[Federal Register Volume 60, Number 40 (Wednesday, March 1, 1995)]
[Rules and Regulations]
[Pages 11022-11026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4941]
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DEPARTMENT OF THE TREASURY
Office of the Under Secretary for Domestic Finance
17 CFR Parts 400, 401, 402, 403, 404, 405, and 450
RIN 1505-AA44
Amendments to Regulations for the Government Securities Act of
1986
AGENCY: Office of the Under Secretary for Domestic Finance, Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (``Department'') is publishing,
as a final rule, amendments to the financial responsibility rules in
part 402 and a conforming amendment to a recordkeeping requirement in
part 404 of the regulations issued under the Government Securities Act
of 1986 (``GSA''). The amendments raise the minimum capital
requirements for all government securities brokers and dealers subject
to the requirements of Sec. 402.2 and establish a written notification
requirement for certain withdrawals of capital. The amendments parallel
the Securities and Exchange Commission's (``SEC'') final and proposed
amendments to the minimum net capital requirements for brokers and
dealers subject to the requirements of 17 CFR 240.15c3-1 (Rule 15c3-1)
and final rules regarding the withdrawal of capital. The Department is
adopting the amendments unchanged from their proposed form.
DATES: Effective date: March 31, 1995. Further dates: see Sec. 402.2e
(Appendix E to Sec. 402.2) for the phase-in schedule for the increased
minimum capital levels.
FOR FURTHER INFORMATION CONTACT: Don Hammond (Assistant Director) or
Kerry Lanham (Government Securities Specialist) at 202-219-3632. (TDD
for the hearing impaired: 202-219-3988.)
SUPPLEMENTARY INFORMATION:
I. Background
The amendments to the Department's financial responsibility rules
in part 402 raise the minimum capital requirements and establish
written notification requirements for certain capital withdrawals for
those government securities brokers and dealers subject to the
provisions of Sec. 402.2. Additionally, the Department is making a
conforming change to the recordkeeping requirements of part 404 which
is necessitated by the revisions to the minimum capital levels. The
amendments parallel rule amendments adopted or proposed by the SEC. The
Department's amendments will increase investor confidence in the
financial responsibility of government securities brokers and dealers
without overburdening the government securities market.
The SEC published its final capital withdrawal regulations on March
5, 1991,1 finalized its first change in minimum capital levels on
November 24, 1992,2 but has not yet finalized its second
proposal3 on minimum capital levels for certain introducing firms.
It is Treasury's objective, where practical, to have consistency with
the SEC capital standard4 and, ultimately, develop a uniform
capital rule for all government securities brokers and dealers
registered with the SEC.5
\1\Securities Exchange Act Release No. 28927 (February 20,
1991), 56 FR 9124 (March 5, 1991).
\2\Securities Exchange Act Release No. 31511 (November 24,
1992), 57 FR 56973 (December 2, 1992).
\3\Securities Exchange Act Release No. 31512 (November 24,
1992), 57 FR 57027 (December 2, 1992).
\4\17 CFR 240.15c3-1.
\5\The Treasury would have acted sooner on these amendments but
its rulemaking authority under the GSA expired on October 1, 1991,
and was not reauthorized until December 17, 1993. (107 Stat. 2344,
Pub. L. 103-202).
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The Department first published these amendments in proposed form on
June 22, 1994,6 and the comment period closed on August 22, 1994.
In addition, the National Association of Securities Dealers distributed
the proposed changes to its potentially affected members. Treasury
received no comments in response to the proposal.
\6\59 FR 32155 (June 22, 1994).
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II. Analysis
A. Minimum Capital Requirements
The SEC has either increased or proposed increasing the minimum net
capital requirements for most brokers and dealers subject to Rule 15c3-
1 to an amount ranging up to $250,000, depending on the type of
business conducted by the broker or dealer. The Treasury minimum dollar
capital levels are based on liquid capital after deducting haircuts,
which is comparable to the SEC's calculation of net capital. The
Treasury capital rule7 currently has a $5,000 minimum liquid
capital requirement for introducing brokers8 and a $25,000 minimum
liquid capital requirement for all other government securities brokers
and dealers9 subject to the rule. The Department believes that
increasing the minimum levels is appropriate in order to provide better
protection to investors [[Page 11023]] in the event of a government
securities broker's or dealer's insolvency and to reflect the current
realities of the government securities market. Accordingly, the
Department is increasing the minimum capital requirements for all
government securities brokers and dealers subject to the provisions of
Sec. 402.2. The other capital requirement--that liquid capital be equal
to at least 120% of haircuts10--is unaffected by this action.
\7\17 CFR 402.2.
\8\17 CFR 402.2(c).
\9\17 CFR 402.2(b).
\10\The Treasury capital rule requires that a government
securities broker or dealer maintain a capital level of the greater
of (i) 120% of total haircuts; or (ii) the minimum dollar capital
amounts, computed by deducting total haircuts from liquid capital,
applicable to its business.
The increases are implemented by creating four minimum capital
standards from the two current requirements, reflecting a better
differentiation of the risks related to a government securities
broker's or dealer's operations based on the type of government
securities business it conducts. The four minimum capital requirements
being adopted are as follows: (1) Government securities brokers and
dealers that carry customer or broker-dealer accounts are subject to a
minimum level of $250,000; (2) government securities brokers and
dealers that carry customer accounts but that operate under the
exemption provided by Rule 15c3-3(k)(2)(i)\11\ have a minimum
requirement of $100,000; (3) government securities brokers that
introduce accounts on a fully disclosed basis and receive but do not
hold customer securities are subject to a minimum requirement of
$50,000; and (4) introducing firms that never handle customer funds or
securities are subject to a minimum requirement of $25,000.
\11\17 CFR 240.15c3-3(k)(2)(i).
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These changes represent increases from the current minimum levels
of between $20,000 and $225,000, depending on the type of business
conducted by the government securities broker or dealer. The Department
is establishing fewer levels than the SEC has proposed since the
operations of registered government securities brokers and dealers do
not encompass all the activities available to diversified brokers or
dealers. The increases that the Department is adopting are modest
relative to the size and complexity of the government securities market
and the operations of government securities brokers and dealers.
An analysis of the government securities brokers and dealers
subject to the provisions of Sec. 402.2 indicates that, as of September
30, 1994, only four, out of a total of 32, would not be in compliance
with the fully phased-in minimum capital levels. One of these firms
would not be in compliance with the new requirements for introducing
firms, two would be out of compliance with the $100,000 requirement and
one would not meet the $250,000 level. The aggregate capital shortfall
of these four firms is less than $150,000. To ease the compliance
burden and to provide a period for the affected government securities
brokers and dealers to raise additional capital, if necessary, the
Department is adding an Appendix E to Sec. 402.2 which phases in the
increases over approximately an 18-month time frame from the effective
date. This corresponds to the phase-in time frames that were used by
the SEC.
B. Capital Withdrawal Requirements
The SEC promulgated final rules regarding the withdrawal of capital
by brokers and dealers.\12\ These rules require written notification to
the SEC and the broker's or dealer's designated examining authority of
certain capital withdrawals, add a restriction on the withdrawal of
capital based on the ratio of net capital to securities haircuts,
provide additional definitions, and permit the SEC, by order, to
prohibit the withdrawal of capital in certain described circumstances.
The Department is amending its capital withdrawal provisions\13\ to
include the notification requirements and certain definitions but has
determined not to adopt the other two requirements for the reasons
described in the preamble to the proposed rule.
\12\See Supra note 1.
\13\17 CFR 402.2(i).
The notification provisions require post-withdrawal notification of
certain significant capital withdrawals as well as prior notification
for larger withdrawals. The timing of the notification is determined by
the aggregate size of total withdrawals relative to the government
securities broker's or dealer's excess liquid capital\14\ over a 30
calendar day period. Once aggregate withdrawals have exceeded 20
percent of a government securities broker's or dealer's excess liquid
capital in a 30 calendar day period, the government securities broker
or dealer has two business days thereafter in which to file
notification of the withdrawals. Aggregate withdrawals that would
result in a government securities broker or dealer exceeding in the
aggregate 30 percent of excess liquid capital in any 30 calendar day
period require notification two business days prior to such
withdrawal.\15\ A government securities broker or dealer may use the
level of excess liquid capital calculated in its most recent Form G-
405, ``Report on Finances and Operations of Government Securities
Brokers and Dealers (FOGS)'' filing,\16\ provided the firm assures
itself that this amount has not materially changed since that time. A
government securities broker or dealer is not required to provide
notice to the Department, but instead notice is to be sent to the SEC
and to the broker's or dealer's designated examining authority.
\14\Excess liquid capital is that amount of liquid capital which
exceeds the greater of the amount of capital required under (i)
Sec. 402.2(a); or (ii) Sec. 402.2 (b) or (c) as applicable.
\15\If prior notification is required, the post-withdrawal
notification must also be filed.
\16\17 CFR 405.2 requires certain government securities brokers
and dealers to file monthly and quarterly financial reports.
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Net withdrawals that, in the aggregate, are less than $500,000 in
any 30 calendar day period or those that represent securities or
commodities transactions between affiliates are excluded from the
reporting requirement. The exclusion for securities and commodities
transactions requires that the transactions be conducted in the
ordinary course of business and settled no later than two business days
after the date of the transaction. Forward settling transactions
between affiliates are not eligible for this exclusion. Therefore, net
losses on forward contracts or net payments on swap agreements, if due
an affiliate, could trigger the notice requirement. The Department
specifically requested comment about the limitations on this exception.
As stated earlier, no comments were received on any aspect of the rule
and, therefore, the Department is adopting this provision and the rule
as proposed.
The SEC's capital withdrawal rule has a provision giving the SEC
authority to prohibit a withdrawal of capital by a broker or dealer,
for up to 20 business days, if the withdrawal would exceed 30 percent
of excess net capital and is deemed detrimental to the financial
integrity of the broker or dealer or may unduly jeopardize the broker's
or dealer's ability to repay its creditors.\17\ The SEC intends that
this provision be used in emergency situations and the rule provides
for an expeditious review of the SEC's action. For the reasons
discussed in the preamble to the proposed rule and after receiving no
comments to the contrary, the Department has determined that a similar
provision will not be incorporated in the Treasury capital rule.
\17\17 CFR 240.15c3-1(e)(3).
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The Department's decision not to enact a corresponding order
provision is [[Page 11024]] supported by the fact that the SEC has
existing temporary cease and desist authority. A temporary cease and
desist order, while different from a capital withdrawal order, serves a
similar purpose. Both are emergency remedies that can be expeditiously
applied. Prior to issuing a temporary cease and desist order, the SEC
must provide notice and opportunity for a hearing unless the SEC ``* *
*determines that notice and hearing prior to entry would be
impracticable or contrary to the public interest.''\18\
\18\15 U.S.C. 78u-3(c)(1).
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The more limited scope of the temporary cease and desist order is
not problematic to the Department because the authority provides the
SEC with the ability to issue such an order not only if a rule
violation has occurred but also if one is threatened. Because the SEC
is the appropriate regulatory agency for government securities brokers
or dealers subject to Sec. 402.2, an impending violation of a
Sec. 402.2 requirement could be cause for the issuance of a temporary
cease and desist order. As discussed more fully in the preamble to the
proposed rule, the Department believes that, in lieu of developing a
separate capital withdrawal order provision, it should rely on the
SEC's existing cease and desist order authority.
Consistent with this approach, the Department also is excluding
this provision of Rule 15c3-1 from the compliance requirements for
those government securities brokers and dealers registered under
Section 15C of the Securities Exchange Act of 1934 (15 U.S.C. 78o-5)
that are subject to the SEC capital rule (i.e., interdealer brokers
operating under Sec. 402.1(e) and futures commission merchants).
In adopting the withdrawal provisions, the Department has
restructured certain related definitions of terms into a Miscellaneous
Provisions paragraph (i)(3) and has added a description of what
constitutes an advance or loan of liquid capital, which is one
component of the restricted activities.
C. Conforming Change
Due to the revisions of the minimum capital requirements under both
the SEC and Treasury capital rules, a conforming change is required in
the recordkeeping provisions of part 404. Specifically, paragraph
404.2(a)(4) contains references to the minimum dollar capital amounts
required of government securities clearing brokers and dealers. The
Department is revising these references in accordance with the fully
phased-in minimum capital level of $250,000 required of clearing firms.
III. Special Analyses
It has been determined that these amendments are not a
``significant regulatory action'' as defined in Executive Order 12866.
Therefore, a Regulatory Assessment is not required.
In the preamble to the proposed rules, pursuant to the Regulatory
Flexibility Act (5 U.S.C. 601, et seq.), the Department certified that
these amendments, if adopted, would not have a significant economic
impact on a substantial number of small entities. Accordingly, a
regulatory flexibility analysis was not prepared. In reviewing the
final rules being adopted herein and in light of the fact that no
comments were received, the Department has concluded that there is no
reason to alter the previous certification.
The collections of information contained in the final regulations
have been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))
under control number 1535-0089.
Estimated total annual reporting burden: 5 hours.
Estimated average annual burden per respondent: 1 hour.
Estimated number of respondents: 5.
Estimated annual frequency of response: Twice.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be directed to the Forms
Management Branch, Bureau of the Public Debt, Department of the
Treasury, Parkersburg, West Virginia 26106-1328; and to the Office of
Management and Budget, Paperwork Reduction Project 1535-0089,
Attention: Desk Officer for Department of the Treasury, Washington, DC
20503.
List of Subjects
17 CFR Part 402
Brokers, Government securities.
17 CFR Part 404
Banks, banking, Brokers, Government securities, Reporting and
recordkeeping requirements.
For the reasons set out in the preamble, 17 CFR chapter IV is
amended as follows:
PART 402--FINANCIAL RESPONSIBILITY
1. The authority citation for part 402 is revised to read as
follows:
Authority: 15 U.S.C. 78o-5(b)(1)(A), (b)(4).
2. Section 402.1 is amended by revising paragraphs (d) and (e)(1)
to read as follows:
Sec. 402.1 Application of part to registered brokers and dealers and
financial institutions; special rules for futures commission merchants
and government securities interdealer brokers; effective date.
* * * * *
(d) Futures commission merchants. A futures commission merchant
subject to Sec. 1.17 of this title that is a government securities
broker or dealer but is not a registered broker or dealer shall not be
subject to the limitations of Sec. 402.2 but rather to the capital
requirement of Sec. 1.17 or Sec. 240.15c3-1, except paragraph (e)(3)
thereof, of this title, whichever is greater.
(e) Government securities interdealer broker. (1) A government
securities interdealer broker, as defined in paragraph (e)(2) of this
section, may, with the prior written consent of the Secretary, elect
not to be subject to the limitations of Sec. 402.2 but rather to be
subject to the requirements of Sec. 240.15c3-1 of this title (SEC Rule
15c3-1), except paragraphs (c)(2)(ix) and (e)(3) thereof, and
paragraphs (e)(3) through (8) of this section by filing such election
in writing with its designated examining authority. A government
securities interdealer broker may not revoke such election without the
written consent of its designated examining authority.
* * * * *
3. Section 402.2 is amended by revising paragraphs (b), (c) and
(i), and by adding an OMB parenthetical at the end of the section to
read as follows:
Sec. 402.2 Capital requirements for registered government securities
brokers or dealers.
* * * * *
(b)(1) Minimum liquid capital for brokers or dealers that carry
customer accounts. Notwithstanding the provisions of paragraph (a) of
this section, a government securities broker or dealer that carries
customer or broker or dealer accounts and receives or holds funds or
securities for those persons within the meaning of Sec. 240.15c3-
1(a)(2)(i) of this title, shall have and maintain liquid capital in an
amount not less than $250,000 (see paragraph (a) of Appendix E to this
section, Sec. 402.2e, for temporary minimum requirements), after
deducting total haircuts as defined in paragraph (g) of this section.
(2) Minimum liquid capital for brokers or dealers that carry
customer accounts, but do not generally hold customer funds or
securities. Notwithstanding the provisions of [[Page 11025]] paragraphs
(a) and (b)(1) of this section, a government securities broker or
dealer that carries customer or broker or dealer accounts and is exempt
from the provisions of Sec. 240.15c3-3 of this title, as made
applicable to government securities brokers and dealers by Sec. 403.4
of this chapter, pursuant to paragraph (k)(2)(i) thereof (17 CFR
240.15c3-3(k)(2)(i)), shall have and maintain liquid capital in an
amount not less than $100,000 (see paragraph (b) of Appendix E to this
section, Sec. 402.2(e), for temporary minimum requirements), after
deducting total haircuts as defined in paragraph (g) of this section.
(c)(1) Minimum liquid capital for introducing brokers that receive
securities. Notwithstanding the provisions of paragraphs (a) and (b) of
this section, a government securities broker or dealer that introduces
on a fully disclosed basis transactions and accounts of customers to
another registered or noticed government securities broker or dealer
but does not receive, directly or indirectly, funds from or for, or owe
funds to, customers, and does not carry the accounts of, or for,
customers shall have and maintain liquid capital in an amount not less
than $50,000 (see paragraph (c) of Appendix E to this section,
Sec. 402.2(e), for temporary minimum requirements), after deducting
total haircuts as defined in paragraph (g) of this section. A
government securities broker or dealer operating pursuant to this
paragraph (c)(1) may receive, but shall not hold customer or other
broker or dealer securities.
(2) Minimum liquid capital for introducing brokers that do not
receive or handle customer funds or securities. Notwithstanding the
provisions of paragraphs (a), (b) and (c)(1) of this section, a
government securities broker or dealer that does not receive, directly
or indirectly, or hold funds or securities for, or owe funds or
securities to, customers, and does not carry accounts of, or for,
customers and that effects ten or fewer transactions in securities in
any one calendar year for its own investment account shall have and
maintain liquid capital in an amount not less than $25,000 (see
paragraph (d) of Appendix E to this section, Sec. 402.2(e), for
temporary minimum requirements), after deducting total haircuts as
defined in paragraph (g) of this section.
* * * * *
(i) Provisions relating to the withdrawal of equity capital.
(1) Notice Provisions. No equity capital of the government
securities broker or dealer or a subsidiary or affiliate consolidated
pursuant to Appendix C to this section, Sec. 402.2c, may be withdrawn
by action of a stockholder or partner, or by redemption or repurchase
of shares of stock by any of the consolidated entities or through the
payment of dividends or any similar distribution, nor may any unsecured
advance or loan be made to a stockholder, partner, sole proprietor,
employee or affiliate without providing written notice, given in
accordance with paragraph (i)(1)(iv) of this section, when specified in
paragraphs (i)(1) (i) and (ii) of this section:
(i) Two business days prior to any withdrawals, advances or loans
if those withdrawals, advances or loans on a net basis exceed in the
aggregate in any 30 calendar day period, 30 percent of the government
securities broker's or dealer's excess liquid capital. A government
securities broker or dealer, in an emergency situation, may make
withdrawals, advances or loans that on a net basis exceed 30 percent of
the government securities broker's or dealer's excess liquid capital in
any 30 calendar day period without giving the advance notice required
by this paragraph, with the prior approval of its designated examining
authority. When a government securities broker or dealer makes a
withdrawal with the consent of its designated examining authority, it
shall in any event comply with paragraph (i)(1)(ii) of this section;
and
(ii) Two business days after any withdrawals, advances or loans if
those withdrawals, advances or loans on a net basis exceed in the
aggregate in any 30 calendar day period, 20 percent of the government
securities broker's or dealer's excess liquid capital.
(iii) This paragraph (i)(1) of this section does not apply to:
(A) Securities or commodities transactions in the ordinary course
of business between a government securities broker or dealer and an
affiliate where the government securities broker or dealer makes
payment to or on behalf of such affiliate for such transaction and then
receives payment from such affiliate for the securities or commodities
transaction within two business days from the date of the transaction;
or
(B) Withdrawals, advances or loans which in the aggregate in any
such 30 calendar day period, on a net basis, equal $500,000 or less.
(iv) Each required notice shall be effective when received by the
Commission in Washington, DC, the regional or district office of the
Commission for the area in which the government securities broker or
dealer has its principal place of business, and the government
securities broker's or dealer's designated examining authority.
(2) Withdrawal Limitations. No equity capital of the government
securities broker or dealer or a subsidiary or affiliate consolidated
pursuant to Appendix C to this section, Sec. 402.2c, may be withdrawn
by action of a stockholder or a partner, or by redemption or repurchase
of shares of stock by any of the consolidated entities or through the
payment of dividends or any similar distribution, nor may any unsecured
advance or loan be made to a stockholder, partner, sole proprietor,
employee or affiliate if, after giving effect thereto and to any other
such withdrawals, advances or loans and any Payments of Payment
Obligations (as defined in Sec. 240.15c3-1d of this title, Appendix D
to SEC Rule 15c3-1, modified as provided in Appendix D to this section,
Sec. 402.2d) under satisfactory subordination agreements which are
scheduled to occur within 180 calendar days following such withdrawal,
advance or loan, either:
(i) The ratio of liquid capital to total haircuts, determined as
provided in Sec. 402.2, would be less than 150 percent; or
(ii) Liquid capital minus total haircuts would be less than 120
percent of the minimum capital required by Sec. 402.2(b) or
Sec. 402.2(c) as applicable; or
(iii) In the case of any government securities broker or dealer
included in such consolidation, the total outstanding principal amounts
of satisfactory subordination agreements of the government securities
broker or dealer (other than such agreements which qualify as equity
under Sec. 240.15c3-1(d) of this title) would exceed 70% of the debt-
equity total as defined in Sec. 240.15c3-1(d).
(3) Miscellaneous Provisions. (i) Excess liquid capital is that
amount in excess of the amount required by the greater of Sec. 402.2(a)
or, Secs. 402.2 (b) or (c), as applicable. For the purposes of
paragraphs (i)(1) and (i)(2) of this section, a government securities
broker or dealer may use the amount of excess liquid capital, liquid
capital and total haircuts reported in its most recently required filed
Form G-405 for the purposes of calculating the effect of a projected
withdrawal, advance or loan relative to excess liquid capital or total
haircuts. The government securities broker or dealer must assure itself
that the excess liquid capital, liquid capital or the total haircuts
reported on the most recently required filed Form G-405 have not
materially changed since the time such report was filed.
(ii) The term equity capital includes capital contributions by
partners, par or [[Page 11026]] stated value of capital stock, paid-in
capital in excess of par, retained earnings or other capital accounts.
The term equity capital does not include securities in the securities
accounts of partners and balances in limited partners' capital accounts
in excess of their stated capital contributions.
(iii) Paragraphs (i)(1) and (i)(2) of this section shall not
preclude a government securities broker or dealer from making required
tax payments or preclude the payment to partners of reasonable
compensation, and such payments shall not be included in the
calculation of withdrawals, advances or loans for purposes of
paragraphs (i)(1) and (i)(2) of this section.
(iv) For the purposes of this subsection (i), any transaction
between a government securities broker or dealer and a stockholder,
partner, sole proprietor, employee or affiliate that results in a
diminution of the government securities broker's or dealer's liquid
capital shall be deemed to be an advance or loan of liquid capital.
* * * * *
(Approved by the Office of Management and Budget under control
number 1535-0089)
4. By adding Sec. 402.2e (Appendix E) as follows:
Sec. 402.2e Appendix E--Temporary Minimum Requirements.
(a) A government securities broker or dealer that falls within the
provisions of paragraph (b)(1) of Sec. 402.2 shall maintain not less
than the greater of:
(1) The amount of liquid capital required under paragraph (a) of
Sec. 402.2(a); or
(2) The amount of liquid capital, after deducting total haircuts,
of:
(i) $25,000 through June 30, 1995;
(ii) $100,000 from July 1, 1995 through December 31, 1995;
(iii) $175,000 from January 1, 1996 through June 30, 1996; and
(iv) $250,000 from July 1, 1996 and thereafter.
(b) A government securities broker or dealer that falls within the
provisions of paragraph (b)(2) of Sec. 402.2 shall maintain not less
than the greater of:
(1) The amount of liquid capital required under paragraph (a) of
Sec. 402.2; or
(2) The amount of liquid capital, after deducting total haircuts,
of:
(i) $25,000 through June 30, 1995;
(ii) $50,000 from July 1, 1995 through December 31, 1995;
(iii) $75,000 from January 1, 1996 through June 30, 1996; and
(iv) $100,000 from July 1, 1996 and thereafter.
(c) A government securities broker that falls within the provisions
of paragraph (c)(1) of Sec. 402.2 shall maintain not less than the
greater of:
(1) The amount of liquid capital required under paragraph (a) of
Sec. 402.2; or
(2) The amount of liquid capital, after deducting total haircuts,
of:
(i) $5,000 through June 30, 1995;
(ii) $20,000 from July 1, 1995 through December 31, 1995;
(iii) $35,000 from January 1, 1996 through June 30, 1996; and
(iv) $50,000 from July 1, 1996 and thereafter.
(d) A government securities broker that falls within the provisions
of paragraph (c)(2) of Sec. 402.2 shall maintain not less than the
greater of:
(1) The amount of liquid capital required under paragraph (a) of
Sec. 402.2; or
(2) The amount of liquid capital, after deducting total haircuts,
of:
(i) $5,000 through June 30, 1995;
(ii) $11,000 from July 1, 1995 through December 31, 1995;
(iii) $18,000 from January 1, 1996 through June 30, 1996; and
(iv) $25,000 from July 1, 1996 and thereafter.
* * * * *
PART 404--RECORDKEEPING AND PRESERVATION OF RECORDS
5. The authority citation for Part 404 is revised to read as
follows:
Authority: 15 U.S.C. 78o-5(b)(1)(B), (b)(1)(C), (b)(4).
6. Section 404.2 is amended by revising paragraph (a)(4) to read as
follows:
Sec. 404.2 Records to be made and kept current by registered
government securities brokers and dealers; records of non-resident
registered government securities brokers and dealers.
(a) * * *
(4) Paragraph 240.17a-3(b)(1) is modified to read as follows:
``(1) This section shall not be deemed to require a government
securities broker or dealer registered pursuant to Section 15C(a)(1)(A)
of the Act (15 U.S.C. 78o-5(a)(1)(A)) to make or keep such records of
transactions cleared for such government securities broker or dealer as
are customarily made and kept by a clearing broker or dealer pursuant
to the requirements of Secs. 240.17a-3 and 240.17a-4: Provided, that
the clearing broker or dealer has and maintains net capital of not less
than $250,000 (or, in the case of a clearing broker or dealer that is a
registered government securities broker or dealer, liquid capital less
total haircuts, determined as provided in Sec. 402.2 of this title, of
not less than $250,000) and is otherwise in compliance with
Sec. 240.15c3-1, Sec. 402.2 of this title, or the capital rules of the
exchange of which such clearing broker or dealer is a member if the
members of such exchange are exempt from Sec. 240.15c3-1 by paragraph
(b)(2) thereof.''.
* * * * *
Secs. 400.4, 400.5, 401.9, 403.5, 404.2, 404.3, 404.4, 404.5, 405.2,
and 450.4 [Amended]
7. For each section indicated in the list above, remove the Office
of Management and Budget control number from the parenthetical
statement at the end of each section, and add in its place ``1535-
0089'':
Dated: February 15, 1995.
Frank N. Newman,
Deputy Secretary.
[FR Doc. 95-4941 Filed 2-28-95; 8:45 am]
BILLING CODE 4810-39-W
