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F ederal reserve bank of Dallas

DALLAS, TEXAS

7S222

Circular Wo. 72-^3
February 29, 1972

SECURITIES CREDIT TRANSACTIONS
(OTC Margin Stocks Criteria)

To All Banks, Regulation G Registrants and Others
Concerned in the Eleventh Federal Reserve District:
The Board of Governors of the Federal Reserve System
proposed criteria that over-the-counter (OTC) stocks must con­
tinue to meet in order to remain on the List of OTC Margin
Stocks.
The criteria employed in selecting OTC stocks for
inclusion on the List of OTC Margin Stocks were announced on
July 9j 1969- The V+0 stocks now on the list are subject to
the Board's margin regulations.
Adoption of the proposal would mean that OTC margin
stocks failing substantially to meet the criteria would be
removed from the list and would no longer be subject to margin
regulations. The proposed delisting criteria are less restric­
tive than the initial listing criteria.
To aid in the consideration of this matter by the
Board, interested persons are invited to submit relative data,
views, or arguments. Any such material should be submitted in
writing to the Secretary, Board of Governors of the Federal
Reserve System, Washington, D. C. 20551? to be received not
later than March 2h, 1972.
Attached is a copy of the proposed criteria.
Yours very truly,
P. E. Coldwell,
President
Attachment

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

FEDERAL RESERVE SYSTEM
[12 CFR PARTS 207, 220, and 221]
[Regs. G, T, and U]
SECURITIES CREDIT TRANSACTIONS
Requirements for Continued Inclusion on
List of OTC Margin Stocks

The Board of Governors proposes to amend Parts 207, 220,
and 221 in order to implement the requirements for a stock's continued
inclusion on the List of OTC Margin Stocks as follows:
la.

Section 207.2(f)(3) of Part 207, Securities Credit b y

Persons other than Banks, Brokers or Dealers, would be amended as
set forth below:
§ 207.2

Definitions
*

(f)

*

*

*

*

OTC margin stock. * * *

(3)

The Board shall from time to time remove from the list

described in subparagraph (2) of this paragraph (f) stocks that cease

(i)

Exist or of which the issuer ceases to exist, or

(ii) Meet substantially the provisions of subparagraph (1)
of this paragraph (f) and
b.
forth below:

§ 207.5(e) (the Supplement to Regulation G ) .

Paragraph (a) of section 207.5 would be added as set

- 2 § 207.5 Supplement

*

(e)
margin stock.

*

*

*

*

Requirements for continued inclusion on list of OTC
Except as provided in subparagraph (4) of § 207.2(f),

such stock shall meet the requirements that:
(1)

The stock continues to be subject to registration under

section 12(g)(1) of the Securities Exchange Act of 1934,
(2)

Four or more dealers stand willing to, and do in fact,

make a market in such stock including making regularly published
bona fide bids and offers for such stock for their own accounts, or
the stock is registered on a securities exchange that is exempted by
the Securities and Exchange Commission from registration as a national
securities exchange pursuant to section 5 of the Securities and
Exchange Act of 1934 (15 U.S.C.
(3)

78e),

There continue to be 1,000 or more holders of record

of the stock who are not officers, directors, or beneficial owners
of 10 per cent or more of the stock,
(4)

The issuer continues to be a U.S. Corporation,

(5)

Daily quotations for both bid and asked prices for

the stock are continuously available to the general public;
and shall meet 3 of the 4 additional requirements that:
(6)

400,000 or more shares of such stock remain outstanding

in addition to shares held beneficially by officers, directors, or
beneficial owners of more than 10 per cent of the stock,
(7)

The shares described in subparagraph (6) of this

paragraph continue
$5 million,

to have a market value in the aggregate of at

least

-3 (8)

The minimum average bid price of such stock, as deter­

mined by the Board, is at least $5 per share, and
(9)
capital,

The issuer continues to have at least $2.5 million of

surplus, and undivided profits.
2a.

Section 220.2(e)(3) of Part 220, Credit by Brokers and

Dealers, would be amended as set forth below:
§ 220.2

Definitions
*

(e)

*

*

*

*

OTC margin st o c k . * * *

(3)

The Board shall from time to time remove from the

list described in subparagraph (2) of this paragraph (e) stocks
that cease to:
(i)

Exist or of which the issuer ceases to exist, or

(ii)

Meet substantially the provisions of subparagraph (1)

of this paragraph (e) and of § 220.8(h)
b.

(the Supplement to Regulation T ) .

Paragraph (h) of section 220.8 would be added as set

forth below:
§ 220.8 Supplement
*

(h)
margin stock.

*

*

*

*

Requirements for continued inclusion on list of OTC
Except as provided in subparagraph (4) of § 220.2(e),

OTC margin stock shall meet the requirements that:
(1)

The stock remains subject to registration under

section 12(g)(1) of the Securities Exchange Act of 1934,

- 4 -

(2)

Four or itnore dealers stand willing to, and do In fact,

make a market In such stock Including making regularly published
bona fide bids and offers for such stock for their own accounts, or
the stock is registered on a securities exchange that is exempted by
the Securities and Exchange Commission from registration as a national
securities exchange pursuant to section 5 of the Securities and
Exchange Act of 1934 (15 U.S.C.
(3)

78e),

There continue to be 1,000 or more holders of record

of the stock who are not officers, directors, or beneficial owners
of 10 per cent or more of the stock,
(4)

The issuer continues to be a U.S.

Corporation,

(5)

Daily quotations for both bid and asked prices for the

stock are continuously available to the general public;
and shall meet 3 of the 4 additional requirements that:
(6)

400,000 or more shares of such stock remain outstanding

in addition to shares held beneficially by officers, directors, or
beneficial owners of more than 10 per cent of the stock,
(7)

The

agraph continue to

shares described in subparagraph (6) of

this pa r ­

have a market value in the aggregate of

at least

$5 million,
(8)

The minimum average bid price of such stock, as deter­

mined by the Board, is at
(9)

The

least $5 per share, and

issuer continues to have at least $2.5 million of

capital, surplus, and undivided profits.
3a.

Section 221.3(d)(3) (a f Part 221., Credit by Banks for

the Purpose Trf Purchasing or Carrying Margin Stock set forth below:

- 5 -

§ 221.3

Miscellaneous Provisions
*

(d)

*

*

*

*

OTC margin stock. * * *

(3)

The Board shall from time to time remove from the

list described in subparagraph (2) of this paragraph (d) stocks that
cease to:
(i)

Exist or of which the issuer ceases to exist, or

(ii)

Meet substantially the provisions of subparagraph (1)

of this paragraph (d) and of § 221.4(e) (the Supplement to Regulation U).
b.

Paragraph (e) of section 221.4 would be added as set

forth below:
§ 221.4

Supplement
*

(e)
margin stoc k.

*

*

*

*

Requirements for continued inclusion on list of OTC
Except as provided in subparagraph (4) of $ 221.3(d),

OTC margin stock shall meet the requirements that:
(1)

The stock remains subject to registration under section

12(g)(1) of the Securities Exchange Act of 1934,
(2)

Four or more dealers stand willing to, and do in fact,

make a market in such stock

i n c l u d i n g

m a k in g

regularly published

bona fide bids and offers for such stock for their own accounts, or
the stock is registered on a securities exchange that is exempted by
the Securities and Exchange Commission from registration as a national
securities exchange pursuant to section 5 of the Securities and
Exchange Act of 1934 (15 U.S.C. 78e ),

- 6 -

(3)

There continue to be 1,000 or more holders of record

of the stock who are not officers, directors, or beneficial owners
of 10 per cent or more of the stock,
(4)

The

issuer continues to be a U.S.

(5)

Daily quotations for both bid and

Corporation,
asked prices for

the stock are continuously available to the general public; and
shall meet 3 of the 4 additional requirements that:
(6)

400,000 or more shares of such stock remain outstanding

in addition to Bhares held beneficially by officers, directors, or
beneficial owners of more than 10 per cent of the stock,
(7)

The

paragraph continue

shares described in subparagraph (6) of this
to have a market value in the

aggregate of

at

least $5 million,
(8)
mined by

the Board, is at least $5
(9)

capital,

The minimum average

The

bid price of such stock,

asdeter­

per share, and

issuer continues to have at least $2.5 million

surplus, and undivided profits.
To aid in the consideration of this matter by the Board,

interested persons are invited to submit relevant data, views,
arguments.

or

Any such material should be submitted in writing to

the Secretary, Board of Governors of the Federal Reserve System,

of

-

Washington, D. C.
1972.

7 -

20551, to be received not later than March 24,

Such material will be made available for inspection and

copying upon request, except as provided in § 261.6(a) of the
Board'8 rules regarding availability of information.
By order of the Board of Governors, February 17, 1972.

(Signed) Tynan Smith
Tynan Smith
Secretary of the Board
[SEAL]