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r FEDERAL RESERVE BANK OF NEW YORK r L Circular No. 7 9 2 8 1 August 2,1976 J AMENDMENTS TO REGULATIONS G, T, and U Changes in the Criteria for Listing OTC Margin Stocks To A ll Persons Extending Securities Credit in the Second Federal Reserve D istric t: The Board of Governors of the Federal Reserve System has amended, effective .August 6, 1076, its Regulations G, T, and U in order to revise the criteria that overthe-counter stocks must meet and continue to meet to be included and maintained on its List of OTC Margin Stocks. The amendments adopted by the Board of Governors are the same as those proposed by the Board on March 11, and included in our Circu lar No. 7847, dated March 25, 1976. Enclosed are copies of the revised supplements to margin Regulations G, T, and L , effective August 6, 1976, reflecting these changes. Enclosed also is the Board’s summary of changes in the OTC listings. Questions regarding these matters may be directed to the Securities Regulations Division of our Bank Regulations Department. Additional copies of the enclosures will be furnished upon request. Paul A. V olcker, President. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION G Effective August 6, 1976 SECTION 207.5 - SUPPLEMENT (a) Maximum loan value o f margin securities. For the purpose of section 207.1, the maximum loan value of any margin security, except converti ble securities subject to section 207.1(d) and any put, call, or combination thereof, shall be 50 per cent of its current market value, as determined by any reasonable method. No put, call, or combina tion thereof shall have any loan value for the purposes of this part. (b) Maximum loan value o f convertible debt securities subject to section 2 0 7 .1 (d ). For the pur pose of section 207.1, the maximum loan value of any security against which credit is extended pur suant to section 207.1(d) shall be 50 per cent of its current market value, as determined by any reasonable method. (c) R etention requirem ent. For the purpose of section 207.1, in the case of a loan which would exceed the maximum loan value of the collateral following a withdrawal of collateral, the “retention requirement” of a margin security and of a security against which credit is extended pursuant to sec tion 207.1(d) shall be 70 per cent of its current market value, as determined by any reasonable method. exchange pursuant to section 5 of the Securities Exchange Act of 1934(15 U.S.C. 78e), (3) There are 1,200 or more holders of record, as defined in SEC Rule 12g5-l (17 C.F.R. 240.12 g5-1), ot the stock who are not officers, directors, or beneficial owners of 10 per cent or more of the stock, or the average daily trading volume of such stock, as determined by the Board, is at least 500 shares, (4) The issuer is organized under the laws of the United States or a Stated and it, or a predecessor in interest, has been in existence for at least 3 years, (5) The stock has been publicly traded for at least 6 months, (6) Daily quotations from both bid and asked prices for the stock are continuously available to the general public, and (7) There are 500,000 or more shares of such stock outstanding in addition to shares held bene ficially by officers, directors, or beneficial owners of more than 10 per cent of the stock; and shall meet two of the three additional requirements that: (8) The shares described in subparagraph (7) of this paragraph have a market value of at least $5 million, (d) R equirem ents for inclusion on List o f OTC Except as provided in subparagraph (4) of section 207.2(0, such stock shall meet the requirements that: Margin Stocks. (9) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (1 ) The stock is subject to registration under (10) The issuer has at least $5 million of capital, surplus, and undivided profits. section 12(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78/(g)( 1)), is issued by an insur (e) R equirem ents for con tin u ed inclusion on ance company subject to section 12(g)(2)(G) (15 List o f OTC Margin S tocks. Except as provided in U.S.C. 78/(g)(2)(G)) that has at least SI million of subparagraph (4) of section 207.2(0, such stock capital and surplus, or is issued by a closed-end shall meet the requirements that: investment management company subject to regis (1) The stock continues to be subject to regis tration pursuant to section 8 of the Investment tration under section 12(g)(1) of the Securities Company Act of 1940 (15 U.S.C. 80a-8),2 Exchange Act of 1934 (15 U.S.C. 78/(g)(l)), or if (2) Four or more dealers stand willing to, and issued by an insurance company such issuer con 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 bv the Securities and Exchange Com mission from registration as a national securities 9 A s defined in 15 U.S.C. 78c(a)(I6). [ E n c . C'ir. No. 79281 Printed in New York tinues to be subject to section 12(gX2)(G) (15 U.S.C. 78/(gX2XG)) and to have at least $1 million of capital and surplus, or if issued by a closed-end investment management company such issuer con tinues to be subject to registration pursuant to section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8). (2) Three 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 Com mission from registration as a national securities exchange pursuant to section 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e), (3) There continue to be 800 or more holders of record, as defined in SEC Rule 12g5-l (17 C.F.R. 240.12g5-1), of the stock who are not officers, directors, or beneficial owners of 10 per cent or more of the stock, or the average daily trading volume of such stock, as determined by the Board, is at least 300 shares, (4) The issuer continues to be a U.S. corpora tion, (5) Daily Quotations for both bid and asked prices for the stock are continuously available to the general public, and (6) There are 300,000 or more shares of such stock outstanding in addition to shares held bene ficially by officers, directors, or beneficial owners of more than 10 per cent of the stock; and shall meet two of the three additional requirements that: (7) The shares described in subparagraph (6) of this paragraph continue to have a market value of at least $2.5 million, (8) The minimum average bid price of such stock, as determined by the Board, is at least $3 per share, and (9) The issuer continues to have at least $2.5 million of capital, surplus, and undivided profits. (f) M inimum eq u ity ratio. The minimum equity ratio of a credit subject to section 207.1 is 30 per cent. For the period November 5, 1974, through November 2, 1975, all same-day substitutions of collateral permitted by section 207.10(2) for cred its in which the equity ratio equals or exceeds the minimum equity ratio shall also be permitted for all credits in which the equity ratio is less than the minimum equity ratio. (2) The amount to be included in the adjusted debit balance of the account pursuant to section 220.3(d)(3) as margin required for short sales of securities (other than exempted securities) shall be 30 per cent of the current market value of each security. (3) For the period November 5, 1974, through November 2, 1975, all transactions permitted by sections 220.3(b) (1) and 220.3(g) for accounts not subject to section 8(g) shall also be permitted in accounts subject to section 8(g). (h) R equirem ents for inclusion on List o f OTC Margin Stocks. Except as provided in subparagraph (4) of section 220.2(e), OTC margin stock shall meet the requirements that: (1) The stock is subject to registration under section 12(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 787(g)(1)), is issued by an insur ance company subject to section 12(g)(2)(G) (15 U.S.C. 78/(g)(2)(G)) that has at least $1 million of capital and surplus, or is issued by a closed-end investment management company subject to reg istration pursuant to section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), (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 Com mission from registration as a national securities exchange pursuant to section 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e), (3) There are 1,200 or more holders of record as defined in SEC Rule 12g5-l (17 C.F.R. 240.12g 5-1), 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 500 shares, (4) The issuer is organized under the laws of the United States or a State6 and it, or a predecessor in interest, has been in existence for at least 3 years, (5) The stock has been publicly traded for at least 6 months, (6) Daily quotations for both bid and asked prices for the stock are continuously available to the general public, and7 (7) There are 500,000 or more shares of such stock outstanding in addition to shares held benefi cially by officers, directors, or beneficial owners of more than 10 percent of the stock; and shall meet two of the three additional requirements that: 6As defined in 15 U.S.C. 78c(a)(16). (8) The shares described in subparagraph (7) of this paragraph have a market value of at least $5 million, (9) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (10) The issuer has at least $5 million of capital, surplus, and undivided profits. (i) R equirem ents for con tin u ed inclusion o n List o f OTC Margin S tock s. Except as provided in subparagraph (4) of section 220.2(e), OTC margin stock shall meet the requirements that: (1) The stock continues to be subject to regis tration under section 12(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 787(g)(1)), or if issued by an insurance company such issuer con tinues to be subject to section 12(g)(2)(G) (15 U.S.C. 78/(g)(2)(G))and to have at least $1 million of capital and surplus, or if issued by a closed-end investment management company such issuer con tinues to be subject to registration pursuant to sec tion 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), (2) Three or more dealers stand willing to, and do in fact, make a market in such stock including making regularly published bom 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 Com mission from registration as a national securities exchange pursuant to section 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e), (3) There continue to be 800 or more holders of record, as defined in SEC Rule 12g5-l (17 C.F.R. 240.12g5-1), of the stock who are not officers, directors, or beneficial owners of 10 per cent or more of the stock, or the average daily trading volume of such stock, as determined by the Board, is at least 300 shares, (4) The issuer continues to be a U.S. corpora tion, (5) Daily quotations for both bid and asked prices for the stock are continuously available to the general public, and (6) There are 300,000 or more shares of such stock outstanding in addition to shares held bene ficially by officers, directors, or beneficial owners of more than 10 percent of the stock; and shall meet two of the three additional requirements that: (7) The shares described in subparagraph (6) of this paragraph continue to have a market value of at least $2.5 million. (8) The minimum average bid price of such stock, as determined by the Board, is at least $3 per share, and (9) The issuer continues to have at least $2.5 million of capital, surplus, and undivided profits. BOARD OF G OVERNORS OF THE FEDERAL RESERVE SYSTEM SUPPLEMENT TO REGULATION T Effective August 6, 1976 SECTION 220.8 - SUPPLEMENT (a) Maximum loan value for general accounts. The maximum loan value of securities in a general account subject to section 220.3 shall be: (1) Of a registered non-equity security held in the account on March 11, 1968, and continuously thereafter, and of a margin equity security (except as provided in section 220.3(c) and paragraphs (b), (c), and (0 of this section), 50 per cent of the cur rent market value of such securities. (2) Of an exempted security held in the account on March 11, 1968, and continuously thereafter, the maximum loan value of the security as deter mined by the creditor in good faith. (b) Maximum loan value for a special bond account. The maximum loan value of an exempted security and of a registered non-equity security pursuant to section 220.4(i) shall be the maximum loan value of the security as determined by the creditor in good faith. (c) Maximum loan value for special convertible debt security account. The maximum loan value of a margin security eligible for a special convertible security account pursuant to section 220.4(j) shall be 50 per cent of the current market value of the security. (d) Margin required for short sales. The amount to be included in the adjusted debit balance of a general account, pursuant to section 220.3(dX3), as margin required for short sales of securities (other than exempted securities) shall be 50 per cent of the current market value of each security. (e) Retention requirement. In the case of an account which would have an excess of the adjust ed debit balance of the account over the maximum loan value of the securities in the account follow ing a withdrawal of cash or securities from the account, pursuant to section 220.3(bX2): continuously thereafter, and of a margin security, shall be 70 per cent of the current market value of the security. (2) In the case of a special bond account subject to section 220.4(i), the retention requirement of an exempted security and of a registered non equity security shall be equal to the maximum loan value of the security. (3) In the case of a special convertible security account subject to section 220.4(j) which would have an excess of the adjusted debit balance of the account over the maximum loan value of the secur ities in the account following a withdrawal of cash or securities from the account, the retention re quirement of a security having loan value in the account shall be 70 per cent of the current market value of the security. (4) For the purpose of effecting a transfer from a general account to a special convertible security account subject to section 220.4(j), the retention requirement of a security described in section 220.4(j), shall be 70 per cent of its current market value. (f) Securities having no loan value in a general account. No securities other than an exempted security or registered non-equity security held in the account on March 11, 1968, and continuously thereafter, and a margin security, shall have any loan value in a general account except that a mar gin security eligible for the special convertible debt security account pursuant to section 220.4(j) shall have loan value only if held in the account on March 11, 1968, and continuously thereafter; and no put, call, or combination thereof shall have loan value in a general account. (g) Account subject to section 8(g). For pur poses of the computation described in section 220.3(bXlXH), (l)The maximum loan value of a registered non-equity security held in the account on March (1) The “retention requirement” of an exempt 11, 1968, and continuously thereafter, and of a margin equity security shall be 70 per cent of the ed security held in the general account on March current market value of such security, and the 11, 1968, and continuously thereafter, shall be maximum loan value of an exempted security held equal to its maximum loan values as determined by in the account on March 11, 1968, and continu the creditor in good faith, and the “retention ously thereafter shall be the maximum loan value requirement” of a registered non-equity security of the security as determined by the creditor in held in such account on March 11, 1968, and good faith. [Enc. Cir. No. 79281 Printed in N ew York BOARD OF GOVERNORS OF THE FEDERAL RESER VE SYSTEM SUPPLEMENT TO REGULATION U Effective August 6, 1976 SECTION 221.4 - SUPPLEMENT Exchange Act of 1934 (15 U.S.C. 78e), (a) Maximum loan value of stocks. For the pur pose of section 221.1, the maximum loan value of any stock except puts, calls, and combinations thereof, whether or not registered on a national securities exchange shall be 50 per cent of its cur rent market value, as determined by any reasonable method. Puts, calls, and combinations thereof shall have no loan value. (b) Maximum loan value of convertible debt securities subject to section 221.3(t). For the pur pose of section 221.3(t), the maximum loan value of any security against which credit is extended pursuant to section 221.3(t) shall be 50 per cent of its current market value, as determined by any reasonable method. (c) Retention requirement. For the purpose of section 221.1, in the case of a credit which would exceed the maximum loan value of the collateral following a withdrawal of collateral, the “reten tion requirement” of a stock, whether or not regis tered on a national securities exchange, and of a convertible debt security subject to section 221.3 (t), shall be 70 per cent of its current market value, as determined by any reasonable method. (d) Requirements for inclusion on List of OTC Margin Stocks. Except as provided in subparagraph (4) of section 221.3(d), OTC margin stock shall meet the requirements that: (1) The stock is subject to registration under section 12(g)(l) of the Securities Exchange Act of 1934 (15 U.S.C. 78/(g)( 1)), is issued by an insur ance company subject to section 12(gX2)(G) (15 U.S.C. 78/(g)(2)(G)) that has at least $1 million of capital and surplus, or is issued by a closed-end in vestment management company subject to registra tion pursuant to section 8 of the Investment Com pany Act of 1940 (15 U.S.C. 80a-8),2 (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 Com mission from registration as a national securities exchange pursuant to section 5 of the Securities [Ene. Cir. No. 79281 (3) There are 1,200 or more holders of record, as defined in SEC Rule 12g5-l (17 C.F.R. 240.12g 5-1) of the stock who are not officers, directors, or beneficial owners of 10 per cent or more of the stock, or the average daily trading volume of such stock, as determined by the Board, is at least 500 shares, (4) The issuer is organized under the laws of the United States or a State9 and it, or a predecessor in interest, has been in existence for at least 3 years, (5) The stock has been publicly traded for at least 6 months, (6) Daily quotations for both bid and asked prices for the stock are continuously available to the general public, and (7) There are 500,000 or more shares of such stock outstanding in addition to shares held bene ficially by officers, directors, or beneficial owners of more than 10 per cent of the stock; and shall meet two of the three additional requirements that: (8) The shares described in subparagraph (7) of this paragraph have a market value of at least $5 million, (9) The minimum average bid price of such stock, as determined by the Board, is at least $5 per share, and (10) The issuer has at least $5 million of capital, surplus, and undivided profits. (e) Requirements for continued inclusion on List of OTC Margin Stocks. Except as provided in subparagraph (4) of section 221.3(d), OTC margin stock shall meet the requirements that: (l)The stock continues to be subject to regis tration under section 12(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 787(g)(1)), or if issued by an insurance company such issuer con 9A s defined in 15 U.S.C. 78c(a)(16). Printed in New York tinues to be subject to section 12(g)(2XG) (15 U.S.C. 78/(g)(2)(G)) and to have at least $1 million of capital and surplus, or if issued by a closed-end investment management company such issuer con tinues to be subject to registration pursuant to section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8). (2) Three 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 Com mission from registration as a national securities exchange pursuant to section 5 of the Securities Exchange Act of 1934 (15 U.S.C. 78e), (3) There continue to be 800 or more holders of record, as defined in SEC Rule 12g5-1 (17 C.F.R. 240.12g5-1), of the stock who are not officers, directors, or beneficial owners of 10 per cent or more of the stock, or the average daily trading volume of such stock, as determined by the Board, is at least 300 shares, (4) The issuer continues to be a U.S. corpora tion, (5) Daily quotations for both bid and asked prices for the stock are continuously available to the general public, and (6) There are 300,000 or more shares of such stock outstanding in addition to shares held bene ficially by officers, directors, or beneficial owners of more than 10 per cent of the stock; and shall meet two of the three additional requirements that; (7) The shares described in subparagraph (6) of this paragraph continue to have a market value of at least $2.5 million, (8) The minimum average bid price of such stock, as determined by the Board, is at least $3 per share, and (9) The issuer continues to have at least $2.5 million of capital, surplus, and undivided profits. (0 Minimum equity ratio. The minimum equity ratio of a credit subject to section 221.1 is 30 per cent. For the period November 5, 1974, through November 2, 1975, all same-day transactions per mitted by section 221.1(c) for credits in which the equity ratio is equal to or exceeds the minimum equity ratio shall also be permitted for those cred its in which the equity ratio is less than the mini mum equity ratio. Summary o f Changes to PTC Margin St oc k I n i t i a l L i s t i n g Requirements a / P r e v io u s L i s t i n g Requirements New L i s t i n g Requirements ( 1 ) Stock i s r e g i s t e r e d under the S e c u r i t i e s Exchange Act o f 1934 ( 1 ) Same ( 2 ) S t o c k has 5 market makers ( 2 ) St o c k has 4 market makers ( 3 ) St oc k has 1200 p u b l i c h o l d e r s o f reco rd ( 3 ) Same, or has a v e r a g e d a i l y volume o f 500 s h a r e s (4) ( 4 ) Same I s s u e r i s U.S. Cor po r a tio n in e x i s t e n c e f o r at l e a s t 3 ye a r s ( 3 ) St oc k p u b l i c l y traded for at l e a s t 6 months ( 5 ) Same ( 6 ) St oc k p r i c e s are c o n t i n u o u s l y a v a i l a b l e to the p u b l i c ( 6 ) Same (7) 500,000 p u b lic ly held shares ( 7 ) Same ( 8 ) St oc k has market v a l u e o f $3 m i l l i o n ( 8 ) Same ( 9 ) S t oc k has a ve r ag e p r i c e o f $10 per sh ar e ( 9 ) St o c k has a v e r a g e p r i c e o f $5 per shar e ( 1 0) I s s u e r has a t l e a s t $5 m i l l i o n o f c a p i t a l , s u r p l u s and un d iv id e d p r o f i t s ( 1 0 ) Same a / A l l o f the f i r s t seven r e q u i re m en ts must be s a t i s f i e d , but o n l y two o f the f i n a l t h r e e r e q u i re m en ts must be met. [Enc. Cir. No. 7928] r Summary o f Changes t o PTC Margin St oc k Continued L i s t i n g Requirements a / P r e v io u s Continued L i s t i n g Requirements New Continued L i s t i n g Requirements ( 1 ) Stock i s r e g i s t e r e d under t h e S e c u r i t i e s Exchange Act o f 1934 ( 1 ) Same ( 2 ) St ock has 3 market makers ( 2 ) Same ( 3 ) St o c k has 800 p u b l i c h o l d e r s o f record ( 3 ) Same, or has av e r a g e d a i l y volume o f 300 s h a r e s b/ ( 4 ) I s s u e r i s U.S. Co r po r a tio n ( 4 ) Same ( 5 ) St oc k p r i c e s are c o n t i n u o u s l y a v a i l a b l e to the p u b l i c ( 5 ) Same (6) 300,00 p u b li c ly held shares ( 6 ) Same ( 7 ) S t o c k has market v a l u e o f $2 .5 m i l l i o n ( 7 ) Same ( 8 ) St oc k has a ve r ag e p r i c e o f $5 per sh ar e ( 8 ) S t o c k has a v e r a g e p r i c e o f $3 per share ( 9 ) I s s u e r has a t l e a s t $ 2 . 5 m illio n o f c a p it a l, surplus, and u n d iv i d e d p r o f i t s ( 9 ) Same a/ A l l o f th e f i r s t s i x r e q u i r e m e n ts must be s a t i s f i e d , but o n l y two o f th e f i n a l t h r e e re q u ir e m en ts must be met. [Enc. Cir. No. 79 28]
@FedFRASER