In a good faith account, a creditor
may effect or finance customer transactions in accordance with the
following provisions:
(a) Securities entitled to good faith margin.
(1) Permissible
transactions. A creditor may effect and finance transactions
involving the buying, carrying, or trading of any security entitled
to “good faith” margin as set forth in section 220.12 (the supplement).
(2) Required margin. The required margin is
set forth in section 220.12 (the supplement).
(3) Satisfaction
of margin. Required margin may be satisfied by a transfer from
the special memorandum account or by a deposit of cash, securities
entitled to “good faith” margin as set forth in section 220.12 (the
supplement), any other asset that is not a security, or any combination
thereof. An asset that is not a security shall have a margin value
determined by the creditor in good faith.
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(b) Arbitrage. A creditor may effect
and finance for any customer bona fide arbitrage transactions. For
the purposes of this section, the term “bona fide arbitrage” means—
(1) a purchase or sale of
a security in one market together with an offsetting sale or purchase
of the same security in a different market at as nearly the same time
as practicable for the purpose of taking advantage of a difference
in prices in the two markets; or
(2) a purchase of a security which is,
without restriction other then the payment of money, exchangeable
or convertible within 90 calendar days of the purchase into a second
security together with an offsetting sale of the second security at
or about the same time, for the purpose of taking advantage of a concurrent
disparity in the prices of the two securities.
(c) “Prime broker” transactions. A creditor may effect transactions for a customer as part of a “prime
broker” arrangement in conformity with SEC guidelines.
(d) Credit to ESOPs. A
creditor may extend and maintain credit to employee stock ownership
plans without regard to the other provisions of this part.
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(e) Nonpurpose credit.
(1) A creditor may—
(i) effect
and carry transactions in commodities;
(ii) effect and carry transactions in
foreign exchange;
(iii) extend and maintain secured or unsecured nonpurpose credit,
subject to the requirements of paragraph (e)(2) of this section.
(2) Every
extension of credit, except as provided in paragraphs (e)(1)(i) and
(e)(1)(ii) of this section, 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.
The statement shall conform to the requirements established by the
Board.
