports of the Board as it may require as
necessary or appropriate to enable it to per­
form the functions conferred upon it by this
title. If any such broker, dealer, or other per­
son shall fail to make any such report or fail
to furnish full information therein, or, if in the
judgment of the Board it is otherwise neces­
sary, such broker, dealer, or other person shall
permit such inspections to be made by the
Board with respect to the business operations
of such broker, dealer, or other person as the
Board may deem necessary to enable it to ob­
tain the required information.
*

*

*

*

*

[15 USC 78q. As amended by acts of Aug 23, 1935 (49
Stat. 704); May 27, 1936 (49 Stat. 1379); June 25, 1938

59

Securities Exchange Act
(52 Stat. 1076); June 4, 1975 (89 Stat. 137); Oct. 28, 1986
(100 Stat. 3219); Dec. 4, 1987 (101 Stat. 1257); and Oct.
16, 1990 (104 Stat. 966).]

*

*

*

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*

SECTION 23— Rules, Regulations, and
Orders; Annual Reports (15 USC 78w)
(a) Power to make rules and regulations; con­
siderations; public disclosure.
(1) The Commission, the Board of Gover­
nors of the Federal Reserve System, and the
oth er agencies enum erated in section
3(a)(34) of this tide shall each have power
to make such rules and regulations as may
be necessary or appropriate to implement
the provisions of this title for which they
are responsible or for the execution of the
functions vested in them by this title, and
may for such purposes classify persons, se­
curities, transactions, statements, applica­
tions, reports, and other matters within their
respective ju risd ictio n s, and prescribe
greater, lesser, or different requirements for
different classes thereof. No provision of
this title imposing any liability shall apply
to any act done or omitted in good faith in
conformity with a rule, regulation, or order
of the Commission, the Board of Governors
o f the Federal R eserve System , other
agency enumerated in section 3(a)(34) of
this title, or any self-regulatory organiza­
tion, notwithstanding that such rule, regula­
tion, or order may thereafter be amended or
rescinded or determined by judicial or other
authority to be invalid for any reason.
*

*

*

*

*

[15 USC 78w. As amended by acts of Aug 23, 1935 (49
Stat. 704); May 27, 1936 (49 Stat. 1379); Aug. 20, 1964
(78 Stat. 580); June 4, 1975 (89 Stat. 155); Oct. 28, 1986
(100 Stat. 3220); Dec. 4, 1987 (101 Stat. 1259); Oct. 15,
1990 (104 Stat. 940); and Dec. 17, 1993 (107 Stat. 2351).]

*

*

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*

*

SECTION 29— Validity o f Contracts
(15 USC 78cc)

(b) Contract provisions in violation o f title.
Every contract made in violation of any provi­
sion of this title or of any rule or regulation
thereunder, and every contract (including any
contract for listing a security on an exchange)
heretofore or hereafter made the performance
of which involves the violation of, or the con­
tinuance of any relationship or practice in vio­
lation of, any provision of this title or any
rule or regulation thereunder, shall be void (1)
as regards the rights of any person who, in
violation of any such provision, rule, or regu­
lation, shall have made or engaged in the per­
formance of any such contract, and (2) as re­
gards the rights of any person who, not being
a party to such contract, shall have acquired
any right thereunder with actual knowledge of
the facts by reason of which the making or
performance of such contract was in violation
of any such provision, rule or regulation; Pro­
vided, (A) That no contract shall be void by
reason of this subsection because of any viola­
tion of any rule or regulation prescribed pur­
suant to paragraph (3) of subsection (c) of
section 15 of this title, and (B) that no con­
tract shall be deemed to be void by reason of
this subsection in any action maintained in re­
liance upon this subsection, by any person to
or for whom any broker or dealer sells, or
from or for whom any broker or dealer
purchases, a security in violation of any rule
or regulation prescribed pursuant to paragraph
(1) or (2) of subsection (c) of section 15 of
this title, unless such action is brought within
one year after the discovery that such sale or
purchase involves such violation and within
three years after such violation. The Commis­
sion may, in a rule or regulation prescribed
pursuant to such paragraph (2) of such section
15(c), designate such rule or regulation, or
portion thereof, as a rule or regulation, or por­
tion thereof, a contract in violation of which
shall not be void by reason of this subsection.
*

*

*

*

*

[15 USC 78cc. As amended by acts of June 25, 1938 (52
Stat. 1076) and Oct. 15, 1990 (104 Stat. 956).]