[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR220.105]

[Page 18-19]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 220--CREDIT BY BROKERS AND DEALERS (REGULATION T)--Table of Contents
 
Sec. 220.105  Ninety-day rule in special cash account.

    (a) Section 220.4(c)(8) places a limitation on a special cash 
account if a security other than an exempted security has been purchased 
in the account and ``without having been previously paid for in full by 
the customer * * * has been * * * delivered out to any broker or 
dealer.'' The limitation is that during the succeeding 90 days the 
customer may not purchase a security in

[[Page 19]]

the account other than an exempted security unless funds sufficient for 
the purpose are held in the account. In other words, the privilege of 
delayed payment in such an account is withdrawn during the 90-day 
period.
    (b) The Board recently considered a question as to whether the 
following situation makes an account subject to the 90-day 
disqualification: A customer purchases registered security ABC in a 
special cash account. The broker executes the order in good faith as a 
bona fide cash transaction, expecting to obtain full cash payment 
promptly. The next day, the customer sells registered security XYZ in 
the account, promising to deposit it promptly in the account. The 
proceeds of the sale are equal to or greater than the cost of security 
ABC. After both sale and purchase have been made, the customer requests 
the broker to deliver security ABC to a different broker, to receive 
security XYZ from that broker at about the same time, and to settle with 
the other broker--such settlement to be made either by paying the cost 
of security XYZ to the other broker and receiving from him the cost of 
security ABC, or by merely settling any difference between these 
amounts.
    (c) The Board expressed the view that the account becomes subject to 
the 90-day disqualification in Sec. 220.4(c)(8). In the instant case, 
unlike that described at 1940 Federal Reserve Bulletin 772, the security 
sold is not held in the account and is not to be deposited in it 
unconditionally. It is to be obtained only against the delivery to the 
other broker of the security which had been purchased. Hence payment can 
not be said to have been made prior to such delivery; the purchased 
security has been delivered out to a broker without previously having 
been paid for in full, and the account becomes subject to the 90-day 
disqualification.

[13 FR 2368, May 1, 1948]