Full text of Federal Reserve Bank of New York Circulars : Regulation U

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1
v

FEDERAL RESERVE BANK
OF NEW YORK

Qa

a

.

December 6, 1976

REGULATION U
Additional Changes in Revised F.R. Form U -l
To All Banks, and Others Concerned,
in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System has adopted further changes in its revised
Federal Reserve Form U-l entitled “Statement of Purpose of a Stock-Secured Extension of Credit by a
Bank.” Enclosed is a copy of the new form, which is effective January 1, 1977, and which should be repro­
duced as needed. A limited number of additional copies of the form are available upon request from our
Securities Regulations Division.
Printed below is the text of the Board’s Order announcing the adoption of the revised form. Any
questions regarding this matter may be directed to the Securities Regulations Division of our Bank Regu­
lations Department.
P A U L A. VOLCKER,

President.

[Reg. U]
P A R T 221— C R E D IT BY B A N K S FO R TH E P U R P O SE O F P U R C H A SIN G
OR C A R R Y IN G M A R G IN STO CK S

(Docket No. R-0026)
N otice o f Further R evisions to R evised Form U*1

On June 11, 1976, notice was published in the
Federal Register (41 F.R. 23667) that the Board of
Governors had adopted a revised Federal Reserve Form
U-l, “Statement of Purpose of a Stock-Secured Exten­
sion of Credit by a Bank,” to be effective September 1,
1976. In order to review certain operational questions
that were raised in connection with the use of such
revised Federal Reserve Form U-l, the Board postponed
the effective date of the revised form until January 1,
1977 (41 F.R. 35477 and 41 F.R. 48335). The Board has
reviewed the questions presented and believes that
further amendments to the revised form, particularly
with regard to the officer’s certification on Part II of the
form, are warranted. Accordingly, the Board has further
revised the form, effective January 1, 1977.1
In addition to certain clarifying technical changes
in the language of the officer’s certification, the
1 A c o p y o f th e o r ig in a l F e d e r a l R e se r v e F o r m U - l is file d as a p a r t o f
th e o r ig in a l d o c u m e n t . C o p ie s a r e a v a ila b le o n r e q u e s t fr o m

th e

B o a r d o f G o v e r n o r s o f th e F e d e r a l R e se r v e S y s te m or a n y F e d e r a l
R e se r v e B a n k




principal purposes of the amendment are (i) to clarify
that the bank officer signing the form may, in good
faith, rely upon other bank employees to examine and
validate the securities, and (ii) to restrict the examina­
tion and validation requirements only to securities that
are or will be in the physical possession of the bank.
In adopting further revisions to the Form U-l, the
Board announced that any banks that have reproduced
copies of the earlier version of the Form U-l that was to
have become effective September 1, 1976, may continue
to use such earlier version until their supply of such
forms is exhausted or until December 31, 1977, which­
ever shall occur sooner, and that for this interim period,
the earlier version shall be deemed to meet the require­
ments of section 221.3(a) of Regulation U (12 CFR
221.3(a)).

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B O A R D O F G O V E R N O R S O F TH E F E D E R A L R E S E R V E SY ST E M
ST A T E M E N T O F P U R PO SE O F A ST O C K -SE C U R E D E X T E N S IO N O F C R E D IT BY

(N a m e o f B a n k )

(F E D E R A L R E S E R V E F O R M U - l )
A F A L S E O R D IS H O N E S T S T A T E M E N T ON T H IS F O R M M A Y BE P U N IS H A B L E B Y F IN E O R IM P R IS O N M E N T (U S . C O D E ,
T IT L E 1 5 , S E C T IO N 7 8 f f A N D T IT L E 18 . S E C T IO N S 1 0 0 1 , 1 0 0 5 A N D 1 0 1 4 ) . A B O R R O W E R W H O F A L S E L Y C E R T IF IE S
THE PUR PO SE

OF

A C R E D IT

ON

T H IS

FO R M O R O T H E R W IS E W IL L F U L L Y O R IN T E N T I O N A L L Y E V A D E S T H E

P R O V IS IO N S O F R E G U L A T IO N U W ILL A L S O V IO L A T E F E D E R A L R E S E R V E R E G U L A T IO N X , “ R U L E S G O V E R N IN G
B O R R O W E R S WHO O B T A IN S E C U R IT IE S C R E D IT ” .
In stru ctio n s:

(1) Section 221.3(a) of Regulation U requires that a statement of purpose must be obtained in connection with any extension of
credit by a bank secured directly o r indirectly by any stock. The term “stock” is defined in section 221.3(0 and includes any
security commonly known as a stock; any voting trust certificate and any security convertible, with or without consideration,
into such security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right.
(2) Part I (3) and (4) need be filled in only if the purpose of the credit described in Part I (I) is other than to purchase or carry
margin stock. The term “margin stock” is defined in section 221.3(v) and generally means (1) stocks that are registered on a
national securities exchange and stocks that are on the Federal Reserve Board’s List of OTC Margin Stocks, (2) debt securities
(bonds) that are convertible into such stocks and (3) shares of most mutual funds.
(3) Part (I “Date and source of valuation” need be filled in only if such source is other than regularly published information in a
journal of general circulation.
(4) Part 11, except for the certification by the officer of the bank, need not be completed in the case of a credit of $5,000 or less
which is not for the purpose of purchasing or carrying margin stock. However, in such cases, Part I must be completed.
(5) Please print or type (if space is inadequate attach separate sheet),

PART I To be c o m p le te d b y b o rro w e r(s)
NO

(1) Is this credit in the amount of $...... .......... or any part thereof, for the purpose of
purchasing or carrying margin stock?
i
If “no”, describe the specific purpose...........................................

LJ

□

(2) In addition to this credit, do you have any other outstanding credit that has been extended by
this bank, or has this bank agreed to extend additional credit to you?

□

□

(3) Is any of the collateral listed in tables (1) and (2) of Part II to be delivered, or has any
such collateral been delivered, from a bank, broker, dealer or person other than you?

□

□

□

Q

□

□

If “yes”,from w h o m ? ............................ ...

Against payment todeliverer?

(4) Has any of the collateral listed in Part II been owned less than 30 days?
T he undersigned has (h ave) read th is
the best o f m y (o u r) k n o w le d g e and
F urtherm ore, to th e b est o f m y (ou r)
uine, unaltered, and n o t sto le n , forged

form and any a tta c h m e n ts th ereto and h e reb y c e r tifie s and affirm s that to
b elief the in fo rm a tio n c o n ta in e d th erein is tru e, a ccu rate and c o m p le te .
k n ow led ge, the secu rities listed as co lla tera l in Part II are a u th e n tic , g en ­
or co u n terfeit.

SIG N E D ...............................................................................................

S IG N E D ............................................................. ....................................

(Borrower’s signature)

(Borrower’s signature)




(Date)

(P rin t or ty p e n a m e)

(Date)

(P r in t o r t y p e n a m e )

T H IS FORM SH O ULD NOT BE SIG N E D IN BLANK

i

*

PART II To be completed by bonk
(1) C ollateral consisting of sto ck , o th er th an d e b t secu rities c o n v e r tib le in to m argin sto c k . T h e m a x im u m loan
valu e of su ch s to c k under the current S u p p lem en t to R eg u la tio n U is .............per ce n t o f its current m ark et value.
Total market value
per issue

Date and source of
valuation

Market price
per share

Issue

No. of shares

(2) C ollateral c o n sistin g o f d eb t secu rities co n v ertib le in to m argin s to c k . T h e m a x im u m loan v alu e o f su ch
d e b t se c u r itie s u n d er the current S u p p lem en t to R e g u la tio n U is.............per c e n t o f th e current m ark et value.
Principal
amount

Issue

Market price

Date and source of
valuation

Total market value
per issue

Market price

Source of valuation

Good faith
loan value

(3) O th er co lla tera l.
Describe briefly

■

The undersigned,

a duly

authorized

stock-secured

credit may be

subject

(ii)

this

any

has

read

form and

to

officer of
the

credit

attachments

the bank,

(i)

restrictions

thereto,

( iii)

is a w a r e

that

this

of R e g u l a t i o n U ,

has

accepted

the customer's

s t a t e m e n t i n P a r t I i n g o o d f a i t h as r e q u i r e d b y R e g u l a t i o n U * , a n d (iv) h e r e b y c e r t i ­
f i e s a n d a f f i r m s t h a t , to t h e b e s t o f t h e o f f i c e r ' s k n o w l e d g e a n d b e l i e f , a l l the
i n f o r m a t i o n c o n t a i n e d h e r e i n is
d e s c r i b e d a b o v e in tables 1 and
physically
s h e (a)
formed

delivered

to

true, a c c u r a t e and c o m p l e t e .
If any of the
2 that directly secure the credit have b e e n

the b a n k , the u n d e r s i g n e d

officer

has examined, or w ill examine, the ph y s i c a l
or w i l l perform, such v a l i d a t i o n procedures

further certifies

securities
or wil l be
that he

a s p e c t s of such s e c u r i t i e s and
as a r e r e q u i r e d b y b a n k p o l i c y

or
per­
an d

g o v e r n m e n t r e g u l a t i o n s p r o m u l g a t e d u n d e r s e c t i o n 1 7(f) o f t h e S e c u r i t i e s E x c h a n g e A c t
o f 1 9 3 4 , as a m e n d e d , o r h a s b e e n i n f o r m e d t h a t a n o t h e r e m p l o y e e o f t h e b a n k h a s p e r f o r m e d
or will

perform

such

functions,

(b)

if

r e g i s t e r e d in the n a m e of the b o r r o w e r
o f t h e r e g i s t e r e d o w n e r to p l e d g e s u c h
the

o f f i c e r '8 k n o w l e d g e

forged

and

their

and b e l i e f

that

faces h a v e not b e e n

Date

any

of

such

securities

o r i ts n o m i n e e , h a s
s e c u r i t i e s , a n d (c)
such

securities

are

are not

or will not be

e x a m i n e d the w r i t t e n cons e n t
is s a t i s f i e d t o t h e b e s t of
genuine

and n o t

stolen

or

altered.

SIGNED
(Bank officer’i signature)
(Title)

(Print or type name)

•To accept this statement in good faith, the officer o f the bank (1) must be aiert to the circumstances surrounding the credit and
(2) if the officer has any information which would cause a prudent person not to accept the statement without inquiry, must have
investigated and be satisfied that the statement is truthful. Among the facts which would require such investigation are receipt of
the statement through the mail or from a third party.

THIS FORM MUST BE RETAINED BY THE BANK FOR AT LEAST THREE YEARS
AFTER THE CREDIT IS EXTINGUISHED