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.