§ 78g. — Margin requirements.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78g]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78g. Margin requirements
(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.
Such rules and regulations may make appropriate provision with respect
to the carrying of undermargined accounts for limited periods and under
specified conditions; the withdrawal of funds or securities; the
substitution or additional purchases of securities; the transfer of
accounts from one lender to another; special or different margin
requirements for delayed deliveries, short sales, arbitrage
transactions, and securities to which paragraph (2) of this subsection
does not apply; the bases and the methods to be used in calculating
loans, and margins and market prices; and similar administrative
adjustments and details. For the purposes of paragraph (2) of this
subsection, until July 1, 1936, the lowest price at which a security has
sold on or after July 1, 1933, shall be considered as the lowest price
at which such security has sold during the preceding thirty-six calendar
months.
(b) Lower and higher margin requirements
Notwithstanding the provisions of subsection (a) of this section,
the Board of Governors of the Federal Reserve System, may, from time to
time, with respect to all or specified securities or transactions, or
classes of securities, or classes of transactions, by such rules and
regulations (1) prescribe such lower margin requirements for the initial
extension or maintenance of credit as it deems necessary or appropriate
for the accommodation of commerce and industry, having due regard to the
general credit situation of the country, and (2) prescribe such higher
margin requirements for the initial extension or maintenance of credit
as it may deem necessary or appropriate to prevent the excessive use of
credit to finance transactions in securities.
(c) Unlawful credit extension to customers
(1) Prohibition
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) of
this section; and
(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).
(2) Margin regulations
(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).
If the Board delegates the authority to prescribe such
regulations under clause (ii) and the Commission and the
Commodity Futures Trading Commission have not jointly prescribed
such regulations within a reasonable period of time after the
date of such delegation, the Board shall prescribe such
regulations 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;
except that nothing in this subparagraph shall be construed to
prevent a national securities exchange or national
securities association from requiring higher margin levels
for a security future product when it deems such action to
be necessary or appropriate; and
(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).
(3) Exception
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;
except that the Board may impose such rules and regulations, in
whole or in part, on any credit otherwise exempted by this paragraph
if the Board determines that such action is necessary or appropriate
in the public interest or for the protection of investors.
(d) Unlawful credit extension in violation of rules and regulations;
exceptions to application of rules, etc.
(1) Prohibition
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 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.
(2) Exceptions
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.
(3) Board authority
The Board may impose such rules and regulations, in whole or in
part, on any credit otherwise exempted by subparagraph (C) if it
determines that such action is necessary or appropriate in the
public interest or for the protection of investors.
(e) Effective date of this section and rules and regulations
The provisions of this section or the rules and regulations
thereunder shall not apply on or before July 1, 1937, to any loan or
extension of credit made prior to June 6, 1934, or to the maintenance,
renewal, or extension of any such loan or credit, except to the extent
that the Board of Governors of the Federal Reserve System may by rules
and regulations prescribe as necessary to prevent the circumvention of
the provisions of this section or the rules and regulations thereunder
by means of withdrawals of funds or securities, substitutions of
securities, or additional purchases or by any other device.
(f) Unlawful receipt of credit; exemptions
(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.
(2) For the purposes of this subsection--
(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.
(g) Effect of bona fide agreement for delayed delivery of mortgage
related security
Subject to such rules and regulations as the Board of Governors of
the Federal Reserve System may adopt in the public interest and for the
protection of investors, no member of a national securities exchange or
broker or dealer shall be deemed to have extended or maintained credit
or arranged for the extension or maintenance of credit for the purpose
of purchasing a security, within the meaning of this section, by reason
of a bona fide agreement for delayed delivery of a mortgage related
security or a small business related security against full payment of
the purchase price thereof upon such delivery within one hundred and
eighty days after the purchase, or within such shorter period as the
Board of Governors of the Federal Reserve System may prescribe by rule
or regulation.
(June 6, 1934, ch. 404, title I, Sec. 7, 48 Stat. 886; Aug. 23, 1935,
ch. 614, Sec. 203(a), 49 Stat. 704; Pub. L. 90-437, July 29, 1968, 82
Stat. 452; Pub. L. 91-508, title III, Sec. 301(a), Oct. 26, 1970, 84
Stat. 1124; Pub. L. 98-440, title I, Sec. 102, Oct. 3, 1984, 98 Stat.
1690; Pub. L. 103-325, title II, Sec. 203, Sept. 23, 1994, 108 Stat.
2199; Pub. L. 104-290, title I, Sec. 104(a), Oct. 11, 1996, 110 Stat.
3422; Pub. L. 105-353, title III, Sec. 301(b)(5), (6), Nov. 3, 1998, 112
Stat. 3236; Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 206(b)], Dec.
21, 2000, 114 Stat. 2763, 2763A-429.)
Amendments
2000--Subsec. (a). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 206(b)(1)], inserted ``or a security futures product'' after
``exempted security'' in introductory provisions.
Subsec. (c)(1)(A). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 206(b)(2)], inserted ``except as provided in paragraph (2),'' after
``security),''.
Subsec. (c)(2), (3). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 206(b)(3), (4)], added par. (2) and redesignated former par. (2) as
(3).
1998--Subsecs. (a), (b). Pub. L. 105-353, Sec. 301(b)(5),
substituted ``Board of Governors of the Federal Reserve System'' for
``Federal Reserve Board''.
Subsec. (d). Pub. L. 105-353, Sec. 301(b)(6), substituted
``exceptions'' for ``exception'' in heading.
1996--Subsec. (c). Pub. L. 104-290, Sec. 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, Sec. 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, Sec. 1(1), struck out
``registered on a national securities exchange'' after ``(other than an
exempted security)''.
Subsec. (c). Pub. L. 90-437, Sec. 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, Sec. 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 Name
Act Aug. 23, 1935, in subsec. (e), substituted ``Board of Governors
of the Federal Reserve System'' for ``Federal Reserve Board''.
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.
Section 401(c) of Pub. L. 91-508 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
Section 301(b) of Pub. L. 91-508 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 Referred to in Other Sections
This section is referred to in sections 78c, 78f, 78m, 78o, 78hh,
80a-2, 80a-54 of this title; title 7 section 2; title 31 section 5315.
