February 11, 1992
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 8-92
RE: MEETING WITH FEDERAL RESERVE BOARD STAFF ON MARGIN
REGULATION PROPOSAL
__________________________________________________________
Attached for your information is a memorandum describing a
meeting last week between the Institute and its outside counsel
and members of the staff of the Federal Reserve Board. The
purpose of the meeting was to discuss the Institute's proposal
that the Board consider liberalizing the margin treatment for
securities issued by unit investment trusts (and other investment
companies) under Regulation T, thereby eliminating certain
discrepancies that exist under current law. Currently, under
Regulation T, securities issued by open-end investment companies
or unit investment trusts are treated as "margin equity
securities" eligible for 50 percent margin treatment. Under the
Institute's proposal, Regulation T would be amended to permit
brokers to give good faith loan value to securities issued by an
investment company, provided that at least 95 percent of the
investment company's portfolio consisted of exempted securities.
We are pleased to report that the Federal Reserve Board
staff seemed receptive to our proposal and expressed a
willingness to work with us on it. Most significantly, the staff
indicated that the timing of our proposal is very good because
the Board's regulatory agenda for this year includes a complete
review of Regulation T. Despite these encouraging signs, it is
not possible to predict at this time what action, if any, the
Board ultimately may take.
We will keep you informed of developments.
Frances M.
Stadler
Assistant General Counsel
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