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FED ER A L RESERVE BANK O F NEW YORK P c i r c u l a r N o . 6906 F e b r u a r y 2 9 , 1 9 72 61 il PROPOSED AMENDMENTS TO REGULATIONS G, T, AND U To A ll P erson s E xtending Securities Credit in the Secon d Federal R ese rv e District: Following is the text of a statement issued February 23 by the Board of Governors of the Federal R eserve System: The Board of Governors of the Federal R eserve System proposed today the criteria that over-the-counter (OTC) stocks must continue to m eet in order to remain on its 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 9, 1969. The 440 stocks now on the list are sub ject 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 le s s restrictive than the initial listing criteria. Interested persons are asked to submit their com m ents on the proposed criteria in writing by March 24, 1972. Printed below is an excerpt from the Federal R egister of February 26, containing the text of proposed amendments to margin Regulations G, T, and U; the proposed amendments set forth the criteria for continued inclusion of over-the-counter stocks on the Board of Gover nors' List of OTC Margin Stocks. Comments thereon should be submitted by March 24 and may be sent to our Regulations and Bank Analysis Department. Alfred Hayes, President. FEDERAL RESERVE SYSTEM [1 2 CFR Parts 207, 220, 221 1 [Regs. G, T, and U] SECURITIES CREDIT TRANSACTIONS Requirements fo r Continued Inclusion on List o f OTC M argin 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 by Persons other than Banks, Brokers or Dealers, would be amended as set forth below: § 2 0 7 .2 * D efin itio n s. * * * * (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 to: (i) Exist or of which the issuer ceases to exist, or (ii) Meet substantially the provisions of subparagraph (1) of this paragraph (f) and § 207.5(e) (the Supplement to Regulation G ) . * * * * * b. Paragraph (e) of § 207.5 would be added as set forth below: § 2 0 7 .5 * Su pp lem en t. * * * * (e) R equ irem en ts for con tin u ed inclu sion on list of O TC m argin stock. Except as provided in subparagraph (4) of § 207.2(f), such stock shall meet the re quirements 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 pub lished bona fid e 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 (Over) Exchange Commission from registration as a national securities exchange pursu ant to section 5 of the Securities and Ex change Act of 1934 (15 U.S.C. 78e), (3) There continue to be 1,000 or more holders of record of the stock who are not officers, directors, or beneficial own ers of 10 percent 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 continu ously available to the general public; and shall meet three of the four additional requirements that: (6) 400,000 or more shares of such stock remain outstanding in addition to shares held beneficially by officers, di rectors, or beneficial owners of more than 10 percent of the stock, (7) The shares described in subpara graph (6) of this paragraph continue to have a market value in the aggregate of at least $5 million, (8) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (9) The issuer continues to have at least $2.5 million of capital, 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: such stock including making regularly published bona fid e bids and offers for such stock for their own accounts, or the stock is registered on a securities ex change that is exempted by the Securi ties and Exchange Commission from reg istration as a national securities ex change pursuant to section 5 of the Se curities and Exchange Act of 1934 (15 U.S.C. 78e), (3) There continue to be 1,000 or more holders of record of the stock who are not officers, directors, or beneficial own ers of 10 percent 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 continu ously available to the general public; and shall meet 3 of the 4 additional require ments that: (6) 400,000 or more shares of such stock remain outstanding in addition to shares held beneficially by officers, direc tors, or beneficial owners of more than 10 percent of the stock, (7) The shares described in subpara graph (6) of this paragraph continue to have a market value in the aggregate of at least $5 million, (8) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (9) The issuer continues to have at § 2 2 0 .2 D e fin itio n s. least $2.5 million of capital, surplus, and * * * * * undivided profits. (e) * * * 3a. Section 221.3(d)(3) of Part 221, (3) The Board shall from time to time Credit by Banks for the Purpose of Pur remove from the list described in subchasing or Carrying Margin Stock, would paragraph (2) of this paragraph (e) be amended as set forth below: stocks that cease to: § 2 2 1 .3 M iscellan eou s p rovisions. (i) Exist or of which the issuer ceases * * * * * to exist, or (d) O TC m argin stock. * * * (ii) Meet substantially the provisions (3) The Board shall from time to time of subparagraph (1) of this paragraph (e) and of § 220.8(h) (the Supplement remove from the list described in subparagraph (2) of this paragraph (d) to Regulation T ) . stocks that cease to: * * * * * (i) Exist or of which the issuer ceases b. Paragraph (h) of § 220.8 would be to exist, or added as set forth below: (ii) Meet substantially the provisions § 2 2 0 .8 S u p p le m e n t. of subparagraph (1) of this paragraph * * * * * (d) and of § 221.4(e) (the Supplement to (h) R equ irem en ts fo r con tin u ed in Regulation U ) . clusion on list of O TC m argin stock. Ex b. Paragraph (e) of § 221.4 would be cept as provided in subparagraph (4) of added as set forth below: § 220.2(e), OTC margin stock shall meet § 2 2 1 .4 S u p p lem en t. the requirements that: * * * * * (1) The stock remains subject to regis (e) R equ irem en ts fo r con tin u ed in tration under section 12( g) ( 1) of the clusion on list of O TC m argin stock. Ex Securities Exchange Act of 1934, cept as provided in subparagraph (4) of (2) Four or more dealers stand will § 221.3(d), OTC margin stock shall meet ing to, and do in fact, make a market in the requirements that: (1) The stock remains subject to regis tration 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 pub lished bona fide bids and offers for such stock for their own accounts, or the stock is registered on a securities ex change that is exempted by the Secu rities and Exchange Commission from registration as a national securities ex change pursuant to section 5 of the Secu rities and Exchange Act of 1934 (15 U .S.C .78e), (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 percent 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 continu ously available to the general public; and shall meet three of the four additional requirements that: (6) 400,000 or more shares of such stock remain outstanding in addition to shares held beneficially by officers, di rectors, or beneficial owners of more than 10 percent of the stock, (7) The shares described in subpara graph (6) of this paragraph continue to have a market value in the aggregate of at least $5 million, (8) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (9) The issuer continues to have at least $2.5 million of capital, surplus, and undivided profits. To aid in the consideration of this matter by the Board, interested persons are invited to submit relevant data, views, or arguments. Any such material should be submitted in writing to the Secretary, Board of Governors of the Federal Re serve System, Washington, D.C. 20551, to be received not later than March 24,1972. Such material will be made available for inspection and copying upon request, ex cept as provided in 8 261.6(a) of the Board’s rules regarding availability of information. By order of the Board of Governors, February 17,1972. [ sea l] • T y n a n S m it h , S ecreta ry of th e B oard. [F R D o c .7 2 -2 8 8 3 P lie d 2 -2 5 - 7 2 ;8 :4 9 a m ]
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