Exempted Borrowers
An exempted borrower is a registered broker-dealer whose transactions consist in substantial measure with the public, rather than with other broker-dealers. This would tend to include introducing and executing brokers and exclude prime brokers and clearing firms. What they are exempt from is Regulation T’s initial margin requirement when borrowing securities.
In recent years, customers have evaded Regulation T by purchasing securities and “lending” them to their broker-dealers in exchange for 100% cash, with which they would pay for the securities on the settlement date. This was possible because the broker-dealers were an exempted borrower