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October 26, 1999

Liza G. Diaz, Esq.
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603-4080

Dear Ms. Diaz:

This is in response to your letter of October 21, 1999, concerning the application of the Board's margin regulations to an insurance company.

Prior to July 1, 1996, section 220.3(i) of Regulation T provided that any insurance company that sold variable annuity contracts or conducted a general securities business (and was therefore subject to registration as a broker-dealer with the Securities and Exchange Commission) was subject to Regulation T only for transactions in connection with those activities. "Conventional lending practices" of the insurance company were subject to Regulation G.

In 1995 and 1996, the Board proposed to delete and subsequently deleted section 220.3(i), stating that "no substantive change is intended." In addition, Regulation G was incorporated into Regulation U in 1998.

We understand that your client is an insurance company that sells variable annuity contracts. In light of the Board's action, Board staff believes it is most appropriate to treat the conventional lending practices of your client as subject to Regulation U.

Yours truly,

(Signed) Scott Holz

Scott Holz

Senior Counsel

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1999 Margin Requirements