C.F.R. » Title 12 » CHAPTER II—FEDERAL RESERVE SYSTEM › SUBCHAPTER A—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM › PART 220—CREDIT BY BROKERS AND DEALERS (REGULATION T)

12 C.F.R. § 220.3

General provisions

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(a) Records. The creditor shall maintain a record for each account showing the full details of all transactions.

(b) Separation of accounts—(1) In general. The requirements of one account may not be met by considering items in any other account. If withdrawals of cash or securities are permitted under this part, written entries shall be made when cash or securities are used for purposes of meeting requirements in another account.

(2) Exceptions. Notwithstanding paragraph (b)(1) of this section:

(i) For purposes of calculating the required margin for a security in a margin account, assets held in the good faith account pursuant to § 220.6(e)(1)(i) or (ii) may serve in lieu of margin;

(ii) Transfers may be effected between the margin account and the special memorandum account pursuant to §§ 220.4 and 220.5.

(c) Maintenance of credit. Except as prohibited by this part, any credit initially extended in compliance with this part may be maintained regardless of:

(1) Reductions in the customer's equity resulting from changes in market prices;

(2) Any security in an account ceasing to be margin or exempted; or

(3) Any change in the margin requirements prescribed under this part.

(d) Guarantee of accounts. No guarantee of a customer's account shall be given any effect for purposes of this part.

(e) Receipt of funds or securities. (1) A creditor, acting in good faith, may accept as immediate payment:

(i) Cash or any check, draft, or order payable on presentation; or

(ii) Any security with sight draft attached.

(2) A creditor may treat a security, check or draft as received upon written notification from another creditor that the specified security, check, or draft has been sent.

(3) Upon notification that a check, draft, or order has been dishonored or when securities have not been received within a reasonable time, the creditor shall take the action required by this part when payment or securities are not received on time.

(4) To temporarily finance a customer's receipt of securities pursuant to an employee benefit plan registered on SEC Form S-8 or the withholding taxes for an employee stock award plan, a creditor may accept, in lieu of the securities, a properly executed exercise notice, where applicable, and instructions to the issuer to deliver the stock to the creditor. Prior to acceptance, the creditor must verify that the issuer will deliver the securities promptly and the customer must designate the account into which the securities are to be deposited.

(f) Exchange of securities. (1) To enable a customer to participate in an offer to exchange securities which is made to all holders of an issue of securities, a creditor may submit for exchange any securities held in a margin account, without regard to the other provisions of this part, provided the consideration received is deposited into the account.

(2) If a nonmargin, nonexempted security is acquired in exchange for a margin security, its retention, withdrawal, or sale within 60 days following its acquisition shall be treated as if the security is a margin security.

(g) Arranging for loans by others. A creditor may arrange for the extension or maintenance of credit to or for any customer by any person, provided the creditor does not willfully arrange credit that violates parts 221 or 224 of this chapter.

(h) Innocent mistakes. If any failure to comply with this part results from a mistake made in good faith in executing a transaction or calculating the amount of margin, the creditor shall not be deemed in violation of this part if, promptly after the discovery of the mistake, the creditor takes appropriate corrective action.

(i) Foreign currency. (1) Freely convertible foreign currency may be treated at its U.S. dollar equivalent, provided the currency is marked-to-market daily.

(2) A creditor may extend credit denominated in any freely convertible foreign currency.

(j) Exempted borrowers. (1) A member of a national securities exchange or a registered broker or dealer that has been in existence for less than one year may meet the definition of exempted borrower based on a six-month period.

(2) Once a member of a national securities exchange or registered broker or dealer ceases to qualify as an exempted borrower, it shall notify its lender of this fact before obtaining additional credit. Any new extensions of credit to such a borrower, including rollovers, renewals, and additional draws on existing lines of credit, are subject to the provisions of this part.

[Reg. T, 63 FR 2822, Jan. 16, 1998]
Notes of Decisions
Cited in 31 cases, 1970–2009 · leading case: Marriott Int'l Resorts, L.P. v. United States, 586 F.3d 962 (Fed. Cir. 2009).
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Marriott Int'l Resorts, L.P. v. United States, 586 F.3d 962 (Fed. Cir. 2009). · cites it 2× “12 C.F.R. § 220.3 (a) (1994). MORI’s short sale transactions were required to be maintained in a margin account.”
Fed. Sec. L. Rep. P 96,786 Edgar C. Fryling & Onie Fryling v. Merrill Lynch, Pierce, Fenner & Smith Inc. & William Roebuck, Defendants, 593 F.2d 736 (6th Cir. 1979). · cites it 5× “12 C.F.R. § 220.3 . Section 3(b), 12 C.F.”
United States v. Naftalin, 441 U.S. 768 (1979). “§§ 78g, 78j (a); 12 CFR §§ 220.3 , 220.4 (c)(ii), 220.8 (d), 224.”
Arthur F. McCormick Individually, & as Tr. of the A. F. & T. R. McCormick Trust v. James v. Esposito, 500 F.2d 620 (5th Cir. 1974). · cites it 4× “The March 11, 1968, requirement applies to registered “nonequity securities” and to “exempted securities,” 12 C.F.R. §§ 220.3 (b)(2)(i), 220.-3(b) (2) (v), 220.”
United States v. Tuff, 359 F. Supp. 2d 1129 (W.D. Wash. 2005). · cites it 2× “Under Regulation T, 12 C.F.R. § 220.3 (e)(4), in lieu of securities a creditor may accept a properly executed exercise notice and instructions to the issuer of the securities to deliver them to the creditor to temporarily finance a customer’s receipt of securities pursuant to an…”
Norman A. Landry v. Hemphill, Noyes & Co., Norman A. Landry v. Hemphill, Noyes & Co., 473 F.2d 365 (1st Cir. 1973). · cites it 2× “12 C.F.R. 220.3(b), (e). 3 . See 12 C.F.R.”
Marriott Int'l Resorts, L.P. v. United States, 83 Fed. Cl. 291 (Fed. Cl. 2008). · cites it 2× “12 C.F.R. § 220.3 (a) (1994). MORI’s short sale transactions were required to be maintained in a margin account.”
United States v. Philip Peltz, 433 F.2d 48 (2d Cir. 1970). “The immediate consequence of the lies was that the brokerage houses did not demand the 70% collateral required by the then applicable regulation of the Federal Reserve Board, 12 C.F.R. § 220.3 , for short sales. As a result the firms were exposed to risk of serious loss when, as…”
H. Glen Leason v. John D. Rosart, 811 F.2d 1322 (9th Cir. 1987). · cites it 2× “Meyers complied with 12 C.F.R. § 220.3 (e) (1982) by liquidating Rosart’s securities for a loss of $24,-062.”
Neill v. David A. Noyes & Co., 416 F. Supp. 78 (N.D. Ill. 1976). “See 12 C.F.R. 220.3(b), (e). The imposition of civil liability for violations of regulations such as Regulation T has been accepted by a number of the nation’s courts.”
Palmer v. Thomson & McKinnon Auchincloss, Inc., 474 F. Supp. 286 (D. Conn. 1979). “10 Following the reasoning of Pearlstein II and Gutter, Thomson was required (under § 3(e) of Regulation T, 12 C.F.R. § 220.3 (e)) to liquidate only those 163 “tainted” shares (the “unsettled” portion of the May 9 transaction).”
Telvest, Inc. v. Bradshaw, 618 F.2d 1029 (4th Cir. 1980). “Regulation T, 12 CFR 220.3(b)(1), provides that payment of cash and delivery of.”
Show all 31 citing cases →
— 12 C.F.R. § 220.3(b) — 2 cases
Norman A. Landry v. Hemphill, Noyes & Co., Norman A. Landry v. Hemphill, Noyes & Co., 473 F.2d 365 (1st Cir. 1973). “12 C.F.R. 220.3(b), (e). 3 . See 12 C.F.R.”
Neill v. David A. Noyes & Co., 416 F. Supp. 78 (N.D. Ill. 1976). “See 12 C.F.R. 220.3(b), (e). The imposition of civil liability for violations of regulations such as Regulation T has been accepted by a number of the nation’s courts.”
— 12 C.F.R. § 220.3(b)(1) — 2 cases
Telvest, Inc. v. Bradshaw, 618 F.2d 1029 (4th Cir. 1980). “Regulation T, 12 CFR 220.3(b)(1), provides that payment of cash and delivery of.”
Fed. Sec. L. Rep. P 97,329 Telvest, Inc., a Delaware Corp. v. Junie L. Bradshaw, Thomas P. Harwood, Preston C. Shannon, Commissioners of the Virginia State Corp. Comm'n Lewis W. Bros., Jr., Dir., Div. of Sec. & Retail Franchising, & Am. Furniture Co., Inc., Intervenor-Defendant. Telvest, Inc., a Delaware Corp. v. Junie L. Bradshaw, Thomas P. Harwood, Preston C. Shannon, Commissioners of the Virginia State Corp. Comm'n Lewis W. Bros., Jr., Dir., Div. of Sec. & Retail Franchising, Appeal of Am. Furniture Co., Inc, 618 F.2d 1029 (4th Cir. 1980).
— 12 C.F.R. § 220.3(f) — 1 case
Lantz v. Wedbush, Noble, Cooke, Inc., 418 F. Supp. 653 (D. Alaska 1976).
— 12 C.F.R. § 220.3(g) — 1 case
Norman A. Landry v. Hemphill, Noyes & Co., Norman A. Landry v. Hemphill, Noyes & Co., 473 F.2d 365 (1st Cir. 1973). “12 C.F.R. 220.3(b), (e). 3 . See 12 C.F.R.”
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