Source: https://casetext.com/statute/united-states-code/title-15-commerce-and-trade/chapter-2b-securities-exchanges/section-78g-margin-requirements
Timestamp: 2020-07-04 05:41:19
Document Index: 322710619

Matched Legal Cases: ['§ 78', '§ 78', '§7', '§203', '§301', '§102', '§203', '§104', '§301', '§1', '§206', '§929', '§1', '§206', '§1', '§206', '§1', '§206', '§301', '§301', '§104', '§104', '§1', '§1', '§1', '§401', '§301']

Section 78g - Margin requirements, 15 U.S.C. § 78g | Casetext Search + Citator
Section 78g - Margin requirements
15 U.S.C. § 78g
(a) Rules and regulations for extension of credit; standard for initial extension; undermargined accounts
For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Board of Governors of the Federal Reserve System shall, prior to October 1, 1934, and from time to time thereafter, prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security or a security futures product). For the initial extension of credit, such rules and regulations shall be based upon the following standard: An amount not greater than whichever is the higher of-
(1) 55 per centum of the current market price of the security, or
(2) 100 per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than 75 per centum of the current market price.
It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer-
(A) on any security (other than an exempted security), except as provided in paragraph (2), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System (hereafter in this section referred to as the "Board") shall prescribe under subsections (a) and (b); or
(B) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board may prescribe-
(i) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board; and
(ii) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of subparagraph (A).
(A) Compliance with margin rules required
It shall be unlawful for any broker, dealer, or member of a national securities exchange to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on, any security futures product unless such activities comply with the regulations-
(i) which the Board shall prescribe pursuant to subparagraph (B); or
(ii) if the Board determines to delegate the authority to prescribe such regulations, which the Commission and the Commodity Futures Trading Commission shall jointly prescribe pursuant to subparagraph (B).
(B) Criteria for issuance of rules
The Board shall prescribe, or, if the authority is delegated pursuant to subparagraph (A)(ii), the Commission and the Commodity Futures Trading Commission shall jointly prescribe, such regulations to establish margin requirements, including the establishment of levels of margin (initial and maintenance) for security futures products under such terms, and at such levels, as the Board deems appropriate, or as the Commission and the Commodity Futures Trading Commission jointly deem appropriate-
(i) to preserve the financial integrity of markets trading security futures products;
(ii) to prevent systemic risk;
(iii) to require that-
(I) the margin requirements for a security future product be consistent with the margin requirements for comparable option contracts traded on any exchange registered pursuant to section 78f(a) of this title; and
(II) initial and maintenance margin levels for a security future product not be lower than the lowest level of margin, exclusive of premium, required for any comparable option contract traded on any exchange registered pursuant to section 78f(a) of this title, other than an option on a security future;
(iv) to ensure that the margin requirements (other than levels of margin), including the type, form, and use of collateral for security futures products, are and remain consistent with the requirements established by the Board, pursuant to subparagraphs (A) and (B) of paragraph (1).
This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged by a member of a national securities exchange or a broker or dealer to or for a member of a national securities exchange or a registered broker or dealer-
(A) a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(B) to finance its activities as a market maker or an underwriter;
This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged-
(A) by a person not in the ordinary course of business;
(B) on an exempted security;
(C) to or for a member of a national securities exchange or a registered broker or dealer-
(i) a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(ii) to finance its activities as a market maker or an underwriter;
(D) by a bank on a security other than an equity security; or
(E) as the Board shall, by such rules, regulations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder.
(1) It is unlawful for any United States person, or any foreign person controlled by a United States person or acting on behalf of or in conjunction with such person, to obtain, receive, or enjoy the beneficial use of a loan or other extension of credit from any lender (without regard to whether the lender's office or place of business is in a State or the transaction occurred in whole or in part within a State) for the purpose of (A) purchasing or carrying United States securities, or (B) purchasing or carrying within the United States of any other securities, if, under this section or rules and regulations prescribed thereunder, the loan or other credit transaction is prohibited or would be prohibited if it had been made or the transaction had otherwise occurred in a lender's office or other place of business in a State.
(A) The term "United States person" includes a person which is organized or exists under the laws of any State or, in the case of a natural person, a citizen or resident of the United States; a domestic estate; or a trust in which one or more of the foregoing persons has a cumulative direct or indirect beneficial interest in excess of 50 per centum of the value of the trust.
(B) The term "United States security" means a security (other than an exempted security) issued by a person incorporated under the laws of any State, or whose principal place of business is within a State.
(C) The term "foreign person controlled by a United States person" includes any noncorporate entity in which United States persons directly or indirectly have more than a 50 per centum beneficial interest, and any corporation in which one or more United States persons, directly or indirectly, own stock possessing more than 50 per centum of the total combined voting power of all classes of stock entitled to vote, or more than 50 per centum of the total value of shares of all classes of stock.
(3) The Board of Governors of the Federal Reserve System may, in its discretion and with due regard for the purposes of this section, by rule or regulation exempt any class of United States persons or foreign persons controlled by a United States person from the application of this subsection.
June 6, 1934, ch. 404, title I, §7, 48 Stat. 886; Aug. 23, 1935, ch. 614, §203(a), 49 Stat. 704; Pub. L. 90-437, July 29, 1968, 82 Stat. 452; Pub. L. 91-508, title III, §301(a), Oct. 26, 1970, 84 Stat. 1124; Pub. L. 98-440, title I, §102, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103-325, title II, §203, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104-290, title I, §104(a), Oct. 11, 1996, 110 Stat. 3422; Pub. L. 105-353, title III, §301(b)(5), (6), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 106-554, §1(a)(5) [title II, §206(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A-429; Pub. L. 111-203, title IX, §929, July 21, 2010, 124 Stat. 1852.
AMENDMENTS2010-Subsec. (c)(1)(A). Pub. L. 111-203 substituted "; or" for "; and" at end. 2000-Subsec. (a). Pub. L. 106-554, §1(a)(5) [title II, §206(b)(1)], inserted "or a security futures product" after "exempted security" in introductory provisions. Subsec. (c)(1)(A). Pub. L. 106-554, §1(a)(5) [title II, §206(b)(2)], inserted "except as provided in paragraph (2)," after "security),".Subsec. (c)(2), (3). Pub. L. 106-554, §1(a)(5) [title II, §206(b)(3), (4)], added par. (2) and redesignated former par. (2) as (3). 1998-Subsecs. (a), (b). Pub. L. 105-353, §301(b)(5), substituted "Board of Governors of the Federal Reserve System" for "Federal Reserve Board".Subsec. (d). Pub. L. 105-353, §301(b)(6), substituted "exceptions" for "exception" in heading. 1996-Subsec. (c). Pub. L. 104-290, §104(a)(1), amended heading and text of subsec. (c) generally. Prior to amendment, text read as follows: "It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer- "(1) on any security (other than an exempted security), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System shall prescribe under subsections (a) and (b) of this section;"(2) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe (A) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board of Governors of the Federal Reserve System, and (B) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of paragraph (1) of this subsection."Subsec. (d). Pub. L. 104-290, §104(a)(2), amended heading and text of subsec. (d) generally. Prior to amendment, text read as follows: "It shall be unlawful for any person not subject to subsection (c) of this section to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board of Governors of the Federal Reserve System shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this section. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) of this section and the rules and regulations thereunder. This subsection and the rules and regulations thereunder shall not apply (A) to a loan made by a person not in the ordinary course of his business, (B) to a loan on an exempted security, (C) to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of a national securities exchange, (D) to a loan by a bank on a security other than an equity security, or (E) to such other loans as the Board of Governors of the Federal Reserve System shall, by such rules and regulations as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder."1994-Subsec. (g). Pub. L. 103-325 inserted "or a small business related security" after "mortgage related security". 1984-Subsec. (g). Pub. L. 98-440 added subsec. (g).1970-Subsec. (f). Pub. L. 91-508 added subsec. (f).1968-Subsec. (a). Pub. L. 90-437, §1(1), struck out "registered on a national securities exchange" after "(other than an exempted security)".Subsec. (c). Pub. L. 90-437, §1(2), struck out "who transacts a business in securities through the medium of any such member" after "any broker or dealer", in par. (1) struck out "registered on a national securities exchange" after "(other than an exempted security)", and in par. (2) substituted "other than securities" for "other than exempted securities and/or securities registered upon a national securities exchange". Subsec. (d). Pub. L. 90-437, §1(3), struck out "registered on a national securities exchange" after "the purpose of purchasing or carrying any security", and "registered on national securities exchanges" after "the purpose of purchasing or carrying securities".
CHANGE OF NAMEAct Aug. 23, 1935, in subsec. (e), substituted "Board of Governors of the Federal Reserve System" for "Federal Reserve Board".
EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111-203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111-203 set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
EFFECTIVE DATE OF 1970 AMENDMENT Amendment by Pub. L. 91-508 effective on first day of seventh calendar month which begins after Oct. 26, 1970, except as otherwise provided in section 401(c) of Pub. L. 91-508 see section 401(a) of Pub. L. 91-508 set out as a note under section 1951 of Title 12, Banks and Banking.Pub. L. 91-508, title IV, §401(c), Oct. 26, 1970, 84 Stat. 1125, provided that: "The Board of Governors of the Federal Reserve System may by regulation provide that the amendment made by title III [amending this section] shall be effective on any date not earlier than the publication of the regulation in the Federal Register and not later than the first day of the thirteenth calendar month which begins after the date of enactment [Oct. 26, 1970]."
VALIDITY OF RULES AND REGULATIONS Pub. L. 91-508, title III, §301(b), Oct. 26, 1970, 84 Stat. 1125, provided that: "The amendment made by subsection (a) of this section [amending this section] does not affect the continuing validity of any rule or regulation under section 7 of the Securities Exchange Act of 1934 [this section] in effect prior to the effective date of the amendment."
Section 78f - National securities exchanges
Section 78h - Restrictions on borrowing and lending by members, brokers, and dealers