Margin Requirements
1999 Letters
- December 16, 1999
- To Mr. Steven Lofchie concerning the "pre-borrowing" of securities under Regulation T. Board staff believes that a creditor who anticipates the need for a security more than three days in advance of trade date may pay a commitment fee, as an alternative to pre-borrowing, without violating section 220.10 of Regulation T (12 CFR 220).
- October 26, 1999
- To Ms. Liza Diaz concerning the application of the Board's margin
regulations to an insurance company. Although an insurance company that
sells variable-annuity contracts or conducts a general securities business
is subject to Regulation T (12 CFR 220), in connection with these activities,
Board staff believes that the "conventional lending practices" of such
an insurance company should be subject to Regulation U (12 CFR 221).
- October 22, 1999
- To Mr. Steven Fredman concerning the application of Regulation X,
12 CFR 224, to an offshore limited partnership ("Master Fund"),
which invests in securities and other financial instruments both inside
and outside the United States, with profits and losses flowing to two
funds -- the Domestic Fund (a U.S. limited partnership) and the Offshore
Fund (a foreign corporation that is 31 percent owned by U.S. persons).
The Offshore Fund receives 65 percent of the Master Fund's profits and
losses, and the Domestic Fund receives the remaining 35 percent. The
Master Fund is a "foreign person controlled by a United States
person" as defined in 12 CFR 224.2(c), because the beneficial interest
of the Master Fund held by U.S. persons, taking into account the Domestic
Fund and the Offshore Fund, exceeds 50 percent.
- February 18, 1999
- To Mr. Robert Cappola concerning a customer who sells a fully-paid
security in a cash account that holds no cash and purchases another
security of equal value on the same day. The transaction is impermissible
if the cash account is subject to the 90-day freeze provision of section
220.8(c), because the customer does not have sufficient funds in the
account on trade date and section 220.8(c) does not permit delay of
payment beyond trade date.
- February 4, 1999
- To the Nasdaq-Amex Market Group, concerning the treatment of nine
Select Sector SPDR Funds under Regulation T, 12 CFR 220. The margin
treatment for the Funds will be the same under Regulation T as SPDRs
and DIAMONDs, i.e., the Shares are equity securities that qualify as
"margin securities" under section 220.2.
- February 3, 1999
- To the Nasdaq-Amex Market Group, concerning treatment of Nasdaq-100 Shares under Regulation T, 12 CFR 220. The Shares will be treated the same under Regulation T as SPDRs and DIAMONDs, i.e., the Shares are equity securities that qualify as "margin securities" under section 220.2.