Regulation X

Regulation X is a rule that was introduced in the Securities Exchange Act of 1934. This regulation limits the amount of credit given to foreigners for buying U.S. Treasury bonds. It is not applicable to anyone that owes less than $100,000 to brokers for securities. If a person or organization is subject to Regulation X, they are also subject regulations regarding bankers, brokers, dealers and lenders in the U.S.

Regulation X, in specific, was designed to regulate purpose credit. Purpose credit is a kind of credit authorized lenders such as bankers, brokers, and dealers give to people or institutions that use that credit to purchase treasury securities.

Regulation X is used when the use of purpose credit violates or exceeds the limits put in place by Regulations T and U. Regulations T and U include the rules regarding the terms and conditions regarding the offering of purpose credit by authorized lenders.

If there appears to be a violation, the Federal Reserve Board can take actions against the lenders to enforce the rules.

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