Full text of Federal Reserve Bank of New York Circulars : 7317. Copy of Supplements to Margin Regulations G, T, and U

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FE D E R A L R ESER VE BANK
O F NEW YORK

J" Circular No. 7 3 1 7 "I
L January 7, 1974 J

COPY OF SUPPLEMENTS TO MARGIN REGULATIONS G, T, AND U
Effective January 3, 1974

To A ll Persons E xtending Securities Credit
in the Second Federal R eserve D istrict:

Our Circular No. 7314, dated January 2, 1974, contained the text of a statement,
issued by the Board of Governors of the Federal Reserve System, announcing a
reduction, from 65 percent to 50 percent, in its margin requirements for purchasing
or carrying stocks.
Enclosed is a copy of revised Supplements, effective January 3, 1974, to margin
Regulations G, T, and IT of the Board of Governors, which reflect the Board’s action.
Additional copies of the enclosure will be furnished upon request.




A lfred H a y e s ,

President.

BOARD OF GOVERNORS OP THE FEDERAL RESERVE SYSTEM

SUPPLEMENTS TO REGULATIONS G, T, AND U
SUPPLEM ENT T O R E G U L A T IO N G
E ffectiv e January 3, 1974
S E C T IO N 207.5 — S U P P L E M E N T
(a) Maximum loan value of margin securi­
ties. F or the pu rp ose o f § 207.1, the m axim um
loan valu e o f any m argin security, ex cep t c o n ­
vertible securities su b ject to § 2 0 7 .1 (d ) and
any put, call or com bin ation th ereof, shall b e
50 p er cen t o f its current m arket value, as
determ in ed b y any reason able m ethod. N o

in clu d in g m aking regularly p u b lish ed bona
fide bids and offers fo r such stock fo r their
o w n accounts, or the stock is registered o n a
securities exch ange that is ex em p ted b y the
Securities

and

E xch a n ge

C om m ission

from

registration as a national securities exch a n ge
pursuant to section 5 o f the Securities and
E xch an ge A ct o f 1934 (1 5 U .S.C. 7 8 e ),

put, call or com bin ation th ereof shall have
any loan valu e fo r the purposes o f this part.

(3 ) T h ere are 1,500 or m ore h old ers o f
r e co rd o f the stock w h o are n ot officers, d i­

(b ) Maximum loan value of convertible
debt securities subject to § 2 0 7 .1 (d ). F o r the

rectors, or ben eficia l ow n ers o f 10 p e r cen t or
m ore o f the stock,

p u rp ose o f § 207.1, the m axim um loan value

(4 ) T h e issuer is org a n ized u nder the law s

o f any security against w h ich cred it is ex­

o f the U n ited States or a State9 and it, o r a

ten d ed pursuant to § 2 0 7 .1 (d ) shall b e 50 per
cen t o f its current m arket value, as d eter­

p red ecessor in interest, has b e e n in existence
fo r at least 3 years,

m ined b y any reason able m ethod.

(5 ) T h e stock has b e e n p u b licly traded fo r
at least 6 m onths, and

( c ) R eten tion requirem ent. F o r the p u r­
p ose o f § 207.1, in the case o f a loan w h ich
w o u ld ex ce e d the m axim um loan valu e o f the
collateral fo llo w in g a w ith draw al o f collateral,

(6 ) D a ily quotations fo r b o th b id and asked
p rices fo r the stock are con tin u ou sly available
to the general p u b lic;

the “ retention requ irem en t” o f a m argin se­
cu rity and o f a security against w h ich credit
is exten d ed pursuant to § 2 0 7 .1 (d ) shall b e
70 p er cen t o f its current m arket value, as
d eterm in ed b y any reason able m ethod.
(d) Requirements for inclusion on list of
O T C margin stock.
subparagraph

(4 )

E xcep t as p ro v id e d in

o f § 2 0 7 .2 (f), such stock

shall m eet the requirem ents that:
(1 ) T h e

stock

is

su b ject

to

registration

under § 1 2 ( g ) ( 1 ) o f the Securities E xchan ge
A ct o f 1934 (1 5 U .S.C. 7 8 7 ( g ) ( 1 ) ) , or if is­
sued b y

an insurance

§1 2 ( g ) ( 2 ) (G )

(1 5

com p a n y

U .S.C.

su bject to

7 8 7 (g )(2 )(G ))

the issuer h ad at least $1 m illion o f capital
and surplus,

and shall m eet 3 o f the 4 addition al req u ire­
m ents that:
(7 ) T h ere are 500,000 or m ore shares o f
such stock outstanding in addition to shares
h eld b en eficia lly b y officers, directors, or b e n e ­
ficial ow n ers o f m ore than 10 p er cen t o f the
stock,
(8 ) T h e shares d escrib ed in subparagraph
(7 ) o f this paragraph have a m arket valu e in
the aggregate o f at least $10 m illion,
(9 ) T h e

m inim um

average

b id




of

latest m onth, is at least $10 p e r share, and
(1 0 ) T h e issuer h ad at least $5 m illion o f
capital, surplus, and u n d iv id ed profits.

(2 ) F ive or m ore dealers stand w illin g to,
and d o in fact, m ake a m arket in such stock

p rice

such stock, as d eterm in ed b y the B oard in the

9 As defined in 15 U.S.C. 78c(a)(16).

P R IN T E D IN N E W Y O R K

(e )

Requirements for continued inclusion

on list of O T C margin stock. E xcep t as p ro ­
v id e d in subparagraph ( 4 ) o f § 2 0 7 .2 ( f), such
stock shall m eet the requirem ents that:

( 5 ) D aily quotations for b o th b id and asked
prices fo r the stock are continuously available

( 1 ) T h e stock continues to b e su b ject to
registration under section 1 2 ( g ) ( 1 ) o f the

to the general p u b lic;
and shall m eet 3 o f the 4 additional req u ire­

Securities E xchan ge A ct o f 1934 (1 5 U.S.C.
7 8 / ( g ) ( l ) ), or if issued b y an insurance c o m ­
pan y such issuer continues to b e su bject to

ments that:
( 6 ) 400,000 or m ore shares o f such stock
rem ain outstanding in addition to shares held

section 1 2 ( g ) ( 2 ) ( G ) (1 5 U.S.C. 7 8 Z (g )(2 )
( G ) ) and has at least $1 m illion o f capital
and surplus,

beneficially b y officers, directors, or beneficial
ow ners o f m ore than 10 per cen t o f the stock,
( 7 ) T h e shares d escrib ed in subparagraph

( 2 ) F our or m ore dealers stand w illin g to,
and d o in fact, m ake a m arket in such
in clu d in g m aking regularly pu b lish ed
fide bids and offers for such stock for
o w n accounts, or the stock is registered

(4 ) T h e issuer continues to b e a U.S. co r­
poration,

( 6 ) o f this paragraph con tin u e to have a
market value in the aggregate o f at least $5

stock

bona

m illion,

their
on a

(8 ) The

m inim um average b id

p rice

of

securities exch ange that is exem p ted b y the

such stock, as determ ined b y the Board, is at

Securities and E xchan ge C om m ission from
registration as a national securities exchange
pursuant to section 5 o f the Securities and
E xch an ge A ct o f 1934 (1 5 U.S.C. 7 8 e ),

least $5 p er share, and
( 9 ) T h e issuer continues to have at least
$2.5 m illion o f capital, surplus, and u n d ivid ed
profits.

( 3 ) T here con tin u e to b e 1.000 or m ore
holders o f record o f the stock w h o are not
officers, directors, or ben eficial ow ners o f 10
per cent or m ore o f the stock,

( f ) Minimum equity ratio.

T h e m inim um

equ ity ratio o f a cred it su bject to § 207.1 is 40
per cent.

S U P P L E M E N T T O R E G U L A T IO N T
E ffectiv e January 3, 1974
S E C T IO N 220.8 — S U P P L E M E N T
(a )

Maximum loan value for general ac­

security as d eterm in ed b y the cred itor in g o o d
faith.

counts. T h e m axim um loan valu e o f securities
( b ) Maximum loan value for a special bond
account. T h e m axim um loan value o f an ex­

in a general a ccou n t su b ject to § 220.3 shall
be:

em p ted security and o f a registered n on -eq u ity

(1 ) o f a registered n on -eq u ity security h eld

security pursuant to § 2 2 0 .4 ( i ) shall b e the

in the accou n t on M a rch 11, 1968, and c o n ­

m axim um loan value o f the security as deter­
m ined b y the cred itor in g o o d faith.

tinuously thereafter, and o f a m argin equ ity
security (e x ce p t as p ro v id e d in § 2 2 0 .3 (c ) and
paragraphs ( b ) , ( c ) and ( f ) o f this se ctio n ),

( c ) M axim um loan value for special con­

50 per cent o f the current m arket value o f

vertible d e b t security accou nt. T h e m axim um

such securities.

loan value o f a m argin security elig ib le fo r a

(2 ) o f an ex em p ted security h eld in the

special con v ertib le security a ccou n t pursuant

accou n t on M arch 11, 1968, and con tin u ou sly

to § 2 2 0 .4 (j) shall b e 50 p er cen t o f the cu r­
rent m arket value o f the security.

thereafter, the m axim um loa n valu e o f the




2

am ount to b e in clu d ed in the adjusted d e b it

exem p ted security or registered n on -eq u ity
security h eld in the a ccou n t on M a rch 11,

balan ce o f a general accou nt, pursuant to

1968, and con tin u ou sly thereafter, and a m ar­

§ 2 2 0 .3 (d ) ( 3 ) , as m argin req u ired fo r short
sales o f securities ( other than exem p ted secur­

gin security, shall have any loan valu e in a
general a ccou n t excep t that a m argin security

ities)

elig ib le for the special co n v e rtib le d e b t secu ri­

(d) Margin required for short sales.

T he

shall b e 50 per cent o f the current

ty a ccou n t pursuant to § 220.4 ( j ) shall have

market valu e o f each security.

loan value on ly if held in the a ccou n t on

( e ) Retention requirement. In the case o f
an a ccou n t w h ich w o u ld have an excess o f the

M arch 11, 1968, and con tin u ou sly thereafter;
and no put, call or com b in a tion th ereof shall

adjusted d eb it bala n ce o f the a ccou n t ov er the
m axim um loan value o f the securities in the

have loan value in a general account.

a ccou n t fo llo w in g a w ith draw al o f cash or
securities from
§ 2 2 0 .3 ( b ) ( 2 ) :

the

a ccou n t,

pursuant

(g) Account subject to section 8 (g ).

to

purposes

of

the

com pu tation

For

d escrib ed

in

§ 2 2 0 .3 ( b ) ( 1 ) ( h ) ,

(1 ) T h e “ retention requ irem en t” o f an ex­
em p ted security h eld in the .general a ccou n t

(1 ) T h e m axim um loan value o f a regis­

on M arch 11, 1968, and con tin u ou sly there­
after, shall b e equ al to its m axim um loan value
as d eterm in ed b y the cred itor in g o o d faith,

tered n on -eq u ity security h eld in the a ccou n t

and the “ retention requ irem en t” o f a registered
n on -equ ity security h eld in such a ccou n t on

b e 60 p er cen t o f the current m arket value o f
such secu rity ; and the m axim um loan value o f

M arch 11, 1968, and con tin u ou sly thereafter,
and o f a m argin security, shall b e 70 per cent

an exem p ted security h eld in the a ccou n t on
M arch 11, 1968, and con tin u ou sly thereafter

o f the current market value o f the security.

shall b e the m axim um loan valu e o f the secu ­

(2 ) In the case o f a special b o n d a ccou n t

rity as d eterm in ed b y the cred itor in g o o d
faith.

on M arch 11, 1968, and con tin u ou sly th ere­
after, and o f a m argin eq u ity security shall

su b ject to § 2 2 0 .4 ( i), the retention req u ire­
m ent o f an exem p ted security and o f a regis­

(2 ) T h e am ount to b e in clu d ed in the a d ­

tered n on -eq u ity security shall b e equ al to the

justed d e b it balan ce o f the a ccou n t pursuant

m axim um loan valu e o f the security'.
(3 ) In

to § 2 2 0 .3 ( d )(3 ) as m argin req u ired fo r short
sales o f securities (other than exem p ted secu ­

the case o f a special con vertib le

security accou n t su b ject t o § 220.4 ( j ) w h ich

rities)

w o u ld have an excess o f the adjusted d eb it

m arket value o f each security.

shall b e 40 per cent o f the current

b alan ce o f the a ccou n t ov er the m axim um loan
(h ) Requirements for inclusion on list of
O T C margin stock. E x ce p t as p ro v id e d in
subparagraph (4 ) o f § 2 2 0 .2 (e ), O T C m argin

valu e o f the securities in the a ccou n t fo llo w in g
a w ith draw al o f cash or securities from the
accou nt, the retention requ irem en t o f a secu r­
ity h avin g loan valu e in the a ccou n t shall b e

stock shall m eet the requirem ents that:

70 p er cen t o f the current market value o f the
security.

(1 ) T h e

stock

is

su b ject

to

registration

under § 1 2 ( g ) ( 1 ) o f the Securities E xch an ge

(4 ) F or the p u rpose o f effectin g a transfer

A ct o f

from a general a ccou n t to a special co n v e rt­

1934

(1 5

U.S.C. 7 8 Z ( g ) ( l ) ) ,

or if

issued b y an insurance com p a n y su bject to

ible security a ccou n t su b ject to § 2 2 0 .4 (j), the
retention requ irem en t o f a security d escrib ed

§ 1 2 ( g ) ( 2 ) ( G ) (1 5 U .S.C . 7 8 1 ( g ) ( 2 ) ( G ) ) ,
the issuer had at least $1 m illion o f capital and
surplus,

in § 2 2 0 .4 (j), shall b e 70 p er cen t o f its current
m arket value.
( f ) Securities having no loan value in a

( 2 ) F iv e or m ore dealers stand w illin g to,

general account. N o securities other than an

and d o in fact, make a m arket in such stock




3

in clud ing m aking regularly p u b lish ed bona
fide bids and offers fo r such stock fo r their

( 1 ) T h e stock continues to b e su b ject to
registration u nder section 1 2 ( g ) ( 1 ) o f the
Securities E xchan ge A ct o f 1934 (1 5 U .S.C .

ow n accounts, or the stock is registered on a
securities exch ange that is exem p ted b y the
Securities

and

E xch a n ge C om m ission

7 8 Z (g ) ( 1 ) ) , or if issued b y an insurance c o m ­
pan y such issuer continues to b e su b ject to

from

registration as a national securities exchange
pursuant to section 5 o f the A ct (1 5 U.S.C.

section 1 2 ( g ) ( 2 ) ( G ) (1 5 U .S.C . 7 8 Z ( g ) ( 2 )
( G ) ) and has at least $1 m illion o f capital and

7 8 e ),

surplus,

( 3 ) T h ere are 1,500 or m ore holders o f

( 2 ) F ou r or m ore dealers stand w illin g to,

record o f the stock w h o are n ot officers, d ire c­
tors, or ben eficial ow ners o f 10 p er cent or

and d o in fact, m ake a m arket in su ch stock
in clu d in g m aking regularly p u b lish ed bona
fide bids and offers fo r such stock fo r their

m ore o f the stock,

ow n accounts, or the stock is registered on a
securities exch ange that is exem pted b y the

(4 ) T h e issuer is orga n ized u n d er th e law s
o f the U nited States or a State6 and it, or a
predecessor in interest, has been in existence

Securities and E xch an ge C om m ission from
registration as a national securities exch ange

fo r at least 3 years,

pursuant to section 5 o f the Securities and
E xch a n ge A ct o f 1934 (15 U.S.C. 7 8 e ),

( 5 ) T h e stock has b een p u b licly trad ed for
at least 6 m onths, and
and

(3 ) T h ere con tin u e to b e 1,000 or m ore
holders o f record o f the stock w h o are not

asked prices fo r the stocks are con tin u ou sly
available to the general p u b lic;

officers, directors, or ben eficial ow ners o f 10
p er cent or m ore o f the stock,

(6 ) D a ily

quotations

fo r

b o th

b id

and shall m eet 3 o f the 4 addition al req u ire­
ments that:

( 4 ) T h e issuer continues to b e a U.S. co r­
poration,

( 7 ) T h ere are 500,000 or m ore shares o f
such stock outstanding in a d dition to shares

( 5 ) D aily

quotations

fo r

b o th

b id

and

h eld ben eficially b y officers, directors, or b e n e ­

asked prices fo r the stock are con tin u ou sly

ficial ow ners o f m ore than 10 p er cent o f the
stock,

available to the general p u b lic;
and shall m eet 3 o f the 4 addition al req u ire­
m ents that:

( 8 ) T h e shares d escrib ed in subparagraph
( 7 ) o f this paragraph h ave a m arket value in

( 6 ) 400,000 or m ore shares o f such stock
rem ain outstanding in a d dition to shares held

the aggregate o f at least $10 m illion,

b en eficially b y officers, directors, or beneficial
ow ners o f m ore than 10 per cent o f the stock,

( 9 ) T h e m inim um average b id p rice o f
such stock, as determ in ed b y the B oard in the
latest m onth, is at least $10 p er share, and

( 7 ) T h e shares d escrib ed in subparagraph
( 6 ) o f this paragraph con tin u e to have a m ar­
ket value in the a ggregate o f at least $5
m illion,

(1 0 ) T h e issuer had at least $5 m illion o f
capital, surplus, and u n d iv id ed profits.

(i)

Requirements for continued inclusion

on list of O T C margin stock. E xcep t as p ro ­
vid ed

in

subparagraph

(4 )

of

§ 2 2 0 .2 (e ),

O T C margin stock shall m eet the requirem ents
that:

m inim um

average b id

p rice

of

( 9 ) T h e issuer continues to have at least
$2.5 m illion o f capital, surplus, and u n d iv id ed
profits.

6 As defined in 15 U.S.C. 7 8 c(a )(1 6 ).




(8 ) T h e

such stock, as determ in ed b y the B oard, is at
least $5 per share, and

4

I

SUPPLEM ENT T O R E G U L A T IO N U
E ffectiv e January 3, 1974
pursuant to section 5 o f the A ct (15 U.S.C.

S E C T IO N 221.4 — S U P P L E M E N T
(a ) Maximum loan value of stocks.

F or

the p u rp ose o f § 221.1, the maxim um

loan

7 8 e ),

value o f any stock ex cep t puts, calls and c o m ­

(3 ) T h ere are 1,500 or m ore holders o f
record o f the stock w h o are not officers, d ire c­

binations th ereof, w h eth er or n ot registered
on a national securities exchange, shall b e 50

tors, or ben eficial ow ners o f 10 p er cent or
m ore o f the stock,

p er cen t o f its current m arket value, as d e ­
term ined b y any reasonable m ethod.

Puts,

calls and com bination s th ereof shall have no
loan value.
(b ) Maximum

loan value

of convertible

debt securities subject to § 2 2 1 .3 (t).
pu rp ose

of

§ 2 2 1 .3 ( t ),

the

F o r the

m axim um

loan

(4 ) T h e issuer is organ ized under the laws
o f the U nited States or a State9 and it, or a
p red ecessor in interest, has b e e n in existence
fo r at least 3 years,
(5 ) T h e stock has b e e n p u b licly traded for
at least 6 m onths, and

value o f any security against w h ich credit is
exten d ed pursuant to § 221.3 (t ) shall b e 50

asked prices fo r the stock are continuously

p er cent o f its current m arket value, as d eter­

available to the general p u b lic;

m in ed b y any reason able m ethod.
( c ) Retention requirement.

F or the pur­

p ose o f § 221.1, in the case o f a cred it w h ich

(6 ) D a ily

quotations

fo r

b o th

b id

and

and shall m eet 3 o f the 4 additional requ ire­
m ents that:

collateral fo llo w in g a w ith d raw al o f co lla t­

(7 ) T here are 500,000 o r m ore shares o f
such stock outstanding in ad d ition to shares

eral, the “retention req u irem en t” o f a stock,

h eld ben eficially b y officers, directors, or b e n e ­

w o u ld ex ce e d the m axim um loan valu e o f the

w h eth er or n ot registered on a national secu ­

ficial ow ners o f m ore than 10 p er cen t o f the

rities exch an ge, and o f a con v ertib le

stock,

d eb t

security su bject to § 221.3 ( t ), shall b e 70 per

(8 ) T h e shares d e scrib ed in subparagraph

cen t o f its current m arket value, as d eter­

(7 ) o f this paragraph have a m arket value in

m ined b y any reason able m ethod.

the aggregate o f at least $10 m illion,

( d ) Requirements for inclusion on list of
O T C margin stock. E x ce p t as p ro v id e d in

(9 ) T h e m inim um average b id price o f
such stock, as d eterm in ed b y the B oard in the

subparagraph (4 ) o f § 2 2 1 .3 (d ), O T C m argin

latest m onth, is at least $10 p er share, and

stock shall m eet the requirem ents that:
(1 ) T h e stock is su b ject to registration
under § 1 2 ( g ) ( 1 ) o f the Securities E xchan ge
A ct o f 1934 (1 5 U .S.C . 7 8 7 ( g ) ( 1 ) ) , or if
issued b y an insurance co m p a n y su b ject to
§ 1 2 ( g ) ( 2 ) ( G ) (15 U .S.C. 7 8 7 ( g ) ( 2 ) ( G ) ) the
issuer had at least $1 m illion o f capital and
surplus,
(2 ) F ive or m ore dealers stand w illin g to,
and d o in fact, m ake a m arket in such stock
in clu d in g m aking regularly pu b lish ed

bona

fide bids and offers fo r such stock fo r their
ow n accou nts, or the stock is registered on a
securities exch ange that is exem p ted b y the
Securities

and

E xch a n ge

C om m ission

from

registration as a national securities exch ange




(1 0 ) T h e issuer had at least $5 m illion o f
capital, surplus, and u n d iv id ed profits.
(e )
Requirements for continued inclusion
on list of O T C margin stock. E xcep t as p ro ­
v id e d in subparagraph ( 4 ) o f § 2 2 1 .3 (d ),
O T C m argin stock shall m eet the require­
ments that:
(1)

T h e stock continues to b e su b ject to re g ­

istration u nder section 12 ( g ) ( 1 ) o f the Securi­
ties E xchan ge A ct o f 1934 (1 5 U.S.C. 7 8 7 (g )
( 1 ) ), or if issued b y an insurance com p a n y such
issuer continues to b e su b ject to section 1 2 (g )
( 2 ) (G )

(1 5 U.S.C. 7 8 7 ( g ) ( 2 ) ( G ) ) and has

at least $1 m illion o f capital and surplus,

9 As defined in 15 U.S.C. 78c( a ) ( 16) .

and shall m eet 3 o f the 4 additional requ ire­

( 2 ) F our or m ore dealers stand w illin g to,
and d o in fact, m ake a market in such stock
in clu d in g m aking regularly p u blish ed bona
fide bid s and offers fo r such stock fo r their
ow n accounts, or the stock is registered on a
securities exch ange that is exem pted b y the

ments that:
( 6 ) 400,000 or m ore shares o f such stock
rem ain outstanding in addition to shares held
ben eficially b y officers, directors, or ben eficial
ow ners o f m ore than 10 p er cen t o f the stock,

Securities and E xchan ge C om m ission from
registration as a national securities exchange
pursuant to section 5 of the Securities and
E xch an ge A ct o f 1934 (15 U.S.C. 7 8 e ),

( 7 ) T he shares d e scrib ed in subparagraph
( 6 ) o f this paragraph con tin u e to have a m ar­
ket value in
m illion,

( 3 ) T here con tin u e to b e 1,000 or m ore

the

aggregate

( 8 ) T h e m inim um

holders o f record o f the stock w h o are not
officers, directors, or beneficial ow ners o f 10

o f at least $5

average b id

p rice

of

such stock, as determ in ed b y the B oard, is at
least $5 p er share, and

p er cent or m ore o f the stock,

( 9 ) T h e issuer continues to have at least
$2.5 m illion o f capital, surplus, and u n d iv id ed

(4 ) T h e issuer continues to b e a U.S. c o r ­
poration,

profits.

( 5 ) D a ily quotations fo r b oth b id and
asked prices fo r the stock are contin u ou sly

equ ity ratio o f a cred it su b ject to § 221.1 is 40

available to the general p u blic;

p er cent.




(f)

6

Minimum equity ratio.

T h e m inim um