(a) Margin transactions.
(1) All transactions not specifically authorized
for inclusion in another account shall be recorded in the margin account.
(2) A creditor may establish
separate margin accounts for the same person to—
(i) clear
transactions for other creditors where the transactions are introduced
to the clearing creditor by separate creditors; or
(ii) clear transactions through other
creditors if the transactions are cleared by separate creditors; or
(iii) provide one or
more accounts over which the creditor or a third-party investment
adviser has investment discretion.
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(b) Required margin.
(1) Applicability. The required margin for each long or short position in securities
is set forth in section 220.12 (the supplement) and is subject to
the following exceptions and special provisions.
(2) Short sale
against the box. A short sale “against the box” shall be treated
as a long sale for the purpose of computing the equity and the required
margin.
(3) When-issued securities. The required margin
on a net long or net short commitment in a when-issued security is
the margin that would be required if the security were an issued margin
security, plus any unrealized loss on the commitment or less any unrealized
gain.
(4) Stock used as cover.
(i) When
a short position held in the account serves in lieu of the required
margin for a short put, the amount prescribed by paragraph (b)(1)
of this section as the amount to be added to the required margin in
respect of short sales shall be increased by any unrealized loss on
the position.
(ii)
When a security held in the account serves in lieu of the required
margin for a short call, the security shall be valued at no greater
than the exercise price of the short call.
(5) Accounts of partners. If a partner of the creditor has a margin
account with the creditor, the creditor shall disregard the partner’s
financial relations with the firm (as shown in the partner’s capital
and ordinary drawing accounts) in calculating the margin or equity
of the partner’s margin account.
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(6) Contribution
to joint venture. If a margin account is the account of a joint
venture in which the creditor participates, any interest of the creditor
in the joint account in excess of the interest which the creditor
would have on the basis of its right to share in the profits shall
be treated as an extension of credit to the joint account and shall
be margined as such.
(7) Transfer of accounts.
(i) A margin
account that is transferred from one creditor to another may be treated
as if it had been maintained by the transferee from the date of its
origin, if the transferee accepts, in good faith, a signed statement
of the transferor (or, if that is not practicable, of the customer),
that any margin call issued under this part has been satisfied.
(ii) A margin account
that is transferred from one customer to another as part of a transaction,
not undertaken to avoid the requirements of this part, may be treated
as if it had been maintained for the transferee from the date of its
origin, if the creditor accepts in good faith and keeps with the transferee
account a signed statement of the transferor describing the circumstances
for the transfer.
(8) Sound credit
judgment. In exercising sound credit judgment to determine the
margin required in good faith pursuant to section 220.12 (the supplement),
the creditor shall make its determination for a specified security
position without regard to the customer’s other assets or securities
positions held in connection with unrelated transactions.
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(c) When additional margin
is required.
(1) Computing
deficiency. All transactions on the same day shall be combined
to determine whether additional margin is required by the creditor.
For the purpose of computing equity in an account, security positions
are established or eliminated and a credit or debit created on the
trade date of a security transaction. Additional margin is required
on any day when the day’s transactions create or increase a margin
deficiency in the account and shall be for the amount of the margin
deficiency so created or increased.
(2) Satisfaction
of deficiency. The additional required margin may be satisfied
by a transfer from the special memorandum account or by a deposit
of cash, margin securities, exempted securities, or any combination
thereof.
(3) Time limits.
(i) A margin call shall
be satisfied within one payment period after the margin deficiency
was created or increased.
(ii) The payment period may be extended
for one or more limited periods upon application by the creditor to
its examining authority unless the examining authority believes that
the creditor is not acting in good faith or that the creditor has
not sufficiently determined that exceptional circumstances warrant
such action. Applications shall be filed and acted upon prior to the
end of the payment period or the expiration of any subsequent extension.
(4) Satisfaction restriction. Any transaction,
position, or deposit that is used to satisfy one requirement under
this part shall be unavailable to satisfy any other requirement.
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(d) Liquidation in lieu
of deposit. If any margin call is not met in full within the
required time, the creditor shall liquidate securities sufficient
to meet the margin call or to eliminate any margin deficiency existing
on the day such liquidation is required, whichever is less. If the
margin deficiency created or increased is $1,000 or less, no action
need be taken by the creditor.
(e) Withdrawals of cash or securities.
(1) Cash or securities may be withdrawn
from an account, except if—
(i) additional cash or securities are
required to be deposited into the account for a transaction on the
same or a previous day; or
(ii) the withdrawal, together with other
transactions, deposits, and withdrawals on the same day, would create
or increase a margin deficiency.
(2) Margin excess may be withdrawn or may
be transferred to the special memorandum account (§ 220.5) by making
a single entry to that account which will represent a debit to the
margin account and a credit to the special memorandum account.
(3) If a creditor does
not receive a distribution of cash or securities which is payable
with respect to any security in a margin account on the day it is
payable and withdrawal would not be permitted under this paragraph
(e), a withdrawal transaction shall be deemed to have occurred on
the day the distribution is payable.
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(f) Interest, service charges, etc.
(1) Without regard to the other
provisions of this section, the creditor, in its usual practice, may
debit the following items to a margin account if they are considered
in calculating the balance of such account:
(i) interest charged
on credit maintained in the margin account;
(ii) premiums on securities borrowed
in connection
with short sales or to effect delivery;
(iii) dividends, interest, or other
distributions due on borrowed securities;
(iv) communication or shipping charges
with respect to transactions in the margin account; and
(v) any other service charges
which the creditor may impose.
(2) A creditor may permit interest, dividends,
or other distributions credited to a margin account to be withdrawn
from the account if—
(i) the withdrawal does not create or
increase a margin deficiency in the account; or
(ii) the current market value of any
securities withdrawn does not exceed 10 percent of the current market
value of the security with respect to which they were distributed.
