Circular
Margin Regulations G, T, AND U
December 4, 1996
Circular No. 10897

Regulation of Certain Loans to Broker-Dealers;
Interpretation and Proposed Amendments

Comments on Proposal Due December 26

To All Depository Institutions, and Others Concerned, in the Second Federal Reserve District:

The following is from a statement issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has issued an interpretation of its margin regulations (Regulations G, T and U) in response to the enactment of the National Securities Markets Improvement Act of 1996 (the Markets Improvement Act) and requested comment on amendments to its margin regulations to implement the statutory amendments to the Securities Exchange Act of 1934 (the Exchange Act).

The Board's interpretation is effective immediately.

Comment on the amendments is requested by December 26, 1996.

Under the Markets Improvement Act, the Board no longer has the authority to regulate certain loans to registered broker-dealers unless it finds that such rules are necessary or appropriate in the public interest or for the protection of investors.

The interpretation makes clear that the Board has not made such a finding and that provisions in its margin regulations for which the Board no longer has general authority are without effect.

The interpretation also reflects the statutory repeal of section 8(a) of the Exchange Act, as provided by the Markets Improvement Act.

Comment is solicited on amendments to the Board's margin regulations to implement the statutory amendments and further the policies behind their adoption.

A copy of the Board's interpretation, as published in the Federal Register, is available. Additional copies may be obtained from the Public Information Department.

Comments thereon should be submitted by December 26, 1996 and may be sent to the Board, as specified in the notice, or, at this Bank, to HaeRan Kim, Counsel, Legal Department.