What is the Federal Reserve Reg X?

Regulation X is a rule, issued by the Board of Governors of the Federal Reserve System (FRS), that governs credit limits granted to foreign persons or organizations for the purchases of U.S. Treasuries, like T-bonds .

What is margin stock under Regulation U?

Related Content. A term defined under Regulation U to generally include publicly traded securities . Regulation U restricts banks and other lenders in the amount of credit they can extend to finance the purchase or carrying of margin stock where that margin stock also serves as collateral for the loan.

What are the 3 key Federal Reserve entities?

There are three key entities in the Federal Reserve System: the Board of Governors, the Federal Reserve Banks (Reserve Banks), and the Federal Open Market Committee (FOMC) .

What is the difference between CFR and Fed Reg?

The Federal Register is the chronological publication of proposed regulations, final regulations, and related materials. The Code of Federal Regulations (CFR) is a subject arrangement of regulations.

How much can I borrow on margin?

Margin works by allowing you to borrow against the eligible investments you already hold in your brokerage account, generally up to 50% of the value of those investments.

Why is buying on margin illegal?

Buying on margins of 10 percent cash was made illegal because the practice contributed to the crash of the stock market in October of 1929 . In the mid to late 1920's, the economy was booming and the country was benefiting from the success of the industrial revolution.

What makes a stock non marginable?

Non-marginable securities are not allowed to be purchased on margin at a particular brokerage, or financial institution, and must be fully funded by the investor's cash . Non-marginable securities are put in place to mitigate risks and control costs on stocks that are volatile.

What entity owns the Federal Reserve?

What Is the Federal Reserve System (FRS)? There is a common misconception that the Federal Reserve System is privately owned. In fact, it combines public and private characteristics: The central governing board of the FRS is an agency of the federal government and reports to Congress.

Can someone buy the Federal Reserve?

The Federal Reserve System is not "owned" by anyone .

Does the Federal Reserve regulate insurance companies?

Financial institutions supervised by the Federal Reserve also engage in functionally regulated insurance underwriting activities and insurance sales activities .

What is federal regulation E?

Regulation E implements the Electronic Fund Transfer Act (EFTA), which establishes a basic framework of the rights, liabilities, and responsibilities of participants in the electronic fund and remittance transfer systems.

12 CFR Part 224 -- Borrowers of Securities Credit (Regulation X) (2024)

Authority:

15 U.S.C. 78g.

Source:

Reg. X, 48 FR 56572, Dec. 22, 1983, unless otherwise noted.

Editorial Note

Editorial Note:

For Federal Register citations affecting part 224, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.

§ 224.1 Authority, purpose, and scope.

(a) Authority and purpose. Regulation X (this part) is issued by the Board of Governors of the Federal Reserve System (the Board) under the Securities Exchange Act of 1934, as amended (the Act) (15 U.S.C. 78a et seq.). This part implements section 7(f) of the Act (15 U.S.C. 78g(f)), the purpose of which is to require that credit obtained within or outside the United States complies with the limitations of the Board's Margin Regulations T and U (12 CFR parts 220 and 221, respectively).

(b) Scope and exemptions. The Act and this part apply the Board's margin regulations to United States persons and foreign persons controlled by or acting on behalf of or in conjunction with United States persons (hereinafter borrowers), who obtain credit outside the United States to purchase or carry United States securities, or within the United States to purchase or carry any securities (both types of credit are hereinafter referred to as purpose credit). The following borrowers are exempt from the Act and this part:

(1) Any borrower who obtains purpose credit within the United States, unless the borrower willfully causes the credit to be extended in contravention of Regulations T or U.

(2) Any borrower whose permanent residence is outside the United States and who does not obtain or have outstanding, during any calendar year, a total of more than $100,000 in purpose credit obtained outside the United States; and

(3) Any borrower who is exempt by Order upon terms and conditions set by the Board.

[Reg. X, 48 FR 56572, Dec. 22, 1983, as amended by Reg. X, 63 FR 2839, Jan. 16, 1998]

§ 224.2 Definitions.

The terms used in this part have the meanings given to them in sections 3(a) and 7(f) of the Act, and in Regulations T and U. Section 7(f) of the Act contains the following definitions:

(a) 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 valve of the trust.

(b) 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) 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.

[Reg. X, 48 FR 56572, Dec. 22, 1983, as amended by Reg. X, 63 FR 2839, Jan. 16, 1998]

§ 224.3 Margin regulations to be applied by nonexempted borrowers.

(a) Credit transactions outside the United States. No borrower shall obtain purpose credit from outside the United States unless it conforms to the following margin regulations:

(1) Regulation T (12 CFR part 220) if the credit is obtained from a foreign branch of a broker-dealer;

(2) Regulation U (12 CFR part 221), as it applies to banks, if the credit is obtained from a foreign branch of a bank, except for the requirement of a purpose statement (12 CFR 221.3(c)(1)(i) and (c)(2)(i)); and

(3) Regulation U (12 CFR part 221), as it applies to nonbank lenders, if the credit is obtained from any other lender outside the United States, except for the requirement of a purpose statement (12 CFR 221.3(c)(1)(ii) and (c)(2)(ii)).

(b) Credit transactions within the United States. Any borrower who willfully causes credit to be extended in contravention of Regulations T and U (12 CFR parts 220 and 221), and who, therefore, is not exempted by § 224.1(b)(1), must conform the credit to the margin regulation that applies to the lender.

[Reg. X, 63 FR 2839, Jan. 16, 1998]