Full text of Federal Reserve Bank of New York Circulars : Amendments to Regulations G, T, and U

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0. L.yu- fas-tr
March 8, 1982

To the Addressee:

Enclosed are copies of two pamphlets containing a consolidatipn
of all outstanding amendments and supplements to Regulations G, T, and U
of the Board of Governors of the Federal Reserve System.
Additional copies of the enclosures will be furnished upon
request.


http://fraser.stlouisfed.org/
Federal Reserve
Bank of St. Louis
_____________________

Circulars Division
FEDERAL RESERVE BANK OF NEW YO^K

___

_

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

AMENDMENTS TO REGULATIONS G, T, AND U
SECURITIES CREDIT BY PERSONS OTHER THAN BANKS, BROKERS,
OR DEALERS
AMENDMENTS TO REGULATION G +

SECTION 207.2 — DEFINITIONS

E ffectiv e February 15, 1982, section 207.1 (h) and (i)
are am ended by rem ovin g ex istin g (h) and (i), and replac­

*

ing them with n ew paragraphs (h) and (i) to read as

*

*

*

*

fo llo w s:
(i) Indirectly secured. T he term “indirectly secu red ”

SECTION 207.1 — GENERAL RULE

in clu d es any arrangem ent with the cu stom er under w hich
the cu stom er's right or ab ility to se ll, p led g e, or otherw ise
d isp o se o f margin secu rities ow n ed by the cu stom er is in
any w ay restricted as lon g as the credit rem ains outstand­

(h) Purpose and nonpurpose credit extended to the

same customer.

ing or under w h ich the ex erc ise o f such right is or m ay be
cau se for acceleration o f the m aturity o f the credit.

(1) T he lender shall identify all the collateral used to

The foregoin g shall not apply:

m eet the requirem ents o f § 2 0 7 .1 (c) (the entire credit

(1 ) if, fo llo w in g ap plication o f the proceeds o f the

being con sid ered a sin g le credit and collateral being sim i­

credit, not m ore than 25 percent o f the valu e o f the assets

larly co n sid ered ) and shall not can cel the id en tification o f

subject to the arrangem ent, as determ ined by any reason­

any portion th ereof ex cep t in circu m stan ces that would

able m eth od , are m argin securities;

permit the w ithdraw al o f that portion. Such identification
m ay be m ade by any reasonable m ethod.

(2 ) to a lending arrangem ent that perm its accelera­
tion o f the m aturity o f the credit as a result o f a default

(2) For any credit exten d ed to the sam e cu stom er

under, or the renegotiation o f the term s o f, another credit

that is not subject to § 207.1 (c) the lender shall in good

to the sam e cu stom er by another lender that is not an

faith require as m uch collateral not so identified as w ould

affiliate* o f the G -lender; or

be required (if any) if the lender held neither the indebt­

(3 ) if the margin secu rities are held by the lender

ed n ess subject to §.207.1 (c) nor the identified collateral.

on ly in the cap acity o f cu stod ian , d ep ositary, or trustee,

(i) Purpose credit secured by margin securities and
other collateral. A lender m ay exten d credit for the

or under sim ilar circu m stan ces, and the lender in good

purpose o f purchasing or carrying margin secu rities s e ­

eral in the ex ten sio n or m aintenance o f the particular

cured by collateral other than margin secu rities, and, in

credit.

faith has not relied upon such margin secu rities as co lla t­

the case o f such credit, the m axim um loan value o f the
collateral shall be as determ ined by the lender in good
faith.
E ffective February 15. 1982, section 2 0 7 .2 (i) is re­
vised to read as fo llo w s:




* For this purpose the term "affiliate" shall mean a person that directly. or
indirectly through one or more intermediaries, controls, or is controlled
by. or is under common control with the lender

t The complete Regulation is comprised of:
1) Regulation G, as amended effective June 1, 1977, printed
in the pamphlet “ Securities Credit Transactions.”
2) The Supplement to Regulation G (section 207.5) dated
February 1982.
3) This amendment.

FEBRUARY 1982

CREDIT BY BROKERS AND DEALERS
AMENDMENTS TO REGULATION T t

E ffectiv e N o v em b er 3 ,
am ended;

and effe ctiv e

1980,
O ctober

section
30,

2 2 0 .2 (f)

1978,

is

S ection 2 2 0 .3 (e ) is am ended by d eletin g the w ords “5-

section

day period” and substituting therefor for words “7-day

2 2 0 .2 ( f ) ( i) ( l) , (2) and (3) are revised as follow s:

period”;

SECTION 220.2 — DEFINITIONS

S ection 2 2 0 .3 (f) is revised to read as follow s:

* * * * *

SECTION 220.3 — GENERAL ACCOUNTS

(f) The term “m argin secu rity” m eans any registered

*

secu rity, O TC m argin sto ck , O T C m argin bond, or any
(f)

security issu ed by an op en -en d investm ent com p any or

*

*

Extensions of time.

*

*

If an appropriate com m ittee

o f a national secu rities exch an ge or a national securities

unit investm ent trust registered under section 8 o f the

association is satisfied that the creditor is acting in good

Investm ent C om p any A ct o f 1940 (15 U .S .C . 80a-8).

faith in m aking the ap p lication , and that excep tion al cir­
cu m stan ces warrant such action , such com m ittee may

* * * * *

extend the 7-day period sp ecified in paragraph (b) o f this
section for one or more lim ited periods com m ensurate

(i)

T he term “O T C m argin bon d ” m eans a debt secu ri­

with the circu m stan ces. A p p lication s should be filed and

ty not traded on a national secu rities exch an ge w hich

acted upon prior to the end o f the 7-day period or the

m eets all o f the fo llo w in g requirem ents:

expiration o f any subsequent exten sion . H ow ever, an

(1 ) At the tim e o f the ex ten sio n o f credit, a principal

application m ay be accep ted as tim ely filed from firms

am ount o f not less than $ 2 5 ,0 0 0 ,0 0 0 o f the issu e is out­

having no direct electron ic a ccess to the exch an ge or

standing.

association if it is postm arked no later than m idnight o f

(2 ) T he issu e w as registered under section 5 o f the

the last day o f the 7-day period or any subsequent

S ecu rities A ct o f 1933 and the issuer either files periodic

exten sion .

reports pursuant to section 13(a) or 15(d) o f the S ecu ri­
ties E xchan ge A ct o f 1934 or is an insurance com pany
S ection 2 2 0 .3 (g )(3 ) is am ended by d eletin g the figure

w h ich m eets all o f the con d ition s sp ecified in section

" $ 1 0 0 ” and substituting therefor the figure " $ 5 0 0 ” ;

12 (g )(2 )(G ) o f the A ct.
(3 ) At the tim e o f the ex ten sio n o f credit, the cred i­

E ffective June 2 , 1980. section s 2 2 0 .4 (c )(6 ) and (7) are

tor has a reasonable basis for b eliev in g that the issuer is

am ended; effe ctiv e July 12, 1978, section 2 2 0 .4 (f)(2 ) is

not in default on interest or principal paym ents.

am ended; effe ctiv e A ugust 11, 1980, section 2 2 0 .4 (g ) is
am ended; effe ctiv e June 2 , 1980, section 2 2 0 .4 (h )(2 ) is
E ffectiv e June 2 , 1980, sectio n s 2 2 0 .3(b)( 1 )(i) and (ii);

am ended;

2 2 0 .3 (e ); 2 2 0 .3 (f) and 2 2 0 .3 ( g )( 3 ) are am ended to read

and

effe ctiv e

O ctober

26,

1981,

section

2 2 0 .4 (i) is am ended to read as fo llo w s:

as fo llo w s:

SECTION 220.4 — SPECIAL ACCOUNTS
*

S ectio n s 2 2 0 .3(b)( 1 )(i) and (ii) are am ended by d elet­
(c)

ing the w ords “5 full b u sin ess d a y s” and substituting

★

therefor the w ords “7 full b u sin ess d a y s” ;




*

*

*

*

*

*

Special cash account.
*

*

+ The complete Regulation comprises:
1) Regulation T, as amended effective June 1, 1977, printed in the pamphlet
“Securities Credit Transactions."
2) The Supplement to Regulation T (section 220.8) dated February 1982.
3) These amendments.

2

(6) If an appropriate co m m ittee o f a national secu ri­

lender apart from the subordinated loan , that the loan w ill

ties ex ch a n g e or a national secu rities association is satis­

not be used to increase the am ount o f d ealin g in securities

fied that the creditor is acting in good faith in m aking the

for the account o f the borrow er, his firm or corporation or

ap p lication , that the application relates to a bona fide cash

an affiliated corporation o f such firm or corporation.

transaction, and that excep tion al circu m stan ces warrant

* * * * *

such a ction , such com m ittee (i) m ay extend any period
sp ecified in subparagraphs (2 ), (3 ), (4 ), or (5) o f this

(g) Specialist’s Account. (1 ) Applicability. In a sp e­

paragraph for on e or m ore lim ited periods com m ensurate

c ia list’s accou n t, a creditor m ay clear and finan ce for a

with the circu m sta n ces, or (ii). in case a security pur­

sp ecialist w h o is a m em ber o f a national secu rities e x ­

chased by the cu stom er in the sp ecial cash account is a

change the m em b er's sp ecialist transactions or transac­

m argin or exem p ted secu rity, m ay authorize the transfer

tions o f any joint account in w hich all participants, or all

o f the transactions to a general account special bond

participants other than the creditor, are registered and act

accou n t, sp ecial co n vertib le security accou n t, or special

as sp ecia lists. The p rovision s o f this su b section are a v a il­

om nibus accou n t, and the com p letion o f such transaction

able to a sp ecialist w h o is a m em ber o f a national secu ri­

pursuant to the p rovision s o f this part relating to such an

ties exch an ge w h ich subm its to the Board o f G overnors

account. A p p lication s under (i) ab ove should be filed and

o f the Federal R eserve S ystem reports suitable for su p ­

acted upon prior to the end o f the 7-day period or the

p lyin g current inform ation regarding the use o f sp ecialist

expiration o f any subsequent ex ten sio n . H ow ever, an

credit.

ap plication m ay be accep ted as tim ely filed from firm s

(2) Definitions. For the purpose o f this subsection:

h aving no direct electron ic a ccess to the exch an ge or

(i) “Joint account" m eans an account in w hich

association if it is postm arked no later than m idnight o f

the creditor m ay participate and w hich by written agree­

the last day o f the 7-day period or any subsequent

ment perm its the co m m in g lin g o f the security p osition s

ex ten sio n .

o f the participants and provides for a sharing o f profits
and lo sses from the account on som e

S ection 2 2 0 .4 (c )(7 ) is am ended by d eleting the figure

predeterm ined

ratio;

“$ 1 0 0 ” and substituting therefor the figure " $ 500” .

(ii) “U n d erlyin g secu rity” m eans the security
w h ich w ill be d elivered upon exercise o f the option and
d oes not include a security con vertib le into the underly­

* * * * *

ing security;
(iii) “O verlyin g op tion ” m eans (A ) a put option
purchased or a call option written against an existin g long

(f) * * *

position in a sp ec ia list's or m arket-m aker’s accou n t, or

(]) * * *

(B ) a call option purchased or a put option written against
a short p osition

(2)

***

(ii)

in a sp ec ia list's or m arket-m aker’s

account.
(iv ) “ In or at the m oney," with respect to a call

— Extend and m aintain a subordinated loan

to another creditor for capital purposes: Provided, That

op tion , indicates that the current market price o f the un­

(a) Either the lender or the borrower is a firm or corp o­

derlyin g security is not more than one standard exercise

ration w hich is a m em ber o f a national securities e x ­

interval b elow the ex erc ise price o f the op tion , and, with

ch an ge or national secu rities asso cia tio n , the other party

respect to a put op tion , that the current market price o f the

to the credit is an affiliated corporation o f such firm or

underlying security is not more than one standard ex er­

corporation, the credit is not in contravention o f any rule

cise interval ab ove the ex ercise price o f the option.

o f the ex ch a n g e or association and the credit has the

(v) “ In the m o n e y ,” with respect to a call op tion ,

approval o f appropriate com m ittees o f the exch an ge or

indicates that the current market price o f the underlying

a sso cia tio n , or

security is not b elow the ex ercise price o f the option and,

(b) T he lender as w ell as the borrower is a creditor as

with respect to a put op tion , that the current market price

defined in section 2 2 0 .2 (b ), the subordinated loan agree­

o f the underlying security is not above the exercise price

ment has the approval o f the appropriate E xam ining A u ­

o f the op tion .

thority as d efin ed in S ecu rities and E xchan ge C o m ­

(3 ) Permitted offset positions. A sp ecialist in o p ­

m ission R ule 15 c 3 - 1(c)( 12) (12 CFR 2 4 0 .1 5 c 3 - 1(c)( 12))

tions is perm itted to estab lish in this account on a share -

and such E xam ining Authority is satisfied , in the case o f

for-share b asis a lon g or short p osition in the secu rities

a borrower w h o w ou ld be con sid ered a cu stom er o f the

underlying the op tion s in w h ich the sp ecialist m akes a




3

t

m arket, and a sp ecialist in secu rities other than op tion s is

sp ecialist or perm itted offset positon p lu s, for a short

perm itted to purchase or write op tion s ov erly in g the se cu ­

p osition in a security other than an op tion , the current

rities in w h ich the sp ecialist m akes a m arket, o n ly under

market value o f the security sold short.

on e or m ore o f the fo llo w in g con d ition s (such p osition s

(6) Additional margin; “free-riding." E xcept as re­

are referred to in this paragraph as “perm itted offset

quired by paragraph (g )(8 ), on any day w hen additional

p o sitio n s”):

margin is required as a result o f transactions in the a c­

(i) T he account h olds a short option position

cou n t, the creditor shall issu e a call for a d ep osit o f cash

w h ich is “ in or at the m o n ey ” and is not offset by a lon g or

or secu rities h avin g loan value and m ay a llow the sp ec ia l­

short option p osition for an equal or greater num ber o f

ist a m axim um o f fiv e full b u sin ess days to m ake a d ep o s­

shares o f the sam e underlying security w h ich is “ in the

it sufficient to m eet the call. T o prevent “free-rid in g” in

m o n ey ” ;
(ii) T he account h old s a lon g option position

the accou n t, a creditor w h o has not obtained this deposit
(and is therefore required to liquidate su fficien t securities

w h ich is “ in or at the m on ey” and is not offset by a lon g or

to m eet the call) is prohibited for a 15 day period from

short option p osition for an equal or greater num ber o f

exten d in g any further credit in the account to finan ce

shares o f the sam e underlying security w h ich is “in the

transactions in secu rities in w h ich the sp ecialist is not

m o n ey ” ;

registered to m ake a m arket. T he acq u isition or liq u id a­

(iii) T he account held a short op tion position

tion o f a perm itted offset p osition shall not be subject to

against w h ich an ex erc ise n otice w as tendered;

this “free-rid in g” p en alty. T he restriction on “free-rid ­

(iv ) The account held a lon g option p osition

ing" shall not apply ot any national secu rities exch an ge

w h ich w as ex ercised ;

adopting a “free-rid in g” rule applicable to sp ecialists

(v ) T he account h olds a net lon g p osition in a

w h ich has been approved by the S ecu rities and E xchan ge

security (other than an op tion ) in w hich the sp ecialist

C om m ission .
(7) Withdrawals. On any day w hen a sp ecialist re­

m akes a market; or,
(v i) The account h old s a net short position in a

quests a withdraw al o f cash or secu rities from the a c­

security (other than an op tion ) in w h ich the sp ecialist

cou n t. the creditor shall com p ute the status o f the account

m akes a market.

for n on -sp ecialist secu rities p osition s in accordance with

(4) Maximum loan value. T he m axim um loan value

the p rovision s o f section 2 2 0 .8 (the S upplem ent to R egu ­

o f secu rities w h ich m ay be used as collateral in the ac­

lation T ), perm itted offset p osition s in accordance with

count shall be:

the p rovision s o f paragraphs (g )(4 )(ii) and (g )(5 )(ii), and
sp ecialist p osition s on a “good faith" b asis. W ithdraw als

(i) N o m ore than 100 per cent o f the current m ar­
ket value o f any lon g p osition in a security in w h ich the

shall be perm itted to the extent that the adjusted debit

sp ecialist m akes a market or a w h o lly -o w n ed margin

balance in the account d oes not ex cee d the m axim um

security;

loan value o f all o f the collateral held in the account after
the w ithdraw al has been m ade.

(ii) 75 per cent o f the current market value o f any

(8) Deficit accounts. On any day w hen the account

underlying security or overlyin g op tion purchased and

w ould liquidate to a d eficit, the creditor shall not extend

held in the account as a perm itted offset position;
(iii) The m axim um loan value prescribed by the

any further credit in the accou n t, and shall issu e a call for

Board in section 2 2 0 .8 (the S upplem ent to R egulation T)

additional cash or collateral, w hich shall be m et by noon

w hen a security purchased and held in the account d oes

o f the fo llo w in g b u sin ess day. In the even t sufficient cash

not qu alify as a sp ecialist or perm itted offset p osition .

or collateral is not d ep osited the creditor shall liquidate

(5) Adjusted debit balance. The am ount to be in­

ex istin g p osition s in the account.

cluded in the adjusted debit balance o f the account shall

* * * * *

be:
(i) N ot less than 100 per cent o f the current mar­

S ection 2 2 0 .4 (h )(2 ) is am ended by d eletin g the w ords

ket value o f either a security sold short or an option

“5 full b u sin ess days" and substituting therefor the w ords

written w here such p osition q u alifies as a sp ecialist

“7 full b u sin ess days".

transaction;

*

(ii) 125 per cent o f the current market value o f
any security sold short or option written and held in the

(i)

account as a perm itted offset P osition;

*

*

*

*

Special bond account.
(1 ) In a special bond account a creditor m ay extend

(iii) The am ount prescribed by the Board in se c ­

and m aintain credit on any exem p ted secu rity, registered

tion 2 2 0 .8 (the S upplem ent to R egulation T ) w hen a

non -eq u ity secu rity, or O TC margin bond. The m axi­

security sold short in the account d oes not qu alify as a

m um loan value o f secu rities held in this account shall be




4

valu e, or other sim ilar m ech an ical m istak e, the creditor

as prescribed from tim e to tim e in § 2 2 0 .8 o f this Fart (the
S upplem ent to R egu lation T ).

shall not be d eem ed gu ilty o f a violation o f this part if
prom ptly after the d isco v ery o f such m istake he takes

(2 ) Put and ca ll o p tion s on exem p ted securities may
be issu ed , endorsed or guaranteed in this account if either

w hatever action m ay be practicable in the circu m stan ces

a security p osition in lieu o f margin (cover) is held in the

to rem edy such m istake.

account or the am ount o f m argin prescribed by the Board

(k) Credit related to portion o f a security. Credit for

from tim e to tim e § 2 2 0 .8 o f this part (the supplem ent to

the purpose o f purchasing or carrying any part o f an

R egulation T ) is included in the adjusted debit balance.

investm ent contract security (for e x a m p le, but not lim ited

(3 ) A security p osition held in the account may

to, the cattle ow n ersh ip portion o f a program to ow n and

serve in lieu o f the m argin required for w riting a call or a

feed cattle, or the con d om in iu m ow n ersh ip part o f a pro­
gram to ow n and rent a unit through a rental pool or

put, if the fo llo w in g con d ition s are met:

oth erw ise) shall be d eem ed to be credit on the entire

(i) For w riting a c a ll, the coverin g long security

security.

p osition shall be valued at no more than the exercise price
o f the call or
(ii) For w riting a put, the am ount o f margin re­
quired for a co v erin g short security p osition shall be

E ffective February 15, 1982, section 2 2 0 .7 (a ) is re­

based on a valu e not less than the ex erc ise price o f the

vised to read as fo llo w s:

put.
(4) A ny security p osition held in the account w hich

SECTION 220.7 — MISCELLANEOUS
PROVISIONS

serves in lieu o f the margin required for a put or a call
shall be u n available to support any other option transac­
tion in the account.
(5 ) The cu stom er m ay either d esign ate at the tim e

(a) Arranging fo r loans by others. A creditor m ay not

the op tion order is entered w h ich security position held in

arrange for the exten sion or m aintenance o f credit to or

the account is to serve in lieu o f the m argin required or

for any cu stom er by any person upon term s and co n d i­

have a standing agreem ent with the creditor as to the

tions other than those upon w hich the creditor m ay h im ­

m ethod to be used for m aking the determ ination on any

s e lf exten d or m aintain under the p rovision s o f this Part,

giv en day.

excep t that this lim itation shall not apply to credit ar­
ranged for a cu stom er w hich d oes not violate Parts 207
*

*

*

*

and 221 o f this Chapter and results so le ly from:

*

(1) investm ent banking se rv ices, provided by the
E ffective July 13, 1 981, section 2 2 0 .6 is am ended by

creditor to the cu stom er, in clu d in g, but not lim ited to

d eleting paragraph (j) in its en tirety, and redesignating
paragraphs

(k)

and

(1)

as

paragraphs

(j)

and

underw ritings, private p lacem en ts, and ad vice and other

(k)

services in con n ection with exch an ge offers, m ergers and

resp ectiv ely .

acq u isition s, ex cep t for underw ritings that in volve the
public distribution o f an equity security with installm ent

SECTION 220.6 — CERTAIN TECHNICAL
DETAILS

or other deferred paym ent p rovision s; or
(2 ) the sale o f non-m argin secu rities with in stall­
m ent or other deferred paym ent p rovision s if the sale is

*

*

*

*

*

exem p ted from the registration requirem ents o f the S ecu ­
rities A ct o f 1933 under section 4 (2 ) or section 4 (6 ) o f the

(j) Innocent mistakes. If any failure to com p ly with

Act (15 U .S .C . § § 7 7 (d )(2 ) and (6 )).

this part results from a m ech an ical m istake m ade in good
faith in ex ecu tin g a transaction, recording, determ in in g,

* * * * *

or ca lcu latin g any lo a n , balance market price or loan




5

■

CREDIT BY BANKS FOR THE PURPOSE OF PURCHASING OR CARRYING
MARGIN STOCKS
AMENDMENTS TO REGULATION U t

E ffectiv e M arch 3 1 , 1 9 8 2 , se ctio n s 2 2 1 .1 (a ), (b) and

subject to the arrangem ent, as d eterm ined by any reason ­

(c); 2 2 1 .3 (a ), (m ). (p ), (q ), (r) (2 ), (s) and (t) (4); 2 2 1 .4

able m eth od , are m argin stock;

(a) and (c) are am en ded by adding the w ord “ m argin"

(2 ) to a len d in g arrangem ent that perm its a ccelera ­

before the w ord “sto ck ” in every p lace that it appears.

tion o f the maturity o f the credit as a result o f a default
under, or the ren egotiation o f the term s o f, another credit

E ffective February

15,

1982,

section

2 2 1 .3 (c )

to the sam e cu stom er by another lender that is not an

is

affiliate* o f the bank; or

am en ded by rev isin g it to read as fo llo w s:

(3) if the m argin stock is held by the bank on ly in the
cap acity o f cu stod ian , d ep ositary, or trustee, or under

SECTION 221.3 — MISCELLANEOUS
PROVISIONS
*

*

*

*

sim ilar circu m sta n ces, and the bank in go o d faith has not
relied upon such m argin stock as collateral in the e x te n ­

*

sion or m ainten an ce o f the particular credit.

* * * * *

(c) Indirectly secured. T he term “indirectly secured"
in clu d es any arrangem ent w ith the cu stom er under w h ich
the cu sto m er’s right or ab ility to s e ll. p led g e, or oth erw ise
d isp o se o f m argin stock o w n ed by the cu stom er is in any
w ay restricted as lon g as the credit rem ains outstanding or
under w h ich the e x erc ise o f such right is or m ay be cau se

*For this purpose the term “affiliate" shall mean a bank holding company
of which the bank is a subsidiary within the meaning of the Bank
Holding Company Act of 1956. as amended, or any other subsidiary of
such bank holding company , or any other corporation, business trust,
association or other similar organization which is an affiliate as defined
in section 2 (b) of the Banking Act of 1933 (12 U.S.C. 221a).

for a cceleration o f the m aturity o f the credit.
T h e fo reg o in g shall not apply:
(1 ) if, fo llo w in g app lication o f the p roceed s o f the
credit, not m ore than 25 percent o f the value o f the assets




+ The complete Regulation is comprised of:
1) Regulation U, as amended effective June 1, 1977,
printed in the pamphlet “ Securities Credit Transactions.”
2) The Supplement to Regulation U (section 221.4) dated
February 1982.
3) These amendments.

6

A

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SUPPLEMENTS TO REGULATIONS G, T, AND U
SUPPLEMENT TO REGULATION G
SECTION 207.5—SUPPLEMENT

U nited States or S tate8 and it, or a p red ecessor in interest,
has been in ex isten ce for at least 3 years,

Maximum loan value of margin securities.

(a)

For

the purpose o f § 2 0 7 .1 , the m axim u m loan valu e o f any

(5) T he stock has been p u b licly traded for at least 6
m onth s,

m argin secu rity, ex cep t con vertib le secu rities subject to

(6) D aily q uotations for both bid and asked prices

§ 2 0 7 .1(d) and any put, call or com b ination thereof, shall

for the stock are con tin u ou sly availab le to the general

be 5 0 per cent o f its current market v a lu e, as determ ined

p u b lic, and

by any reasonable m ethod. N o put, call or com bination

(7) There are 5 0 0 ,0 0 0 or m ore shares o f such stock

thereof shall have any loan value for the purposes o f this

outstanding in addition to shares held b en eficia lly by

part.

officers, directors, or b en eficial ow n ers o f m ore than 10

(b) Maximum loan value of convertible debt securi­

ties subject to §207.1(d). For the purpose o f § 2 0 7 .1 , the
m axim um loan valu e o f any security against w hich credit
is exten d ed pursuant to § 2 0 7 .1(d) shall be 5 0 per cent o f
its current market v a lu e, as determ ined by any reasonable
m ethod.
(c)

per cent o f the stock; and shall m eet tw o o f the three
additional requirem ents that:
(8) The shares d escribed in subparagraph (7) o f this
paragraph have a market valu e o f at least $5 m illion ,
(9) T he m inim um average bid price o f such stock , as
determ ined by the B oard, is at least $5 per share, and

Retention requirement. For the purpose o f

(1 0 ) The issuer had at least $5 m illion o f cap ital,

§ 2 0 7 .1 , in the ca se o f a loan w h ich w ould ex cee d the

surplus, and u ndivided profits.

m axim um loan value o f the collateral fo llo w in g a w ith ­
drawal o f co lla tera l, the “ retention requirem ent” o f a

(e)
Requirements for continued inclusion on list of
OTC margin stocks. E xcept as provided in subpara­

m argin security and o f a security against w h ich credit is

graph (4 ) o f § 2 0 7 .2 (f), such stock shall m eet the require­

exten d ed pursuant to § 2 0 7 .1(d ) shall be 50 per cent o f its

m ents that:

current market v a lu e, as determ ined by any reasonable
m ethod.

under section 12(g)(1) o f the S ecu rities E xchan ge A ct o f

(d) Requirements for inclusion on list of OTC mar­
gin stocks. E xcept as provided in subparagraph (4 ) o f

com p any such issuer con tinu es to be subject to section

(1) The stock con tinu es to be subject to registration
1934 (15 U .S .C . 7 8 /( g ) ( l) ) , or if issu ed by an insurance

§ 2 0 7 .2 (f), such stock shall m eet the requirem ents that:

12(g )(2 )(G ) (15 U .S .C . 7 8 /(g )(2 )(G )) and to have at least

(1) T he stock is subject to registration under se c ­

$1 m illion o f capital and surplus, or if issued by a clo sed -

tion 1 2 (g )(1 ) o f the S ecu rities E xchan ge A ct o f 1934

end investm ent m anagem ent com p any such issuer c o n ­

(15 U .S .C . 7 8 /(g )( 1)), is issu ed by an insurance com p any

tinues to be subject to registration pursuant to section 8 o f

subject to sectio n 1 2(g )(2 )(G ) (15 U .S .C . 7 8 /(g )(2 )(G ))

the Investm ent C om p any A ct o f 1940 (15 U .S .C . 8 0 a -8 ),
(2) Three or m ore dealers stand w illin g to, and do in

that has at least SI m illion o f capital and surplus, or is
issued by a clo sed -en d investm ent m anagem ent com pany

fact, m ake a market in such stock and regularly subm it

subject to registration pursuant to section 8 o f the In vest­

bona fide bids and offers to an autom ated quotations

m ent C om pany A ct o f 1940 (15 U .S .C . 8 0 a -8 ),

system for their ow n accou n ts.

(2) Four or more dealers stand w illin g to. and do in

(3) There continue to be 8 0 0 or m ore holders o f

fact, m ake a market in such stock and regularly subm it

record, as d efined in SEC Rule

bona fide bids and offers to an autom ated quotations

2 4 0 .1 2 g 5 - 1), o f the stock w h o are not o fficers, d irectors,

system for their ow n accou n ts,

or b en eficial ow n ers o f 10 per cent or m ore o f the stock ,

(3) There are 1 ,2 0 0 or m ore holders o f record, as
defined in SEC R ule 12 g 5 - 1 (17 C .F .R . 2 4 0 . 1 2 g 5 - l), o f

1 2 g 5 -l

(17 C .F .R .

or the average d aily trading volu m e o f such sto ck , as
determ ined by the B oard, is at least 3 0 0 shares,

the stock w h o are not o fficers, directors, or b en eficial

(4) T he issuer con tin u es to be a U .S . corporation,

ow n ers o f 10 per cent or m ore o f the stock , or the average

(5) D aily quotations for both bid and asked prices

daily trading v o lu m e o f such stock , as determ ined by the
B oard, is at least 5 0 0 shares,
(4) The issuer is organ ized under the law s o f the




8A s defined

FEBRUARY 1982

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

for the stock are con tin u ou sly availab le to the general

determ ined by the Board, is at least $3 per share, and

p u b lic,

(9)

(6 ) There are 3 0 0 ,0 0 0 or m ore shares o f such stock

T he issuer con tin u es to have at least $ 2 .5 m illion

o f cap ital, surplus, and u ndivided profits.

outstanding in addition to shares held b en eficially by

( 0 Minimum equity ratio. The m inim um equity ratio

o fficers, d irectors, or b en eficial ow n ers o f more than 10

o f a credit subject to § 2 0 7 .1 is zero per cent. For the

per cent o f the stock; and shall m eet tw o o f the three

period N ovem b er 5 , 1974 through N ovem b er 2 , 1975, all

additional requirem ents that:

sam e-d ay substitutions o f collateral perm itted by section

(7 ) The shares describ ed in subparagraph (6) o f this

207.1 (j)(2) for credits in w h ich the eq u ity ratio equals or

paragraph continue to have a market value o f at least $ 2 .5

e x cee d s the m inim um equity ratio shall a lso be perm itted

m illio n ,

for all credits in w h ich the eq u ity ratio is less than the

(8) The m inim um average bid price o f such stock , as




m inim um eq u ity ratio.

2

SUPPLEMENT TO REGULATION T
SECTION 220.8—SUPPLEMENT
(a) Maximum loan value for general accounts. The
maximum loan value o f securities in a general account
subject to § 220.3 shall be:
(1) O f 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
§220.3(c) and paragraphs (b), (c), and (f) of this section),
50 per cent o f the current market value of such securities.
(2) Of an exempted security held in the account on
March 11, 1968, and continuously thereafter, the maxi­
mum loan value o f the security as determined by the
creditor in good faith.
(b) Maximum loan value for a special bond ac­
count. The maximum loan value of an exempted securi­
ty, an OTC margin bond, or a registered nonequity
security which is not a put, call or combination thereof
shall be as determined by the creditor in good faith. No
put, call or combination thereof shall have any loan
value.
(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 § 220.4(j) shall be 50 per cent o f the
current market value of the security.
(d) Margin required for short sales. The amount to
be included in the adjusted debit balance o f a general
account, pursuant to § 220.3(d)(3), as margin required
for short sales of securities (other than exempted securi­
ties) shall be 50 per cent o f the current market value of
each security.
(e) Retention requirement. In the case of an account
which would have an excess of the adjusted debit balance
of the account over the maximum loan value o f the secu­
rities in the account following a withdrawal of cash or
securities from the account, pursuant to § 220.3(b)(2):
(1) The “ retention requirement” of an exempted
security held in the general account on March 11, 1968,
and continuously thereafter, shall be equal to its maxi­
mum loan value as determined by the creditor in good
faith, and the "retention requirement” of a registered
non-equity security held in such account on March 11,
1968, and continuously thereafter, and of a margin secu­
rity, shall be 50 per cent o f the current market value of the
security.
(2) In the case of a special bond account subject to
§220.4(i), the retention requirement of an exempted se­




curity and o f a registered non-equity security shall be
equal to the maximum loan value of the security.
(3) In the case o f a special convertible security ac­
count subject to § 220.4(j) which would have an excess
o f the adjusted debit balance o f the account over the
maximum loan value of the securities in the account
following a withdrawal of cash or securities from the
account, the retention requirement of a security having
loan value in the account shall be 50 per cent of the
current market value of the security.
(4) For the purpose o f effecting a transfer from a
general account to a special convertible security account
subject to § 220.4(j), the retention requirement of a secu­
rity described in § 220.4(j), shall be 50 per cent o f its
current market value.
(f) Securities having no loan value in a general ac­
count. 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 mar­
gin security, shall have any loan value in a general
account except that a margin security eligible for the
special convertible debt security account pursuant to
§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 purposes of
the computation described in § 220.3(b)
(lK u),

(1) The maximum loan value o f a registered non­
equity security held in the account on March 11, 1968,
and continuously thereafter, and o f a margin equity secu­
rity shall be 100 per cent of the current market value of
such security, and the maximum loan value of an exempt­
ed security held in the account on March 11, 1968, and
continuously thereafter shall be the maximum loan value
of the security as determined by the creditor in good
faith.
(2) The amount to be included in the adjusted debit
balance of the account pursuant to § 220.3(d)(3) as mar­
gin required for short sales of securities (other than
exempted securities) shall be zero 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
§§220.3(bX l) and 220.3(g) for accounts not subject to
section 8(g) shall also be permitted in accounts subject to
section 8(g).

(h) Requirements for inclusion on list of OTC mar­
gin stocks. E xcept as provided in subparagraph (4 ) o f

end in vestm en t m anagem en t com p any such issu er c o n ­

§ 2 2 0 .2 (e ), O TC m argin stock shall m eet the requirem ent

the Investm ent C om p any A ct o f 1940 (15 U . S .C . 8 0 a -8 ),

tinues to be subject to registration pursuant to section 8 o f
(2) Three or m ore dealers stand w illin g to, and do in

that:
(1 ) T he stock is subject to registration under se c ­

fact, m ake a market in such stock and regularly subm it

tion 1 2 (g )(1 ) o f the S ecu rities E xchan ge A ct o f 1934

bona fide bids and offers to an autom ated quotations

(15 U .S .C . 7 8 /(g )( 1)), is issu ed by an insurance com p any

system for their ow n accou n ts.

subject to sectio n 12(g )(2 )(G ) (15 U .S .C . 7 8 /(g )(2 )(G ))

(3) There con tinu e to be 8 0 0 or m ore holders

that has at least $1 m illion o f capital and surplus, or is

o f record, as d efin ed in SE C R ule 1 2 g 5 -l (17 C .F .R .

issu ed by a clo sed -en d investm ent m anagem ent com pany

2 4 0 -1 2 g 5 - 1), o f the stock w h o are not o fficer s, directors,

subject to registration pursuant to section 8 o f the In vest­

or b en eficial ow n ers o f 10 per cent or m ore o f the stock ,

m ent C om p any A ct o f 1940 (15 U .S .C . 8 0 a -8 ),

or the average daily trading volu m e o f such sto ck , as
determ ined by the B oard, is at least 3 0 0 shares,

(2) Four or m ore d ealers stand w illin g to, and do in

(4) T he issuer con tin u es to be a U .S . corporation.

fact, m ake a market in such stock and regularly subm it

bona fide bids and offers to an autom ated quotations

(5) D aily q uotations for both bid and asked prices
for the stock are con tin u ou sly availab le to the general

system for their ow n accou n ts.
(3) There are 1 .2 0 0 or m ore holders o f record, as

p u b lic,

d efined in SEC R ule 1 2 g 5 -l ( 1 7 C .F .R . 2 4 0 . 1 2 g 5 - l ), o f

(6 ) There are 3 0 0 ,0 0 0 or m ore shares o f such stock

the stock w h o are not o fficers, directors or b en eficial

outstanding in addition to shares held b en eficia lly by

ow n ers o f 10 per cent or m ore o f the stock , or the average

officers, directors or b en eficial ow n ers o f m ore than 10

daily trading v o lu m e o f such stock , as determ ined by the

per cent o f the stock; and shall m eet tw o o f the three

B oard, is at least 5 0 0 shares.

additional requirem ents that:

(4 ) T he issuer is organ ized under the law s o f the

(7 ) T he shares described in subparagraph (6) o f this

U nited States or a State6 and it. or a p red ecessor in inter­

paragraph con tinu e to have a m arket valu e o f at least $ 2 .5

est, has been in ex isten ce for at least 3 years,

m illio n ,
(8) The m inim u m average bid price o f such stock , as

(5 ) T h e stock has been p u b licly traded for at least 6

determ ined by the B oard, is at least $3 per share, and

m onths.

(9) T he issuer con tin u es to have at least $ 2 .5 m illion

(6) D a ily q uotations for both bid and asked prices

o f cap ital, surplus, and un d ivid ed profits.

for the stock are con tin u ou sly availab le to the general

(j)

p u b lic, and

Margin required for the writing of options.

(7) There are 5 0 0 .0 0 0 or more shares o f such stock

(1) T he am ount to be included in the adjusted debit

outstanding in addition to shares held b en eficia lly by

balance o f a general accou n t, sp ecial bond accou n t, or

o fficers, directors or b en eficial ow n ers o f m ore than 10

special con vertib le debt security account pursuant to

per cent o f the stock; and shall m eet tw o o f the three

paragraphs (d )(5) and (i) o f § 2 2 0 .3 o f this part, as the

additional requirem ents that:

m argin required for the issu an ce, en d orsem en t, or guar­
antee o f any put or call on an eq u ity security shall be 30

(8 ) T he shares describ ed in subparagraph (7) o f this

percent o f the current market valu e o f the underlying

paragraph have a market value o f at least $5 m illion .

security with an adjustm ent for any ap p licab le increase or

(9) The m inim um average bid price o f such stock , as

reduction.

determ ined by the B oard, is at least S5 per share, and

(2 ) T he am ount to be included in the adjusted debit

(1 0 ) T he issuer had at least $5 m illion o f capital,
surplus, and u ndivided profits.

balance o f an account pursuant to § 2 2 0 .4 (i) o f this part as

(i) Requirements for continued inclusion on list of
OTC margin stocks. E xcept as provided in subpara­

the m argin required for the issu a n ce, en d orsem en t, or

graph (4) o f § 2 2 0 .(e ). O TC margin stock shall m eet the

the security p osition to be held in lieu o f m argin shall be

requirem ents that:

eq u ivalen t to (i). T he am ount sp ec ified by the rules o f the

guarantee o f a put or call on an exem p ted debt security or

(1) T he stock con tin u es to be subject to registration

national secu rities exch an ge on w h ich the op tion is traded

under sectio n 12(g)( 1) o f the S ecu rities E xchan ge A ct o f

provided that all such rules have been approved or

1934 (15 U .S .C . 7 8 /(g )( 1)), or if issu ed by an insurance

am ended by the S ecu rities and E xch an ge C o m m ission

com p any such issuer con tin u es to be subject to section

pursuant to section s 19(b) or 19(c) o f the S ecu rities E x ­

1 2 (g )(2 )(G ) (15 U .S .C . 7 8 /(g )(2 )(G )) and to have at least

ch an ge A ct o f 1934, or (ii) in the case o f an op tion on an

$1 m illion o f capital and surplus, or if issu ed by a clo sed -

exem p ted debt security w h ich is not traded on an e x ­
ch an ge an am ount or security p osition w h ich the creditor
in good faith d eem s to be eq u ivalen t to the m argin or the
cover on com parable exch an ge-traded op tion s.

6A s defined in 15 U.S.C. 78c(aX 16)




4

A ____

SUPPLEMENT TO REGULATION U
SECTION 221.4—SUPPLEMENT

United States or a State12 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 beneficially by
officers, directors, or beneficial owners of more than 10
per cent o f the stock; and shall meet two o f 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 had 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 subpara­
graph (4) of § 221.3(d), OTC margin stock shall meet the
requirements that:
(1) The stock continues to be subject to registration
under section 12(g)( 1) o f the Securities Exchange Act of
1934 (15 U .S.C . 78/(g)( 1)), or if issued by an insurance
company such issuer continues to be subject to section
12(g)(2)(G) (15 U .S.C . 78/(g)(2)(G)) and to have at least
$1 million o f capital and surplus, or if issued by a closedend investment management company such issuer con­
tinues to be subject to registration pursuant to section 8 of
the Investment Company Act o f 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 and regularly submit
bona fide bids and offers to an automated quotations
system for their own accounts,
(3) There continue to be 800 or more holders of
record, as defined in SEC Rule 12 g5-1 (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 300 shares,
(4) The issuer continues to be a U.S. corporation,
(5) Daily quotations for both bid and asked prices

(a) Maximum loan value of stocks. For the purpose
of §221.1, the maximum loan value o f any stock except
puts, calls, and combinations thereof, whether or not
registered on a national securities exchange, shall be 50
per cent of its current 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 securi­
ties subject to §221.3(t). For the purpose of §221.3(t),
the maximum loan value of any security against which
credit is extended pursuant to §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
§221.1, in the case of credit which would exceed the
maximum loan value of the collateral following a with­
drawal of collateral, the “ retention requirement” o f a
stock, whether or not registered on a national securities
exchange and of a convertible debt security subject to
§221,3(t), shall be 50 per cent of its current market value,
as determined by any reasonable method.
(d) Requirements for inclusion on list of OTC mar­
gin stocks. Except as provided in subparagraph (4) of
§221.3(d), OTC margin stock shall meet the require­
ments that:
(1) The stock is subject to registration under sec­
tion 12(g)(1) of the Securities Exchange Act of 1934
(15 U .S.C. 78/(g)(l)), is issued by an insurance 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 registration pursuant to section 8 of the Invest­
ment 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 and regularly submit
bona fide bids and offers to an automated quotations
system for their own accounts,
(3) There are 1,200 or more holders of record, as
defined in SEC Rule 12g5-l (17C .F .R . 240 12g5-l), 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 o f such stock, as determined by the
Board, is at least 500 shares,
(4) The issuer is organized under the laws of the




I2As defined in 15 U.S.C 78c(a)(l6).

5

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 beneficially 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) Minimum equity ratio. The minimum equity ratio
o f a credit subject to § 221.1 is zero per cent. For the
period November5, 1974through November 2, 1975, all
same-day transactions permitted 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
credits in which the equity ratio is less than the minimum
equity ratio.

6