[Federal Register: June 4, 2002 (Volume 67, Number 107)]
[Rules and Regulations]               
[Page 38353-38361]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn02-2]                         


[[Page 38353]]

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FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 104, and 113

[Notice 2002-8]

 
Brokerage Loans and Lines of Credit

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Department of Transportation and Related Agencies 
Appropriations Act, 2001, amended the Federal Election Campaign Act 
(``FECA'' or ``the Act'') to allow a candidate to obtain a loan derived 
from an advance on a candidate's brokerage account, credit card, home 
equity line of credit, or other line of credit available to the 
candidate. The Federal Election Commission (``Commission'') is issuing 
this final rule to implement this amendment to the FECA including 
reporting requirements. Further information is provided in the 
supplementary information that follows.

DATES: Further action, including the publication of a document in the 
Federal Register announcing an effective date, will be taken after 
these regulations have been before Congress for 30 legislative days. 2 
U.S.C. 438(d).

FOR FURTHER INFORMATION CONTACT: Ms. Rosemary C. Smith, Acting 
Associate General Counsel, or Ms. Mai T. Dinh, Attorney, 999 E Street, 
NW, Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: As part of its 1999 legislative 
recommendations to Congress, the Commission sought guidance `` * * * on 
whether candidate committees may accept contributions which are derived 
from advances from a financial institution, such as advances on a 
candidate's brokerage accounts, credit card, or home equity line of 
credit * * * '' See 1999 Fed. Election Comm. Annual Rep. at 45 (2000). 
The Commission recognized that, since the FECA was first enacted, 
financial institutions have created new financing products to allow 
consumers more access to credit. The Commission recommended that the 
FECA be amended to allow candidates to access these new forms of credit 
to finance their campaigns for federal office, provided that the 
extension of credit is done in accordance with applicable law, under 
commercially reasonable terms and by persons who make these loans in 
the normal course of their business. Id.
    In the Department of Transportation and Related Agencies 
Appropriations Act, 2001, Congress amended the FECA (2 U.S.C. 
431(8)(B)) to exclude from the definition of contribution ``a loan of 
money derived from an advance on a candidate's brokerage account, 
credit card, home equity line of credit, or other line of credit 
available to the candidate* * * '' The amendment also included the 
three conditions contained in the Commission's legislative 
recommendation described above. The Department of Transportation and 
Related Agencies Appropriations Act, 2001, became Public Law 106-346 on 
October 23, 2000.\1\
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    \1\ Public Law 106-346 included other statutory changes 
regarding reporting of independent expenditures, which has been 
addressed in a separate rulemaking. See Independent Expenditure 
Reporting Final Rules, 67 FR 12834 (March 20, 2002).
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    The Commission is issuing these final rules to implement this 
amendment to the FECA. The final rules also include the reporting 
requirements associated with obtaining and repaying loans derived from 
brokerage accounts, credit card advances, and lines of credit. In 
addition to publishing the final rules in the Federal Register, the 
Commission is submitting these final rules to Congress for 30 
legislative days before publishing an effective date. See 2 U.S.C. 
438(d). This submission will satisfy the requirements of the 
Administrative Procedures Act, 5 U.S.C. 553(d), and the Congressional 
Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1), requiring agencies 
to submit final rules to the Speaker of the House of Representatives 
and the President of the Senate and to publish them in the Federal 
Register at least 30 calendar days before they take effect. The final 
rules on brokerage loans and lines of credit were transmitted to 
Congress on May 28, 2002.

Explanation and Justification

    On July 25, 2001, the Commission published a Notice of Proposed 
Rulemaking (``NPRM'') containing its proposal to make the regulatory 
changes that would implement the amendment to the FECA to permit 
candidates to receive advances from their brokerage accounts, credit 
cards, home equity lines of credit, or other lines of credit. 66 FR 
38576. The Commission raised several issues in the NPRM and solicited 
comments on those issues, as well as the proposed rules in general. The 
Commission also announced that it would hold a public hearing on 
September 19, 2001, if there were sufficient requests to testify. The 
deadline for submitting comments and requesting to testify at the 
public hearing was August 24, 2001. Because the Commission did not 
receive any requests to testify, it canceled the public hearing. The 
notice of the cancellation was published in the Federal Register on 
September 11, 2001. 66 FR 47120. The Commission received only one 
comment, which was from Mr. Scott Holz, Senior Counsel at the Board of 
Governors of the Federal Reserve System.

Amendment to Definitions of Contribution and Expenditure

11 CFR 100.7  Contribution (2 U.S.C. 431(8))

1. General Provisions on Brokerage Loans and Lines of Credit
    In order to exempt loans covered by this amendment to the FECA from 
the definition of ``contribution,'' the final rules amend 11 CFR 
100.7(b) by changing the introductory language of paragraph (b)(11) and 
adding a new 11 CFR 100.7(b)(22) to include brokerage loans, credit 
card advances, and other lines of credit made to candidates as among 
the items that are not considered contributions. The amended and new 
paragraphs track the language of the amendment to the FECA including 
the conditions set forth, along with some additional clarifications and 
guidance regarding reporting requirements.
    The Commission recognizes that commercial banks offer various lines 
of credit to their customers. Because the amendment to the FECA 
specifically establishes different criteria for lines of credit for 
candidates, the Commission is amending 11 CFR 100.7(b)(11) to exempt 
specifically brokerage loans, credit card advances, and other lines of 
credit extended to candidates from the requirements of bank loans 
contained in section 100.7(b)(11). The final rules amend paragraph 
(b)(11) by adding a sentence at the end of the introductory text that 
states that brokerage loans, credit card advances, and other lines of 
credit made to candidates under section 100.7(b)(22) are not subject to 
section 100.7(b)(11). This exception also includes overdrafts made on 
personal checking or savings accounts of candidates because overdraft 
protection is one form of a line of credit. Thus, overdrafts made on a 
candidate's personal bank accounts are subject to the requirements of 
new section 100.7(b)(22). It is important to note that section 
100.7(b)(11) will still apply to all loans and lines of credit made to 
a political committee and to conventional bank loans made to a 
candidate. No substantive comments were received regarding this issue.

[[Page 38354]]

2. Endorsers, Guarantors, and Co-Signers
    New paragraph (b)(22) implements the three statutory requirements 
for obtaining a loan derived from an advance on a candidate's brokerage 
account, credit card, home equity line of credit, or other line of 
credit, which are: that the loan is made in accordance with applicable 
law; that the loan is made under commercially reasonable terms; and 
that persons making the loans make such loans in the normal course of 
their business. This new regulation also addresses situations where 
there are endorsers, guarantors, or co-signers of these loans. New 
paragraph (b)(22), similar to current paragraph (b)(11), provides that 
an endorser, guarantor, or co-signer is considered a contributor for 
the amount that the endorser, guarantor or co-signer is liable. This 
information must be disclosed on the Schedule C or C-P. See below. The 
exception is when the endorser, guarantor, or co-signer is the spouse 
of the candidate and the candidate's share of collateral used to obtain 
a secured loan equals or exceeds the amount of the loan. See 11 CFR 
100.7(a)(1)(i)(D). Under proposed section 100.7(b)(22)(ii)(B) in the 
NPRM, when a spouse is an endorser, guarantor, or co-signer of an 
unsecured loan, the spouse would not be considered a contributor if the 
candidate uses, in connection with the campaign, only one-half of the 
available credit. The Commission sought comments on whether the 
regulations should allow the candidate to use the entire amount of the 
available credit for use in connection with a campaign in instances 
where the loan is in the ordinary course of business and the candidate 
is liable for the entire amount of the loan even though the spouse has 
endorsed, guaranteed, or co-signed for the loan. The Commission 
received no comments on this issue. In order for new section 
100.7(b)(22)(ii)(B) to be consistent with the existing requirements of 
current paragraphs 100.7(a)(1)(i)(D) and (b)(11) regarding spouses who 
are endorsers, guarantors, or co-signers,\2\ the Commission decided not 
to change the language in the proposed rule. Because no collateral is 
offered for unsecured debt, one-half of the available credit is a 
reasonable amount.
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    \2\ Paragraph 100.7(a)(1)(i)(D), which paragraph (b)(11) adopts 
by reference, states that:
    The spouse shall not be considered a contributor to the 
candidate's campaign if the value of the candidate's share of the 
property equals or exceed, the amount of the loan which is used for 
the candidate's campaign.
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    Finally, section 432(e)(2) of the FECA and 11 CFR 101.2 state that 
a candidate is an agent of the candidate's authorized committee when he 
or she obtains a loan for use in connection with a campaign. Given that 
Public Law 106-346 did not distinguish loans derived from an advance on 
the candidate's brokerage account, credit card, home equity line of 
credit, or other line of credit, from other types of loans, a candidate 
who obtains these loans for use in connection with the candidate's 
campaign is acting as an agent for his or her authorized committee 
under 2 U.S.C. 432(e) and 11 CFR 101.2.
3. Loans for Routine Living Expenses
    In addition to provisions described above, new section 100.7(b)(22) 
contains a provision that addresses loans derived from an advance on 
the candidate's brokerage account, credit card, home equity line of 
credit, or other line of credit that are used for the candidate's 
routine living expenses. The Commission has determined that such loans 
would not violate 2 U.S.C. 439a or 11 CFR 113.2(d), prohibiting 
personal use of campaign funds. The loan, however, must be repaid from 
the candidate's personal funds.
    The Commission sought comment in the NPRM on whether the final 
rules should contain a descriptive and/or inclusive definition of the 
phrase ``personal living expenses.'' The Commission did not receive any 
comments on this question. Upon further examination of 11 CFR part 100, 
the Commission has determined that ``personal living expenses'' are no 
different than ``routine living expenses'' as described in 11 CFR 
100.8(b)(22). Because it is unnecessary to introduce a new term into 
the regulations in this instance, the Commission has decided to use 
``routine living expenses'' in new section 100.7(b)(22)(iii) instead of 
``personal living expenses.''
    Although the final rules do not define ``personal living 
expenses,'' the Commission has determined that it may be useful if this 
Explanation and Justification includes examples of items that are 
considered to be ``routine living expenses,'' recognizing that it would 
be impossible to describe every possible expense of a candidate that is 
not for the purpose of influencing the candidate's election to Federal 
office. The examples are: (1) Household items or supplies, including 
food, furniture, and accessories; (2) funeral, cremation, or burial 
expenses; (3) clothing, other than clothing purchased to attend 
campaign related events or appearances; (4) tuition payments, other 
than those associated with training relating to the campaign; (5) 
mortgage, rent, and utility payments, and maintenance and repair 
expenses associated with residential real property; (6) investment 
expenses such as acquiring securities on margin if no amount of the 
investment and its proceeds are used for the purpose of influencing the 
candidate's election for Federal office; (7) vehicle expenses, 
including loan payments, gas, insurance, maintenance, and repair; (8) 
charitable donations unless the candidate receives compensation for 
services to the charitable entity that become personal funds of the 
candidate and then are used for the purpose of influencing the 
candidate's election for Federal office; and (9) travel expenses if the 
travel is unrelated to the campaign.
    A. Loans Used Exclusively for Routine Living Expenses. In the NPRM 
the Commission sought comments on whether the final rule should require 
the candidate's authorized committee to report loans used exclusively 
for the candidate's routine living expenses. The Commission did not 
receive any comments on this issue. If a candidate used all of the loan 
proceeds for routine living expenses, then it logically follows that 
none of the loan proceeds is used for the purpose of influencing the 
candidate's election for federal office. Therefore, the Commission 
concludes that the reporting requirements in the final rule, which 
remains unchanged from the proposed rule, are a reasonable approach to 
loans used for this purpose. Under new paragraph 100.7(b)(22)(iii)(A), 
loans used solely for routine living expenses do not need to be 
reported in accordance with 11 CFR part 104.
    B. Loans Used for Routine Living Expenses and for the Purpose of 
Influencing the Candidate's Election for Federal Office. Unlike loans 
that are used exclusively for routine living expenses, the final rules 
require reporting of loans that are used both for routine living 
expenses and for the purpose of influencing the candidate's election 
for federal office. Under new section 100.7(b)(22)(iii)(D), if a loan 
or an advance that is derived from the candidate's brokerage account, 
credit card, home equity line of credit, or other line of credit is 
used for the purpose of influencing the candidate's election for 
Federal office and for other purposes, including routine living 
expenses, then the portion that is used for the purpose of influencing 
the candidate's election for Federal office must be reported under 11 
CFR part 104. For example, if a candidate establishes a margin account 
with a brokerage firm to acquire additional securities on margin and to 
obtain non-purpose credit to finance the

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campaign, then the non-purpose credit used to finance the campaign must 
be reported, but the credit used to purchase securities purchased on 
margin does not need to be reported.
    C. Repayments of Loans Used for Routine Living Expenses by Third 
Parties. Under new paragraphs (b)(22)(iii)(C), the candidate's 
principal campaign committee must report a loan that is used for 
routine living expenses if a third party, except the candidate's 
spouse, repays, guarantees, endorses, or co-signs the loan, in part or 
in whole. The third party is deemed to make a contribution in the 
amount of the endorsement, guarantee, or liability and this amount 
would be subject to the limitations and prohibitions of the FECA. See 
11 CFR 113.1(g)(6). Thus, if a third party repays, guarantees, 
endorses, or co-signs the loan, the authorized committee must report 
the loan and the repayment under 11 CFR 104.3, 104.8 and 104.9.
    D. Defining ``Used for the Candidate's Campaign''. In addition to 
seeking comment on whether the term ``personal living expenses'' is 
sufficiently descriptive and inclusive, the Commission also sought 
comment on whether the final rules should define the scope of the 
phrase ``used for the candidate's campaign,'' which is included in 
proposed section 100.7(b)(22)(ii)(A) in the NPRM and is derived from 2 
U.S.C. 432(e)(2). No comments concerning this issue were received. 
After additional analysis, the Commission decided not to define the 
phrase ``used for the candidate's campaign.'' Rather, the phrases 
``used for the candidate's campaign'' and ``used in connection with the 
campaign'' (in proposed section 100.7(b)(22(ii)(B) in the NPRM) have 
been replaced by the phrase ``used for the purpose of influencing the 
candidate's election for Federal office'' in the final rules. This new 
phrase is derived from the statutory language in 2 U.S.C. 
431(8)(A)(i).\3\ The amendment to the FECA, that is the basis of this 
rulemaking, added loans derived from an advance on a candidate's 
brokerage account, credit card, home equity line of credit, and other 
lines of credit available to the candidate to the list of valuable 
services in 2 U.S.C. 431(8)(B) that are not considered as 
contributions. It is appropriate to use similar terminology because 
regulatory language should reflect the statutory language on which it 
is based and section 100.7 is grounded in 2 U.S.C. 431(8).
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    \3\ The statutory language states that ``[t]he term 
``contribution'' includes--(i) any gift, subscription, loan, 
advance, or deposit of money or anything of value made by any person 
for the purpose of influencing any election for Federal office; * * 
*''
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    The only difference is that the regulatory language of new 
paragraph 100.7(b)(22) limits the application to the candidate's 
election, not to any election, for Federal office. For example, if 
Candidate X uses a draw on his own personal line of credit to make a 
contribution to Candidate Y's campaign, then Candidate X's committee 
does not have to report the draw.
    The final rules do not contain a definition of ``used for the 
purpose of influencing the candidate's election for Federal office'' 
because the meaning of the phrase ``for the purpose of influencing any 
election for Federal office'' has been extensively discussed in 
advisory opinions, enforcement actions (matter under review or 
``MUR''), and court cases. See e.g. FEC v. Ted Haley Cong. Comm., 852 
F.2d 111, 114-16 (9\th\ Cir. 1998); Advisory Opinions 1983-12, 1990-5, 
and 1992-6; MUR 3918 (Hyatt for Senate). The court cases, advisory 
opinions, and enforcement actions provide guidance on when a loan is 
being used for the purpose of influencing the candidate's election for 
Federal office.
    E. Bank Loans Used for Routine Living Expenses. The NPRM sought 
comments on whether the final rules should make similar clarifications 
regarding the reporting of bank loans that are used solely for the 
candidate's personal living expenses. The Commission did not receive 
any comments on this issue. The FECA standards for bank loans are 
higher than those for loans derived from a candidate's brokerage 
account, credit card, home equity line of credit, or other lines of 
credit. Bank loans are required, among other things, to be made on a 
basis that assures repayment and must be subject to a due date or 
amortization schedule, requirements that do not generally exist for 
loans derived from a candidate's brokerage account, credit card, home 
equity line of credit, or other lines of credit. See 2 U.S.C. 
431(8)(B)(vii)(II). Thus, the FECA already provides for greater 
safeguards ensuring repayment of bank loans. Consequently, the 
Commission has concluded that it is not necessary to amend the bank 
loan rules at this time to address more specifically loans whose 
proceeds are used for routine living expenses.
4. Repayments of Loans by Authorized Committees to Either the Candidate 
or the Lending Institution
    Under new section 100.7(b)(22)(iv), the candidate's authorized 
committee will have the option of repaying the loan directly to the 
lending institution or to the candidate. The NPRM included an 
alternative approach as to how the candidate's authorized committee 
must accept and use the proceeds of a loan derived from a candidate's 
brokerage account, credit card, home equity line of credit, or other 
lines of credit, and repays that loan. The alternative approach set out 
in the proposed rules would require that the initial receipt and 
eventual repayment of the loan must pass through the candidate's 
personal account. In other words, the lending institution must disburse 
the loan proceeds to the candidate who would then loan or contribute 
the money to the authorized committee. If the candidate loans the money 
to the authorized committee, the committee would be required to repay 
the loan to the candidate, not to the lending institution, and the 
candidate would then repay the lending institution. If the candidate 
makes a contribution as a gift to the campaign, the committee would not 
repay either the candidate or the financial institution.
    The Commission did not receive any comments to this alternative 
approach. The final rules do not adopt this alternative approach in 
order to allow the candidates and their authorized committees the 
flexibility to structure and manage these loans in a manner that fits 
their needs and circumstances. Requiring that the disbursement and 
repayment of these loans pass through the candidate's personal bank 
account may be burdensome and inefficient for some candidates and their 
committees. Therefore, the final rules allow the candidate and the 
authorized committee to decide whether the disbursement of the loan 
proceeds and the loan repayments should pass through the candidate's 
personal bank account or be paid, and repaid, directly between the 
financial institution and the authorized committee.
5. Other Amendments to 11 CFR 100.7(b)
    The final rules delete an obsolete reference in the introductory 
text of 11 CFR 100.7(b)(11) to the Federal Savings and Loan Insurance 
Corporation (``FSLC''). The FSLC has been dissolved and its deposit 
insurance responsibilities have been transferred to the Federal Deposit 
Insurance Corporation pursuant to the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989, Pub. L. 101-73 (August 9, 1989).

11 CFR 100.8  Expenditure

    Currently, 11 CFR 100.8(b)(12) exempts bank loans from the 
definition of ``expenditure'' and contains parallel

[[Page 38356]]

language to that found in the exceptions to the definition of 
``contribution'' in section 100.7(b)(11). The final rules exempt loans 
derived from advances on a candidate's brokerage account, credit card, 
home equity line of credit, or other line of credit available to the 
candidate, from the definition of ``expenditure'' by amending section 
100.8(b)(12) and by adding a new section 100.8(b)(24). The amendments 
to section 100.8(b)(12) are similar to the amendments to section 
100.7(b)(11). See above. New section 100.8(b)(24) adopts, by reference, 
the language of new section 100.7(b)(22).

Reporting Requirements

    The NPRM included several reporting requirements pertaining to 
loans derived from an advance on a candidate's brokerage account, 
credit card, home equity line of credit, or other line of credit for 
use in connection with the candidate's campaign. Under the proposed 
rules, the candidate's principal campaign committee would report 
transactions between the lending institution and the candidate, and 
between the candidate and the principal campaign committee.
    The NPRM also included an alternative reporting approach and sought 
comments on the approach. Under this alternative, a committee would be 
required only to report certain limited information about loans derived 
from advances on brokerage accounts, credit cards, home equity lines of 
credit, or other lines of credit when the candidate has loaned or 
contributed outright, as a gift, such funds to the committee. This 
information would include the name of the institution and any 
applicable interest rate and the due date. Further, in the situation 
where the candidate has loaned the funds to the committee, the 
committee would only be required to report repayments to the candidate, 
and would not report the repayments by the candidate to the lending 
institution. This limited reporting approach would be applied to loans 
from banks as well as to the loans derived from other sources covered 
by the recent statutory amendment. It would rely on the complaint and 
audit processes to monitor situations where the lending institution 
forgives the loan, in part or in whole, or where the candidate relies 
on third parties to make the repayments to the lending institution. The 
Commission did not receive any comments on this alternative. The 
Commission has decided to adopt this alternative reporting approach. 
The new reporting requirements are described below.

11 CFR 104.3  Contents of Reports

    As noted above, the final rules require that loans derived from an 
advance on a candidate's brokerage account, credit card, home equity 
line of credit, or other line of credit for use in connection with the 
candidate's campaign, be reported by the candidate's principal campaign 
committee. The requirements are set forth in several sections in 11 CFR 
part 104. In section 104.3, the candidate's principal campaign 
committee is required to report the loan of money from the candidate as 
a receipt under revised paragraph (a)(3)(vii)(B). It is also required 
to report any repayment of the loan to the candidate as a disbursement 
under revised paragraph (b)(2)(iii)(A). These two paragraphs are 
amended to reflect that loans from the candidate may derive from a bank 
loan or an advance from a brokerage account, credit card, home equity 
line of credit or other lines of credit available to the candidate.
    Under the final rules, section 104.3(b)(4)(iii) is amended to 
specifically include persons who receive repayments from a reporting 
committee of loans derived from an advance on a candidate's brokerage 
account, credit card, or lines of credit, as among those who must be 
identified and itemized in the report. ``Persons'' in this new section 
include candidates and lending institutions. Section 104.3(b)(4)(iv) is 
deleted, removing the requirement that the principal campaign committee 
report each person who receives a repayment from the candidate.
    Current 11 CFR 104.3(d) describes the requirements for reporting 
debts and obligations. The final rules amend this paragraph to set 
forth the new reporting requirements for loans derived from advances on 
a candidate's brokerage account, credit card, home equity line of 
credit and other lines of credit and for bank loans made to candidates. 
First, the introductory language of paragraph (d) is amended to make 
clear that these advances must be reported if they are used for the 
candidate's campaign even if the advances were received before the 
individual became a candidate for federal office. Second, the reference 
to ``candidate'' in paragraph (d)(1) is deleted to exclude bank loans 
to candidates from the reporting requirements of that paragraph. 
Instead of paragraph (d)(1), bank loans to candidates must now be 
reported in accordance with paragraph (d)(4) in Schedule C-1 or C-P-1. 
Political committees must continue to report the information listed in 
paragraph (d)(1) in Schedule C-1 and C-P-1.
    The final rules add a new section 104.3(d)(4) to describe the 
information that must be disclosed in the report about loans to 
candidates, including bank loans. The new paragraph requires authorized 
committees to disclose loans derived from an advance from a candidate's 
brokerage account, credit card, or line of credit on Schedules C, C-P, 
C-1, and C-P-1. Current Schedules C, C-P, C-1 and C-P-1 have not been 
revised to reflect the new reporting requirements for loans to 
candidates from financial institutions. Rather, the instructions to 
Schedules C, C-P, C-1 and C-P-1, and to the Detailed Summary Pages for 
Forms 3 and 3P, will be modified to reflect the new reporting 
requirements under new section 104.3(d)(4). Revisions to the 
instructions to these schedules will be transmitted to Congress at a 
later point, and will become effective at the same time as the 
amendments to the regulations. The revised instructions will be posted 
on the Commission's Web site (www.fec.gov) and will be available to the 
public through the Commission's Information Division.
    Under new section 104.3(d)(4), committees are required to disclose 
the following information: date, amount and interest rate of the loan; 
name and address of the lending institution; and type and value of 
collateral or security, if any. The Commission did not receive any 
comments pertaining to this section.

11 CFR 104.8  Uniform Reporting of Receipts

    Current 11 CFR 104.8 requires that certain receipts, including 
loans, be disclosed on Schedule A. The final rules add new paragraph 
(g) to section 104.8 to describe how receipt of bank loans to 
candidates and loans derived from an advance from a candidate's 
brokerage account, credit card, or line of credit must be reported on 
Schedule A. When the candidate's committee receives the funds directly 
from the lending institution or from the candidate (as a loan or a 
contribution, as a gift), it is reported as an itemized entry on 
Schedule A. A cross reference to section 100.7(b)(22)(iii) is also 
included in new section 104.8(g) regarding the reporting of loans 
obtained solely for the candidate's routine living expenses. Unlike the 
proposed rules, the committee is not required to report loan 
disbursements to the candidate. Also, the loan must be continuously 
reported on Schedule C or C-P until it is extinguished. The candidate 
may choose either to loan or to contribute, as a gift, the loan 
proceeds to the

[[Page 38357]]

authorized committee.\4\ If the money is designated as a contribution 
when the authorized committee reports the receipt, then the authorized 
committee cannot repay the underlying loan to the financial 
institution. Any repayment of the underlying loan would constitute 
conversion of campaign funds for personal use and is prohibited by 11 
CFR 113.2(d). The reporting requirements remain the same. The 
contribution, as a gift, from the candidate to the authorized committee 
must be reported as an itemized receipt in Schedule A. The underlying 
loan must be reported on the Schedule C-1 or C-P-1.
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    \4\ The contribution is not subject to contribution limitations 
in 2 U.S.C. 441a(a). See Buckley v. Valeo, 424 U.S. 1 (1976).
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11 CFR 104.9  Uniform Reporting of Disbursements

    Current 11 CFR 104.9 requires that certain disbursements, including 
loan repayments, be disclosed on Schedule B. The final rules add new 
paragraph (f) to section 104.9 to explain how repayments of bank loans 
to candidates and loans derived from an advance from a candidate's 
brokerage account, credit card, or line of credit are to be reported on 
Schedule B. Repayment by the candidate's committee to the lending 
institution or the candidate is reported as an itemized entry on 
Schedule B. Unlike the proposed rules, the committee is not required by 
the final rules to report repayments by the candidate to the lending 
institution.

11 CFR 104.14  Formal Requirements Regarding Reports and Statements

    Unlike the regulations for bank loans to political committees, the 
final rules do not require principal campaign committees to submit to 
the Commission loan agreements or similar documents that are connected 
with a bank loan to the candidate or a loan derived from an advance 
from a candidate's brokerage account, credit card, or line of credit. 
However, the alternative reporting approach, which the Commission has 
adopted in the final rules, contemplates that in lieu of requiring the 
candidate's committee to disclose detailed information about these 
loans, the final rules would require candidates to preserve records 
pertaining to bank loans to the candidates or loans derived from an 
advance from a candidate's brokerage account, credit card, or line of 
credit. This will enable the Commission to conduct investigations and 
audits when necessary, pursuant to the enforcement and audit authority. 
See 2 U.S.C. 437g and 438(b). Therefore, the final rules added new 
paragraph (b)(4) to section 104.14 that lists the following types of 
documents that candidates must preserve for three years following the 
date of the election for which they were candidates:
    a. Records that demonstrate the ownership of the accounts or assets 
securing the loans such as statements for accounts that identify the 
account holders, the owners of the credit card account, and the names 
on the deed for the home used for a line of credit;
    b. Copies of the executed loan agreements and all security and 
guarantee statements;
    c. Statements of account for all accounts used to secure any loan 
for the period the loan is outstanding such as brokerage accounts or 
credit card accounts, and statements on any line of credit account that 
was used for the purpose of influencing the candidate's election for 
Federal office;
    d. For brokerage loans or other loans secured by financial assets, 
documentation to establish the source of the funds in the account at 
the time of the loan; and
    e. Documentation (check copies etc.) for all payments made on the 
loan by any person.
    The NPRM solicited comments on whether to require the candidate's 
principal campaign committee to submit loan agreements and similar 
documents on loans derived from an advance from a candidate's brokerage 
account, credit card, or line of credit when the committee files 
Schedule D. The Commission did not receive any comments on this issue. 
Because the Commission has decided to adopt the alternative reporting 
approach, the candidate's principal campaign committee is not required 
to submit these documents.
    The Commission, however, did receive a comment concerning the 
documents that are required to be maintained under section 104.14. The 
NPRM listed the Federal Reserve's Form T-4 as among the documents that 
must be maintained for three years. The commenter stated that non-
purpose credit extended from margin accounts does not require a Form T-
4. Only those that are extended from non-purpose credit accounts 
require Form T-4. Also, the brokerage firms generally retain the forms 
and do not necessarily provide a copy to the customer. Therefore, 
authorized committees do not need to maintain copies of Form T-4 in 
their files.

Conforming Amendment

11 CFR 113.1  Definitions

    Under the final rules, the third party payments provisions of the 
definition of ``personal use'' in 11 CFR 113.1(g)(6) is amended to 
include a repayment, endorsement, guarantee, or co-signature of a loan 
derived from a candidate's brokerage account, credit card, home equity 
line of credit, or other line of credit and used for the candidate's 
routine living expenses within the meaning of ``payment.'' A cross 
reference to section 100.7(b)(22) is included in this paragraph.

Additional Topics on Which No Changes to the Rules Are Being Made

Margin Requirements

    The NPRM stated that a loan derived from a brokerage account is 
obtained by opening a non-purpose credit account. The commenter pointed 
out that non-purpose credit can also be extended from margin accounts 
but they are subject to the limitations and regulations of Regulation 
T, 12 CFR part 220. Under 12 CFR 220.6(e), however, non-purpose credit 
accounts are not subject to Regulation T's margin requirements but are 
subject to the rules of the self regulating organizations (``SRO'') 
that regulate the exchanges. Recognizing that non-purpose credit 
accounts contain similar inherent risks to margin accounts, the two 
largest SRO, the New York Stock Exchange (``NYSE'') and the National 
Association of Securities Dealers (``NASD''), established minimum 
maintenance margins for non-purpose credit accounts that are applicable 
to the members in their exchanges.\5\ Generally, the minimum 
maintenance margin is 25 percent.\6\ That is, a customer must maintain 
securities valued at 125 percent of the outstanding non-purpose credit. 
Individual brokerage firms may require higher maintenance margins.
---------------------------------------------------------------------------

    \5\ Margin is the amount paid by the customer when using the 
broker's credit to purchase securities. The maintenance margin is 
the minimum margin that must be held or maintained in an account. As 
long as the value of the equity in the customer's account exceeds 
the maintenance margin, the customer is not required to make 
payments on the loan. A margin call occurs when the value of a 
customer's account falls below the maintenance margin and the 
brokerage firm issues a demand to a customer to deposit more cash or 
securities into the account so that the value of the account 
increases to at least the maintenance margin.
    \6\ However, the Federal Reserve Board may amend Regulation T to 
change the minimum maintenance for margin accounts. Also, the SRO 
may change the maintenance margin for non-purpose credit account 
with the approval of the Securities and Exchange Commission (SEC).

---------------------------------------------------------------------------

[[Page 38358]]

    Brokerage firms are supposed to issue a margin call if the equity 
in a customer's non-purpose credit account falls below the maintenance 
margin. Both the NYSE and the NASD, however, allow firms not to issue a 
margin call if the firm is willing to take a charge against its net 
capital, pursuant to SEC Rule 15c3-1, for the amount the customer would 
have been required to deposit to meet the margin call.\7\ See NYSE Rule 
431(e)(7) and NASD Rule 2520(e)(7).
---------------------------------------------------------------------------

    \7\ This practice is not available to non-purpose credit 
extended from margin accounts because the Federal Reserve Board's 
Regulation T requires that brokers issue a margin call when a margin 
account falls below the maintenance margin.
---------------------------------------------------------------------------

    Although this practice may be considered to be in the ordinary 
course of business, nevertheless, the candidate would receive something 
of value--not having to deposit additional cash or securities into an 
account--for free. Essentially, the brokerage firm is providing 
additional collateral to the candidate without being compensated. Even 
though the brokerage firm may provide the same service to other 
customers who are not seeking Federal office, the Commission has 
determined that services offered free of charge by corporations in the 
ordinary course of business for promotional or good will purposes (if 
these services might otherwise have required consideration) are 
prohibited by 2 U.S.C. 441b. See Advisory Opinions 1996-2, 1988-25, 
1988-12. Moreover, by not making the margin call, the candidate has 
increased his or her risk exposure and may be less likely to be able to 
repay the loan.
    In the NPRM, the Commission sought comments on whether a brokerage 
firm that makes a charge against net capital may, under certain 
circumstances, provide something of value to candidates which is 
prohibited by 2 U.S.C. 441b. The Commission did not receive any 
comments on this issue. Given the analysis above, the Commission has 
concluded that brokerage firms that take a charge against their net 
capital instead of making a margin call on non-purpose credit accounts 
used by candidates to finance their campaign are making an unlawful 
corporate contribution. The final rules do not specifically address 
this issue because the Federal Reserve Board and the Securities and 
Exchange Commission have primary jurisdiction over these transactions. 
Rather, should the situation arise, the Commission may address this 
issue on a case-by-case basis through its enforcement or advisory 
opinion processes.

Repayment and Termination

    Loans derived from a candidate's brokerage account, credit card 
account, home equity line of credit, or other lines of credit, present 
several repayment issues. Under 2 U.S.C. 432(e)(2), a candidate is 
considered an agent of the authorized committee when obtaining a loan 
for use in connection with the candidate's campaign for federal office. 
As such, the authorized committee currently has a continuing obligation 
to report the loan until it is repaid to the lending institution. In 
practice, customers are not required to make payments on the loans 
derived from a brokerage account unless the value of the non-purpose 
credit account falls below the maintenance margin. If the securities in 
margin and non-purpose credit accounts continually increase in value, 
then the customer does not have to make any payments. Thus, a candidate 
could maintain a loan balance well after the candidate is no longer 
seeking federal office.
    Currently, a committee reports the disposition and repayment of its 
loans, including loans to the candidate that are used for campaign 
purposes, before it can terminate. For purposes of determining the 
disposition of these loans, the Commission sought comments on when a 
brokerage loan should be considered repaid in full and on when a 
committee can terminate. The Commission did not receive any comments on 
these questions.
    Because the Commission has adopted the alternative reporting 
approach, the candidate's principal campaign committee no longer must 
report the candidate's repayments directly to the lending institution. 
Thus, the committee may terminate once it has repaid the loans made to 
the committee even if the underlying loan remains outstanding against 
the candidate. However, it is important to note that the candidate must 
still preserve the records described in new section 104(b)(4) for three 
years after the election even if the committee terminates before that 
date.

Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
Flexibility Act)

    The attached final rules do not have a significant economic impact 
on a substantial number of small entities. The final rules implement 
the changes to the FECA expressly permitting candidates to obtain loans 
from a wider range of financial institutions. This increases the 
flexibility that candidates would have to seek financing for their 
campaigns. The requirement to report loans derived from an advance from 
a candidate's brokerage account, credit card, or line of credit only 
impacts the candidates and their campaign committees. It does not have 
a significant economic impact on these committees because they are 
already required to report all loans that are made in connection with a 
federal campaign. In fact, the reporting requirements in the final 
rules are minimal. The changes will not cause committees to devote much 
additional time or resources to comply with the reporting requirements. 
Therefore, the attached final rules do not have a significant economic 
impact on a substantial number of small entities.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 104

    Campaign funds, Political committees and parties, Reporting and 
recordkeeping requirements.

11 CFR Part 113

    Campaign funds.

    For the reasons set out in the preamble, Subchapter A, Chapter I of 
title 11 of the Code of Federal Regulations is amended as follows:

PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)

    1. The authority citation for part 100 continues to read as 
follows:

    Authority: 2 U.S.C. 431, 434(a)(11), 438(a)(8).


    2. 11 CFR 100.7 is amended by revising the introductory text of 
paragraph (b)(11) and adding new paragraph (b)(22) to read as follows:


Sec. 100.7.  Contribution (2 U.S.C. 431(8)).

* * * * *
    (b) * * *
    (11) A loan of money by a State bank, a federally chartered 
depository institution (including a national bank) or a depository 
institution whose deposits and accounts are insured by the Federal 
Deposit Insurance Corporation or the National Credit Union 
Administration is not a contribution by the lending institution if such 
loan is made in accordance with applicable banking laws and regulations 
and is made in the ordinary course of business. A loan will be deemed 
to be made in the ordinary course of business if it: Bears the usual 
and customary interest rate of the lending institution for the category 
of loan involved; is made on a basis which assures repayment; is 
evidenced by a written

[[Page 38359]]

instrument; and is subject to a due date or amortization schedule. Such 
loans shall be reported by the political committee in accordance with 
11 CFR 104.3(a) and (d). Each endorser or guarantor shall be deemed to 
have contributed that portion of the total amount of the loan for which 
he or she agreed to be liable in a written agreement, except that, in 
the event of a signature by the candidate's spouse, the provisions of 
11 CFR 100.7(a)(1)(i)(D) shall apply. Any reduction in the unpaid 
balance of the loan shall reduce proportionately the amount endorsed or 
guaranteed by each endorser or guarantor in such written agreement. In 
the event that such agreement does not stipulate the portion of the 
loan for which each endorser or guarantor is liable, the loan shall be 
considered a contribution by each endorser or guarantor in the same 
proportion to the unpaid balance that each endorser or guarantor bears 
to the total number of endorsers or guarantors. For purposes of this 
paragraph (b)(11), an overdraft made on a checking or savings account, 
other than the personal account of a candidate, shall be considered a 
contribution by the bank or institution unless: The overdraft is made 
on an account which is subject to automatic overdraft protection; the 
overdraft is subject to a definite interest rate which is usual and 
customary; and there is a definite repayment schedule. However, this 
paragraph (b)(11) shall not apply to any loan of money derived from an 
advance on a candidate's brokerage account, credit card, home equity 
line of credit, or other lines of credit described in paragraph (b)(22) 
of this section.
* * * * *
    (22) (i) Any loan of money derived from an advance on a candidate's 
brokerage account, credit card, home equity line of credit, or other 
line of credit available to the candidate, including an overdraft made 
on a personal checking or savings account of a candidate, provided 
that:
    (A) Such loan is made in accordance with applicable law and under 
commercially reasonable terms; and
    (B) The person making such loan makes loans derived from an advance 
on a candidate's brokerage account, credit card, home equity line of 
credit, or other line of credit in the normal course of the person's 
business.
    (i) Each endorser, guarantor, or co-signer shall be deemed to have 
contributed that portion of the total amount of the loan derived from 
an advance on a candidate's brokerage account, credit card, home equity 
line of credit, or other line of credit available to the candidate, for 
which he or she agreed to be liable in a written agreement, including a 
loan used for the candidate's routine living expenses. Any reduction in 
the unpaid balance of the loan, advance, or line of credit shall reduce 
proportionately the amount endorsed or guaranteed by each endorser or 
guarantor in such written agreement. In the event that such agreement 
does not stipulate the portion of the loan, advance, or line of credit 
for which each endorser, guarantor, or co-signer is liable, the loan 
shall be considered a contribution by each endorser or guarantor in the 
same proportion to the unpaid balance that each endorser, guarantor, or 
co-signer bears to the total number of endorsers or guarantors. 
However, if the spouse of the candidate is the endorser, guarantor, or 
co-signer, the spouse shall not be deemed to make a contribution if:
    (A) For a secured loan, the value of the candidate's share of the 
property used as collateral equals or exceeds the amount of the loan 
that is used for the candidate's campaign; or
    (B) For an unsecured loan, the amount of the loan used for in 
connection with the candidate's campaign does not exceed one-half of 
the available credit extended by the unsecured loan.
    (iii) (A) A loan derived from an advance on a candidate's brokerage 
account, credit card, home equity line of credit, or other line of 
credit available to the candidate, that is used by the candidate solely 
for routine living expenses, as described in 11 CFR 100.8(b)(22), does 
not need to be reported under 11 CFR part 104 provided that the loan, 
advance, or line of credit is repaid exclusively from the personal 
funds of the candidate or payments that would have been made 
irrespective of the candidacy pursuant to 11 CFR 113.1(g)(6).
    (B) Any repayment, in part or in whole, of the loan, advance, or 
line of credit described in paragraph (b)(22)(iii)(A) of this section 
by the candidate's authorized committee constitutes the personal use of 
campaign funds and is prohibited by 11 CFR 113.2.
    (C) Any repayment or forgiveness, in part or in whole, of the loan, 
advance, or line of credit described in paragraph (b)(22)(iii)(A) of 
this section by a third party (other than a third party whose payments 
are permissible under 11 CFR 113.1(g)(6)) or the lending institution is 
a contribution, subject to the limitations and prohibitions of 11 CFR 
parts 110 and 114, and shall be reported under 11 CFR part 104.
    (D) Notwithstanding paragraph (b)(22)(iii)(A) of this section, the 
portion of any loan or advance from a candidate's brokerage account, 
credit card account, home equity line of credit, or other line of 
credit that is used for the purpose of influencing the candidate's 
election for Federal office shall be reported under 11 CFR part 104.
    (iv) The candidate's authorized committee may repay a loan from the 
candidate that is derived from an advance on a candidate's brokerage 
account, credit card, home equity line of credit, or other line of 
credit available to the candidate, directly to the candidate or the 
original lender. The amount of the repayment shall not exceed the 
amount of the principal used for the purpose of influencing the 
candidate's election for Federal office and interest that has accrued 
on that principal.
    (v) Loans derived from an advance on a candidate's brokerage 
account, credit card, home equity line of credit, or other line of 
credit available to the candidate shall be reported by the candidate's 
principal campaign committee in accordance with 11 CFR part 104.
* * * * *
    3. 11 CFR 100.8 is amended by revising the introductory text of 
paragraph (b)(12) and adding new paragraph (b)(24) to read as follows:


Sec. 100.8  Expenditure (2 U.S.C. 431(9)).

* * * * *
    (b) * * *
    (12) A loan of money by a State bank, a federally chartered 
depository institution (including a national bank) or a depository 
institution whose deposits and accounts are insured by the Federal 
Deposit Insurance Corporation or the National Credit Union 
Administration is not an expenditure by the lending institution if such 
loan is made in accordance with applicable banking laws and regulations 
and is made in the ordinary course of business. A loan will be deemed 
to be made in the ordinary course of business if it: Bears the usual 
and customary interest rate of the lending institution for the category 
of loan involved; is made on a basis which assures repayment; is 
evidenced by a written instrument; and is subject to a due date or 
amortization schedule. Such loans shall be reported by the political 
committee in accordance with 11 CFR 104.3(a) and (d). Each endorser or 
guarantor shall be deemed to have contributed that portion of the total 
amount of the loan for which he or she agreed to be liable in a written 
agreement, except that, in the event of a signature by the candidate's 
spouse,

[[Page 38360]]

the provisions of 11 CFR 100.7(a)(1)(i)(D) shall apply. Any reduction 
in the unpaid balance of the loan shall reduce proportionately the 
amount endorsed or guaranteed by each endorser or guarantor in such 
written agreement. In the event that the loan agreement does not 
stipulate the portion of the loan for which each endorser or guarantor 
is liable, the loan shall be considered an expenditure by each endorser 
or guarantor in the same proportion to the unpaid balance that each 
endorser or guarantor bears to the total number of endorsers or 
guarantors. For the purpose of this paragraph (b)(12), an overdraft 
made on a checking or savings account shall be considered an 
expenditure unless: The overdraft is made on an account which is 
subject to automatic overdraft protection; and the overdraft is subject 
to a definite interest rate and a definite repayment schedule. However, 
this paragraph (b)(12) shall not apply to any loan of money derived 
from an advance on a candidate's brokerage account, credit card, home 
equity line of credit, or other lines of credit described in paragraph 
(b)(24) of this section.
* * * * *
    (24) Any loan of money derived from an advance on a candidate's 
brokerage account, credit card, home equity line of credit, or other 
line of credit available to the candidate, as defined in 11 CFR 
100.7(b)(22).
* * * * *

PART 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)

    4. The authority citation for part 104 continues to read as 
follows:

    Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432 (i), 434, 
438(a), 438(b), 439a.


    5. 11 CFR 104.3 is amended as follows:
    a. Revise paragraph (a)(3)(vii)(B);
    b. Revise paragraph (b)(2)(iii)(A);
    c. Revise paragraph (b)(4)(iii);
    d. Remove and reserve paragraph (b)(4)(iv);
    e. Revise the introductory text of paragraph (d);
    f. Revise the introductory text of paragraph (d)(1);
    g. Revise paragraph (d)(2);
    h. Revise paragraph (d)(3); and
    i. Add paragraph (d)(4).
    The revisions and additions read as follows:


Sec. 104.3  Contents of reports (2 U.S.C. 434(b), 439(a))

    (a) * * *
    (3) * * *
    (vii) * * *
    (A) Loans made, guaranteed, or endorsed by a candidate to his or 
her authorized committee including loans derived from a bank loan to 
the candidate or from an advance on a candidate's brokerage account, 
credit card, home equity line of credit, or other lines of credit 
described in 11 CFR 100.7(b)(22) and 100.8(b)(24); and
* * * * *
    (b) * * *
    (2) * * *
    (iii) * * *
    (A) Repayment of loans made, guaranteed, or endorsed by the 
candidate to his or her authorized committee including loans derived 
from a bank loan to the candidate or from an advance on a candidate's 
brokerage account, credit card, home equity line of credit, or other 
lines of credit described in 11 CFR 100.7(b)(22) and 100.8(b)(24);
* * * * *
    (4) * * *
    (iii) Each person who receives a loan repayment, including a 
repayment of a loan of money derived from an advance on a candidate's 
brokerage account, credit card, home equity line of credit, or other 
lines of credit described in 11 CFR 100.7(b)(22) and 100.8(b)(24), from 
the reporting committee during the reporting period, together with the 
date and amount of such loan repayment;
    (iv) [Reserved]
* * * * *
    (d) Reporting debts and obligations. Each report filed under 11 CFR 
104.1 shall, on Schedule C or D, as appropriate, disclose the amount 
and nature of outstanding debts and obligations owed by or to the 
reporting committee. Loans, including a loan of money derived from an 
advance on a candidate's brokerage account, credit card, home equity 
line of credit, or other lines of credit described in 11 CFR 
100.7(b)(22), obtained by an individual prior to becoming a candidate 
for use in connection with that individual's campaign shall be reported 
as an outstanding loan owed to the lender by the candidate's principal 
campaign committee, if such loans are outstanding at the time the 
individual becomes a candidate. Where such debts and obligations are 
settled for less than their reported amount or value, each report filed 
under 11 CFR 104.1 shall contain a statement as to the circumstances 
and conditions under which such debts or obligations were extinguished 
and the amount paid. See 11 CFR 116.7.
    (1) In addition, when a political committee obtains a loan from, or 
establishes a line of credit at, a lending institution as described in 
11 CFR 100.7(b)(11) and 100.8(b)(12), it shall disclose in the report 
covering the period when the loan was obtained, the following 
information on schedule C-1 or C-P-1:
* * * * *
    (2) The political committee shall submit a copy of the loan or line 
of credit agreement which describes the terms and conditions of the 
loan or line of credit when it files Schedule C-1 or C-P-1. This 
paragraph (d)(2) shall not apply to any Schedule C-1 or C-P-1 that is 
filed pursuant to paragraph (d)(4) of this section.
    (3) The political committee shall file in the next due report a 
Schedule C-1 or C-P-1 each time a draw is made on a line of credit, and 
each time a loan or line of credit is restructured to change the terms 
of repayment. This paragraph (d)(3) shall not apply to any Schedule C-1 
or C-P-1 that is filed pursuant to paragraph (d)(4) of this section.
    (4) When a candidate obtains a bank loan or loan of money derived 
from an advance on the candidate's brokerage account, credit card, home 
equity line of credit, or other line of credit described in 11 CFR 
100.7(b)(22) and 100.8(b)(24) for use in connection with the 
candidate's campaign, the candidate's principal campaign committee 
shall disclose in the report covering the period when the loan was 
obtained, the following information on Schedule C-1 or C-P-1:
    (i) The date, amount, and interest rate of the loan, advance, or 
line of credit;
    (ii) The name and address of the lending institution; and
    (iii) The types and value of collateral or other sources of 
repayment that secure the loan, advance, or line of credit, if any.
* * * * *

    6. 11 CFR 104.8 is amended by adding paragraph (g) to read as 
follows:


Sec. 104.8  Uniform reporting of receipts.

* * * * *
    (g) The principal campaign committee of the candidate shall report 
the receipt of any bank loan obtained by the candidate or loan of money 
derived from an advance on a candidate's brokerage account, credit 
card, home equity line of credit, or other lines of credit described in 
11 CFR 100.7(b)(22) and 100.8(b)(24), as an itemized entry of Schedule 
A as follows:
    (1) The amount of the loan that is used in connection with the 
candidate's campaign shall be reported as an itemized entry on Schedule 
A.
    (2) See 11 CFR 100.7(b)(22)(iii) for special reporting rules 
regarding certain loans used for a candidate's routine living expenses.

[[Page 38361]]


    7. 11 CFR 104.9 is amended by adding paragraph (f) to read as 
follows:


Sec. 104.9  Uniform reporting of disbursements.

* * * * *
    (f) The principal campaign committee of the candidate shall report 
its repayment to the candidate or lending institution of any bank loan 
obtained by the candidate or loan of money derived from an advance on a 
candidate's brokerage account, credit card, home equity line of credit, 
or other lines of credit described in 11 CFR 100.7(b)(22) and 
100.8(b)(24) as an itemized entry on Schedule B.

    8. Amend Sec. 104.14 by revising paragraph (b) to read as follows:


Sec. 104.14  Formal requirements regarding reports and statements.

* * * * *
    (b) Each political committee or other person required to file any 
report or statement under this subchapter shall maintain all records as 
follows:
    (1) Maintain records, including bank records, with respect to the 
matters required to be reported, including vouchers, worksheets, 
receipts, bills and accounts, which shall provide in sufficient detail 
the necessary information and data from which the filed reports and 
statements may be verified, explained, clarified, and checked for 
accuracy and completeness;
    (2) Preserve a copy of each report or statement required to be 
filed under 11 CFR parts 102 and 104, and all records relevant to such 
reports or statements;
    (3) Keep all reports required to be preserved under this section 
available for audit, inspection, or examination by the Commission or 
its authorized representative(s) for a period of not less that 3 years 
after the report or statement is filed (See 11 CFR 102.9(c) for 
requirements relating to preservation of records and accounts); and
    (4) Candidates, who obtain bank loans or loans derived from an 
advance from the candidate's brokerage account, credit card, home 
equity line of credit, or other lines of credit available to the 
candidate, must preserve the following records for three years after 
the date of the election for which they were a candidate:
    (i) Records to demonstrate the ownership of the accounts or assets 
securing the loans;
    (ii) Copies of the executed loan agreements and all security and 
guarantee statements;
    (iii) Statements of account for all accounts used to secure any 
loan for the period the loan is outstanding such as brokerage accounts 
or credit card accounts, and statements on any line of credit account 
that was used for the purpose of influencing the candidate's election 
for Federal office;
    (iv) For brokerage loans or other loans secured by financial 
assets, documentation to establish the source of the funds in the 
account at the time of the loan; and
    (v) Documentation for all payments made on the loan by any person.
* * * * *

PART 113--EXCESS CAMPAIGN FUNDS AND FUNDS DONATED TO SUPPORT 
FEDERAL OFFICEHOLDER ACTIVITIES (2 U.S.C. 439a)

    9. The authority citation for part 113 continues to read as 
follows:

    Authority: 2 U.S.C. 432(h), 438 (a)(8), 439a, 441a.

    10. 11 CFR 113.1 is amended by revising the introductory text in 
paragraph (g)(6) to read as follows:


Sec. 113.1  Definitions (2 U.S.C. 439a).

* * * * *
    (g) * * *
    (6) Third party payments. Notwithstanding that the use of funds for 
a particular expense would be a personal use under this section, 
payment of that expense by any person other than the candidate or the 
campaign committee shall be a contribution under 11 CFR 100.7 to the 
candidate unless the payment would have been made irrespective of the 
candidacy. ``Payment'' includes repayment, endorsement, guarantee, or 
co-signature of a loan described in 11 CFR 100.7(b)(22) and used for 
the candidate's routine living expenses. Examples of payments 
considered to be irrespective of the candidacy include, but are not 
limited to, situations where--
* * * * *

    Dated: May 24, 2002.
David M. Mason,
Chairman, Federal Election Commission.
[FR Doc. 02-13689 Filed 6-3-02; 8:45 am]
BILLING CODE 6715-01-P