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F E D E R AL R E S E R V E B ANK O F N E W YORK J" Circular N o. 6 5 2 5 "I L April 17, 1970 J AMENDMENT TO REGULATION T Certain Credit by Insurance Companies To A ll BroTcers and D ealers, and L ife Insurance Com panies E xten din g S ecurities C redit, in the Second Federal Reserve D is tr ic t: Enclosed is a copy of an amendment, effective May 15, 1970, to Regulation T of the Board of Governors of the Federal Reserve System. The Board issued the following explanation of the pur pose of the amendment: A new p arag rap h (f) has been added to section 220.7 of R egulation T to perm it life insurance com panies subject to registration w ith the SEC under section 15 of the Securities Exchange A ct of 1934 (15 U.S.C. 78o) (because they offer or sell variable annuity contracts) to extend, m aintain, or arran g e for credit subject to Regulation G, ra th e r th an R egulation T, where the securities credit they extend is u nrelated to transactions involving a variable annuity or a general securities business. Insurance companies subject to registration w ith the SEC became subject to R egulation T as a result of am endm ents adopted by the B oard on Ju n e 2, 1969 (F ederal R egister of Ju n e 11, 1969 (34 F.R . 9196)). Several such companies had previously registered w ith the B oard under Regulation G in connection w ith their conventional lending operations, which include loans secured by m argin securities, as defined hy § 207.2(d) of th a t regulation. The present am endm ent is designed to allocate the lending operations of such companies between R egula tions G and T on a functional basis to clarify th a t extensions of credit p u rsu a n t to norm al lending activi ties of such insurance companies are not appropriately subject to R egulation T, when distinct from any broker-dealer activity of the companies and subject to R egulation G. Extensions of credit related to tra n s actions involving the offer or sale of the insurance com panies’ variable annuity contracts, or connected w ith the activity of the companies as a broker or dealer, are subject to R egulation T in the same m anner as are the financial relations between any broker or dealer and his customers. Extensions of credit norm ally associated w ith conventional lending practices of such insurance companies, however, are governed by the provisions of R egulation G to the extent they are applicable. This functional allocation applies where an insurance company has dealings w ith the same customer in connection w ith both types of activities. F o r example, the fact th a t a person is or may become a holder of a variable annuity contract issued by the com pany does not of itself cause credit extended to such person by the company as p a r t of its m ortgage, com mercial, or in d u strial loan operations to become subject to Regulation T. In order to provide relief pending the prom ulgation of this am endm ent, the B oard suspended, u n til A p ril 16, 1970, the provisions of R egulation T w ith the purpose of m aking such provisions inapplicable to credit extended by insurance companies subject to registration w ith the SEC as broker-dealers if the cred it is unrelated to transactions involving variable annuity contracts offered or sold by such insurance companies or affiliated persons thereof (34 F.R . 12132, 16629; J u ly 14, October 13, 1969). The period of such suspen sion is hereby extended u n til May 15, 1970. Additional copies of the amendment will be furnished upon request. A lfred H ayes, President. CREDIT BY BROKERS AND DEALERS AMENDMENT TO REGULATION T I ss u e d b y t h e B oard o f G o vern o r s op t h e F ederal R e se r v e S y st e m (2) The provisions of this part shall apply to any credit extended to or maintained or arranged for a customer by a life insurance company de scribed in subparagraph ( 1 ) of this paragraph § 220.7—MISCELLANEOUS PROVISIONS that has registered, or is required to register, as a broker or dealer pursuant to section 15 of the * * * Securities Exchange Act of 1934 (15 U.S.C. 78o) in connection with its activities as such a broker (f) Credit by insurance com panies that or dealer, including: issue variable annuity contracts. (1) Except (i) the offer or sale of any security or securi as provided in subparagraph ( 2 ) of this para ties registered under the Securities Act of 1933 graph, Part 207 of this Chapter (Regulation G) (15 U.S.C. 77) or exempt from such registration rather than this part shall apply to any credit by Rule 156 of the Securities and Exchange Com extended, maintained, or arranged for by a life mission (17 CFR 230.156) issued by (a) such insurance company which (i) meets the definition insurance company, or (b) an investment company of “insurance company” set forth in section registered pursuant to section 8 of the Investment 2(a) (17) of the Investment Company Act of 1940 Company Act of 1940 (15 U.S.C. 80a-8) for which (15 U.S.C. 80a-2(a) (17)) and (ii) is engaged in the insurance company is an underwriter, invest issuing or participating in the issuance of any ment advisor or dealer; and variable annuity contract, or of any interest in a Effective May 15, 1970, section 220.7 is amended by adding a new paragraph ( f ) to read as follows: separate account established by such insurance company, registered under the Securities Act of 1933 (15 U.S.C. 77) or exempt from such regis tration by Rule 156 of the Securities and Exchange Commission (17 CFR 230.156). (ii) those activities which are not part of the conventional lending activities of such life insur ance companies and which, in accordance with the ordinary usage of the trade, would be considered part of the business of a broker or dealer. PR IN T E D IN N EW YORK
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