Securities Credit Transactions; Borrowing by Brokers and Dealers

The Board is issuing an interpretation of its margin regulations (Regulations G, T and U) in response to the enactment of the National Securities Markets Improvement Act of 1996 (the Markets Improvement Act). Under the Markets Improvement Act, the Board no longer has the authority to regulate certain loans to registered broker-dealers unless it finds that such rules are necessary or appropriate in the public interest or for the protection of investors. This interpretation makes clear that the Board has not made such a finding and that provisions in its margin regulations for which the Board no longer has general authority are without effect. The interpretation also identifies the regulatory provisions that the Board has adopted to implement section 8(a) of the Securities Exchange Act of 1934 (the Exchange Act), which limits the sources of credit for broker- dealers, and concludes that these provisions are without effect in light of the repeal of section 8(a) contained in the Markets Improvement Act.