
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 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, 78o, 78hh, 80a-2, 
80a-54 of this title; title 7 section 2; title 31 section 5315.
