FRGTU_20180621_omb

Supporting Statement for the
Margin Credit Reports
(FR G-1, FR G-2, and FR G-4; OMB No. 7100-0011), (FR G-3; OMB No. 7100-0018),
(FR T-4; OMB No. 7100-0019), and (FR U-1; OMB No. 7100-0115)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority by the Office of Management and Budget (OMB), has extended for three years, with
revision, the Registration Statement for Persons Who Extend Credit Secured by Margin Stock
(Other Than Banks, Brokers, or Dealers) (FR G-1; OMB No. 7100-0011), Deregistration
Statement for Persons Registered Pursuant to Regulation U (FR G-2; OMB No. 7100-0011), and
Annual Report (FR G-4; OMB No. 7100-0011). The Board also has extended for three years,
without revision, the Statement of Purpose for an Extension of Credit Secured by Margin Stock
by a Person Subject to Registration Under Regulation U (FR G-3; OMB No. 7100-0018),
Statement of Purpose for an Extension of Credit by a Creditor (FR T-4; OMB No. 7100-0019),
and Statement of Purpose for an Extension of Credit Secured by Margin Stock (FR U-1; OMB
No. 7100-0115). These six mandatory collections of information are collectively known as the
Margin Credit Reports and relate to extensions of credit secured by margin stock.
The Securities Exchange Act of 1934 (the Act) authorizes the Board to regulate
securities credit extended by brokers, dealers, banks, and other lenders. The FR T-4, FR U-1,
and FR G-3 are recordkeeping requirements for brokers and dealers, banks, and other lenders,
respectively. The FR G-3 and FR U-1 document the purpose of loans secured by margin stock.
For purposes of these forms, margin stock is defined as (1) stocks that are registered on a
national securities exchange or any over-the-counter security designated for trading in the
National Market System, (2) debt securities (bonds) that are convertible into such stocks, and
(3) shares of most mutual funds. The FR T-4 documents the purpose of credit being extended
when that credit is not to purchase, carry, or trade in securities and the credit is in excess of that
otherwise permitted under Regulation T , Credit by Brokers and Dealers.
Lenders that are not brokers, dealers, and banks making loans secured by margin stock
must register and deregister with the Federal Reserve using the FR G-1 and FR G-2, respectively,
and must file an annual report (FR G-4) while registered. The Federal Reserve uses the data
collected by the FR G-1, FR G-2, and FR G-4 to identify lenders subject to the Board’s
Regulation U (Credit by Banks or Persons other than Brokers or Dealers for the Purpose of
Purchasing or Carrying Margin Stocks) to verify their compliance with the regulation, and to
monitor margin credit.
The Board has revised the instructions for the FR G-1, FR G-2, and FR G-4 to require
respondents to submit Portable Document Format (PDF) versions of the reporting forms and
attachments to a designated Board e-mail address. The Board made these revisions in an effort
to improve clarity, as the current instructions do not contain explicit guidance on the form of
submission for the reports. The Board also has consolidated all six Margin Credit Reports
under one OMB control number, 7100-0011, which currently only includes the FR G-1, FR G2, and FR G-4. This change is aimed at simplifying the tracking and clearance process for the

Margin Credit Reports. This change would not modify the reporting or recordkeeping
requirements of the reports in any way. The revisions will be implemented as proposed, except
that they will be effective July 1, 2018, instead of April 1, 2018. The annual burden for these
reports is estimated to be 245 hours and would remain unchanged with the proposed revisions.
Background and Justification
The Act directs the Federal Reserve to regulate the amount of credit that can be extended
on any security when the credit is used to purchase or carry securities. The Federal Reserve has
implemented its authority under the Act through three regulations. Regulation X (Borrowers of
Securities Credit), which covers borrowers, does not contain any collections of information. The
other two regulations (Regulation T and Regulation U), which do contain collections of
information, cover lenders. The regulations and the information required by each recordkeeping
and reporting requirement are described below.
Regulation T
Regulation T was adopted in 1934 pursuant to section 7 of the Act (15 U.S.C. 78g) to
regulate extensions of credit by and to brokers and dealers. Regulation T requires that a broker
or dealer be aware of the circumstances surrounding an extension of credit and be satisfied that
the customer’s statement as to the use of the credit is truthful, in order to ensure compliance
with section 7(c) of the Act, which prohibits the extension of “purpose credit” by a creditor if the
credit is unsecured, secured by collateral other than securities, or secured by any security (other
than an exempted security). Under Regulation T an extension of credit made by a broker or
dealer, other than an extension of credit to effect and carry transactions in commodities or
foreign exchange, shall be deemed to be purpose credit unless, prior to extending the credit, the
creditor accepts in good faith from the customer a written statement that it is not purpose credit.
Statement of Purpose for an Extension of Credit by a Creditor (FR T-4). This form
must be completed only if the purpose of the credit being extended is not to purchase, carry, or
trade in securities and the credit is in excess of that otherwise permitted under Regulation T
(nonpurpose credit). The information captured on FR T-4 provides a written record of the
amount of nonpurpose credit being extended, the purpose for which the money is to be used, and
a listing and valuation of collateral.
Regulation U
Regulation U was adopted in 1936 pursuant to section 7 of the Act to regulate extensions
of margin credit by banks. The former Regulation G was adopted pursuant to section 7 of the
Act in 1968 to impose similar restrictions on lenders other than brokers, dealers, and banks.
Regulation G was merged into Regulation U in 1998. The FR G-1, FR G-2, FR G-3, and
FR G-4 reporting forms for nonbank lenders maintain the G designation even though Regulation
G was merged into Regulation U.
Statement of Purpose for an Extension of Credit Secured by Margin Stock (FR U-1).
To comply with the requirements of Regulation U, a bank must complete the FR U-1 purpose

2

statement when it extends credit in excess of $100,000 secured directly or indirectly, in whole
or in part, by any margin stock. The information captured on FR U-1 provides a written record
of the amount of credit being extended, the purpose for which the money is to be used, and a
listing and valuation of collateral.
Statement of Purpose for an Extension of Credit Secured by Margin Stock by a
Person Subject to Registration Under Regulation U (FR G-3). Any nonbank lender subject to
the registration requirements of Regulation U must complete an FR G-3 purpose statement for
each extension of credit secured directly or indirectly, in whole or in part, by any margin stock.
The purpose statement is intended to ensure that a lender does not extend credit to purchase or
carry margin stock in excess of the amount permitted by the Federal Reserve pursuant to
Regulation U. The FR G-3 reporting form collects the same information as FR U-1 reporting
form.
The FR T-4, FR U-1, and FR G-3 purpose statements serve as a compliance tool for
Regulation T and U lenders, as well as a means by the Justice Department or the Securities and
Exchange Commission to verify compliance with the Act and the Board’s rules, and, as
necessary, an evidentiary or enforcement tool.
Registration Statement for Persons Who Extend Credit Secured by Margin Stock
(Other Than Banks, Brokers, or Dealers) (FR G-1). The registration statement is required to
enable the Federal Reserve to identify nonbank lenders subject to Regulation U, to verify
compliance with the regulation, and to monitor margin credit. In addition, registered nonbank
lenders can be subject to periodic review by the Board, National Credit Union Administration,
and Farm Credit Administration.
Deregistration Statement for Persons Registered Pursuant to Regulation U (FR G2). FR G-2 deregistration statement is used by nonbank lenders to deregister if their margin
credit activities no longer exceed the regulatory threshold found in Regulation U. Under section
221.3(b)(2) of Regulation U, a registered nonbank lender may apply to terminate its registration
if the lender has not, during the preceding six calendar months, had more than $200,000 of such
credit outstanding.
Annual Report (FR G-4). The information submitted on the annual report is required
pursuant to Regulation U to enable the Federal Reserve to monitor the amount of credit that is
secured by margin stock and that is extended by nonbank lenders.
Description of Information Collections
Registration Statement (FR G-1)
Section 221.3(b)(1) of Regulation U requires that the FR G-1 be submitted by every
person (other than commercial banks, brokers, or dealers) not currently registered when the
amount of credit extended during a calendar quarter equals $200,000 or more or the amount of
credit outstanding at any time during that calendar quarter equals $500,000 or more, in credit
secured directly or indirectly by collateral that includes any margin stock. Information collected

3

on the registration statement consists of certain background questions, information regarding the
credit being extended, and dollar amounts of margin credit.
Respondents include federal and state credit unions; insurance companies; commercial
and consumer credit organizations; production credit associations; small businesses; insurance
premium funding plans; plan-lenders (a company or its affiliate that extends credit to employees
to purchase company stock under an eligible employee stock option or stock purchase plan);
lenders to Employee Stock Ownership Plans (ESOPs), thrift plans, and broker-dealer affiliates;
and other lenders not identified above. The bulk of regulated credit is extended by plan-lenders
and lenders to ESOPs, insurance companies, broker-dealer affiliates, and credit unions.
The registration statement remains in effect until an eligible nonbank lender submits a
deregistration statement that is approved by a Federal Reserve Bank, acting under delegated
authority from the Board.
Deregistration Statement (FR G-2)
As noted, a registered nonbank lender may apply to deregister under section 221.3(b)(2)
of Regulation U if the lender has not, during the preceding six months, had more than $200,000
of margin-stock-secured credit outstanding. The deregistration statement requires six items,
including the name and phone number of the registrant, the firm’s Internal Revenue Service
Identification Number (registrants that are individuals are not required to disclose their Social
Security number), the authorizing officer’s signature and title, and the date. A nonbank lender
who has deregistered must reregister if subsequent lending volume exceeds the thresholds
identified in Regulation U.
Annual Report (FR G-4)
The FR G-4 annual report requires nonbank lenders to provide the total amount of credit
outstanding secured directly or indirectly by margin stock as of June 30, and the amount of credit
extended secured directly or indirectly by margin stock during the year. Lenders are required to
indicate whether the loans involved are purpose or nonpurpose and to disclose whether credit is
used to fund employee stock option, purchase, or ownership plans. Those lenders funding stock
option, purchase, and ownership plans must specify whether such credit was extended pursuant
to the provisions set forth in section 221.4 of Regulation U, which authorizes employers to
extend credit to employees and ESOPs without regard to the margin requirements. All nonbank
lenders registered pursuant to Regulation U must file an annual report with the Federal Reserve.
Any new registrants are required to file the annual report for the year following their registration
date.
Statements of Purpose (FR T-4, FR U-1, and FR G-3)
Lenders that extend credit pursuant to the Federal Reserve’s margin requirements are
sometimes required to obtain purpose statements from their customers. The FR T-4 purpose
statement is used for extensions of credit by brokers and dealers, FR U-1 is used for extensions of
credit by banks, and FR G-3 for extensions of credit by other lenders.

4

Both the borrower and the lender complete the purpose statement. Each purpose
statement consists of three parts. The borrower completes Part I of the reporting form and is
required to do the following: state the amount of the loan and whether the purpose of the loan is
to purchase, carry, or trade in securities (pursuant to Regulation T) or purchase or carry margin
stock (pursuant to Regulation U) and, if not, describe the specific purpose of the loan. FR T-4
respondents must also answer a question as to whether the securities serving as collateral will be
delivered against payment. The borrower must sign and date the reporting form. The lender
completes Part II, which may entail listing and valuing any collateral. The lender then signs and
dates Part III of the reporting form, acknowledging that the customer’s statement is accepted in
good faith. The lender is required to hold the forms for at least three years after the credit is
extinguished. The Federal Reserve System does not collect or process this information, but as
noted, the information required on the form may be used by Federal Reserve examiners to assess
compliance with the Act and Regulation T.
Proposed Revisions
As noted, the Board proposed to revise the instructions for the FR G-1, FR G-2, and
FR G-4 to require respondents to submit PDF versions of the reporting forms and attachments to
a designated Board e-mail address. The Board proposed these revisions in an effort to improve
instructional clarity as the current instructions do not contain explicit guidance on report
submission. The Board did not propose any revisions to the FR G-3, FR T-4, or FR U-1. The
Board also proposed to consolidate all six Margin Credit Reports under one OMB control
number, 7100-0011, which currently only includes the FR G-1, FR G-2, and FR G-4. This
change is aimed at simplifying the tracking and clearance process for the family of Margin
Credit Reports. The Board has finalized these proposed revisions, and the revisions will be
effective July 1, 2018.
Time Schedule for Information Collection
Current Process
The FR G-l is event-generated and must be filed within 30 calendar days following the
end of the calendar quarter during which the nonbank lender becomes subject to the registration
requirements. It is filed with the Federal Reserve Bank in the district in which the principal
office of the lender is located. The Reserve Bank provides a copy to the Board.
A nonbank lender applies to deregister by sending FR G-2 to the Federal Reserve Bank in
the district in which its principal office is located. Upon receipt of FR G-2, the Reserve Bank
confirms that the registrant is eligible to deregister. The Reserve Bank then acts on the
deregistration under delegated authority from the Board and notifies the Board and the institution
of its action.
All FR G-1 registrants are required to file FR G-4, an annual report on their loans secured
by margin stock collateral. The registrant must file the FR G-4 annual report within 30 calendar
days of the June 30 date, and with the Federal Reserve Bank in the district in which the principal
office of the lender is located.

5

The FR G-3, FR T-4, and FR U-1 are recordkeeping requirements retained by the lender
for three years after the credit is extinguished. The Federal Reserve System does not collect or
process the information.
Proposed Process
The revisions require the FR G-1, FR G-2, and FR G-4 to be sent directly to the Board as
a PDF via a designated e-mail address. No other revisions to the time schedule for information
collection are being proposed.
Legal Status
The reports are authorized by section 7 of the Act (15 U.S.C. 78g). In addition, the FR T4 is required by section 220.6 of Regulation T (12 CFR 220.6), FR U-1 is required by sections
221.3(c)(1)(i) and (2)(i) of Regulation U (12 CFR 221.3(c)(1)(i) and (2)(i)), and FR G-1, FR G2, FR G-3, and FR G-4 are required by sections 221.3(b)(1), (2), and (3), and (c)(1)(ii) and (2)(ii)
of Regulation U (12 CFR 221.3(b)(1), (2), and (3), and (c)(1)(ii) and (2)(ii)). All six reports are
mandatory.
The FR G-1 and FR G-4 collect financial information, including a balance sheet, from
nonbank lenders subject to Regulation U. Some of these lenders may be individuals or nonbank
entities that do not make this information publicly available; release could therefore cause
substantial harm to the competitive position of the respondent or result in an unwarranted
invasion of personal privacy. In those cases, the information could be withheld under exemption
4 or exemption 6 of the Freedom of Information Act (5 U.S.C. 552(b)(4) and (6)).
Confidentiality determinations will be made on a case-by-case basis. Because the FR G-3, FR T4, and FR U-1 are not submitted to the Federal Reserve System and FR G-2 does not contain any
information considered to be confidential, no confidentiality determination is necessary for these
reports.
Consultation Outside the Agency
On January 23, 2018, the Board published an initial notice in the Federal Register
(83 FR 3146) requesting public comment for 60 days on the extension, with revision, of the
FR G-1, FR G-2, and FR G-4. Within the same notice, the Board also requested comment on the
extension, without revision, of the FR G-3, FR T-4, and FR U-1. The comment period for this
notice expired on March 26, 2018. The Board did not receive any comments. On May 16, 2018,
the Board published a final notice in the Federal Register (83 FR 22685). The revisions will be
implemented as proposed; however, the Board will delay the effective date until July 1, 2018,
rather than April 1, 2018.
Estimate of Respondent Burden
As shown in the table below, the total annual burden for these reports is estimated to be
245 hours. The proposed revisions would not result in a change in burden hours. The total
burden comprises both reporting and recordkeeping burden. The total annual reporting burden

6

for FR G-1, FR G-2, and FR G-4 is estimated to be 160 hours. The total annual recordkeeping
burden for FR G-3, FR T-4, and FR U-1 purpose statements is estimated to be 85 hours. The
purpose statements are used by lenders only as an internal documentation tool and are not
submitted to the Board. These reporting and recordkeeping requirements represent less than one
percent of total burden Federal Reserve System’s paperwork burden.
Number of
respondents1
Reporting
FR G-1
FR G-2
FR G-4
Recordkeeping
FR G-3
FR T-4
FR U-1

Estimated
Annual
average hours
frequency
per response

Estimated
annual burden
hours

52
25
12

1
1
1

2.50
0.25
2.00

130
6
24

6
4
4

20
20
75

0.17
0.17
0.17

20
14
51

Total

245

The estimated total annual cost to the public for the Margin Credit Reports is $13,732.2
Sensitive Questions
These collections of information contain no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The estimated cost to the Federal Reserve System is negligible.

1

Of these respondents, none are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $550 million in total assets) www.sba.gov/document/support--table-size-standards.
2
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $18, 45% Financial Managers at
$69, 15% Lawyers at $68, and 10% Chief Executives at $94). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2017, published March 30, 2018, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

7