(a) Extending, maintaining, and arranging credit.
(1) Extending credit. No lender, except a plan lender, as defined in section 221.4(a), shall
extend any purpose credit, secured directly or indirectly by margin stock, in
an amount that exceeds the maximum loan value of the collateral securing the
credit.
(2) Maintaining credit. A lender may continue to maintain any credit initially extended in
compliance with this part, regardless of—
(i) reduction in the customer’s equity resulting from change in market
prices;
(ii) change in the maximum loan value prescribed by this part;
or
(iii) change in the status of the security (from nonmargin to margin)
securing an existing purpose credit.
(3) Arranging credit. No lender may arrange for the extension or maintenance of any purpose
credit, except upon the same terms and conditions under which the lender
itself may extend or maintain purpose credit under this
part.
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(b) Registration of nonbank lenders; termination of registration; annual
report.
(1) Registration. Every person other than a person subject to part 220 of this chapter or
a bank who, in the ordinary course of business, extends or maintains credit
secured, directly or indirectly, by any margin stock shall register on
Federal Reserve Form FR G-1 (OMB control number 7100-0011) within 30 days
after the end of any calendar quarter during which—
(i) the amount of credit extended equals $200,000 or more; or
(ii) the amount of credit outstanding at any time during that calendar
quarter equals $500,000 or more.
(2) Deregistration. A registered nonbank lender may apply to terminate its registration, by
filing Federal Reserve Form FR G-2 (OMB control number 7100-0011), if the
lender has not, during the preceding six calendar months, had more than
$200,000 of such credit outstanding. Registration shall be deemed terminated
when the application is approved by the Board.
(3) Annual report. Every registered nonbank lender shall, within 30 days following June 30
of every year, file Form FR G-4 (OMB control number 7100-0011).
(4) Where to register and file applications and reports. Registration statements, applications to terminate registration, and
annual reports shall be filed with the Federal Reserve Bank of the District
in which the principal office of the lender is
located.
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(c) Purpose statement.
(1) General rule.
(i) Banks. Except for credit extended under paragraph (c)(2) of this section,
whenever a bank extends credit secured directly or indirectly by any margin
stock, in an amount exceeding $100,000, the bank shall require its customer
to execute Form FR U-1 (OMB No. 7100-0115), which shall be signed and
accepted by a duly authorized officer of the bank acting in good
faith.
(ii) Nonbank lenders. Except for credit extended under paragraph (c)(2) of this section or
section 221.4, whenever a nonbank lender extends credit secured directly or
indirectly by any margin stock, the nonbank lender shall require its customer
to execute Form FR G-3 (OMB control number 7100-0018), which shall be signed
and accepted by a duly authorized representative of the nonbank lender acting
in good faith.
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(2) Purpose statement for revolving-credit or multiple-draw agreements
or financing of securities purchases on a payment-against-delivery
basis.
(i) Banks. If a bank extends credit, secured directly or indirectly by any margin
stock, in an amount exceeding $100,000, under a revolving-credit or other
multiple-draw agreement, Form FR U-1 must be executed at the time the credit
arrangement is originally established and must be amended as described in
paragraph (c)(2)(iv) of this section for each disbursement if all of the
collateral for
the agreement is
not pledged at the time the agreement is originally
established.
(ii) Nonbank lenders. If a nonbank lender extends credit, secured directly or indirectly by
any margin stock, under a revolving-credit or other multiple-draw agreement,
Form FR G-3 must be executed at the time the credit arrangement is originally
established and must be amended as described in paragraph (c)(2)(iv) of this
section for each disbursement if all of the collateral for the agreement is
not pledged at the time the agreement is originally
established.
(iii) Collateral. If a purpose statement executed at the time the credit arrangement is
initially made indicates that the purpose is to purchase or carry margin
stock, the credit will be deemed in compliance with this part
if—
(A) the maximum loan value of the collateral at least equals the aggregate
amount of funds actually disbursed; or
(B) at the end of any day on which credit is extended under the agreement,
the lender calls for additional collateral sufficient to bring the credit
into compliance with section 221.7 (the
supplement).
(iv) Amendment of purpose statement. For any purpose credit disbursed under the agreement, the lender shall
obtain and attach to the executed Form FR U-1 or FR G-3 a current list of
collateral which adequately supports all credit extended under the
agreement.
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(d) Single-credit rule.
(1) All purpose credit extended to a customer shall be treated as a single
credit, and all the collateral securing such credit shall be considered in
determining whether or not the credit complies with this part, except that
syndicated loans need not be aggregated with other unrelated purpose credit
extended by the same lender.
(2) A lender that has extended purpose credit secured by margin stock may
not subsequently extend unsecured purpose credit to the same customer unless
the combined credit does not exceed the maximum loan value of the collateral
securing the prior credit.
(3) If a lender extended unsecured purpose credit to a customer prior to
the extension of purpose credit secured by margin stock, the credits shall be
combined and treated as a single credit solely for the purposes of the
withdrawal and substitution provision of paragraph (f) of this
section.
(4) If a lender extends purpose credit secured by any margin stock and
nonpurpose credit to the same customer, the lender shall treat the credits as
two separate loans and may not rely upon the required collateral securing the
purpose credit for the nonpurpose credit.
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(e) Exempted borrowers.
(1) An exempted borrower that has been in existence for less than one year
may meet the definition of exempted borrower based on a six-month
period.
(2) Once a member of a national securities exchange or registered broker or
dealer ceases to qualify as an exempted borrower, it shall notify its lenders
of this fact. Any new extensions of credit to such a borrower, including
rollovers, renewals, and additional draws on existing lines of credit, are
subject to the provisions of this part.
(f) Withdrawals and substitutions.
(1) A lender may permit any withdrawal or substitution of cash or
collateral by the customer if the withdrawal or substitution would
not—
(i) cause the credit to exceed the maximum loan value of the collateral;
or
(ii) increase the amount by which the credit exceeds the maximum loan value
of the collateral.
(2) For purposes of this section, the maximum loan value of the collateral
on the day of the withdrawal or substitution shall be
used.
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(g) Exchange offers. To enable a customer to
participate in a
reorganization, recapitalization, or exchange offer that is made to holders
of an issue of margin stock, a lender may permit substitution of the
securities received. A nonmargin, nonexempted security acquired in exchange
for a margin stock shall be treated as if it is margin stock for a period of
60 days following the exchange.
(h) Renewals and extensions of maturity. A renewal or extension of maturity of a credit need not be considered a
new extension of credit if the amount of the credit is increased only by the
addition of interest, service charges, or taxes with respect to the
credit.
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(i) Transfers of credit.
(1) A transfer of a credit between customers or between lenders shall not
be considered a new extension of credit if—
(i) the original credit was extended by a lender in compliance with this
part or by a lender subject to part 207 of this chapter in effect prior to
April 1, 1998 (see part 207 appearing in the 12 CFR 200 to 219 edition
revised as of January 1, 1997), in a manner that would have complied with
this part;
(ii) the transfer is not made to evade this part;
(iii) the amount of credit is not increased; and
(iv) the collateral for the credit is not
changed.
(2) Any transfer between customers at the same lender shall be accompanied
by a statement by the transferor customer describing the circumstances giving
rise to the transfer and shall be accepted and signed by a representative of
the lender acting in good faith. The lender shall keep such statement with
its records of the transferee account.
(3) When a transfer is made between lenders, the transferee shall obtain a
copy of the Form FR U-1 or Form FR G-3 originally filed with the transferor
and retain the copy with its records of the transferee account. If no form
was originally filed with the transferor, the transferee may accept in good
faith a statement from the transferor describing the purpose of the loan and
the collateral securing it.
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(j) Action for lender’s protection. Nothing in this part shall require a bank to waive or forego any lien
or prevent a bank from taking any action it deems necessary in good faith for
its protection.
(k) Mistakes in good faith. A mistake in good faith in connection with the extension or maintenance
of credit shall not be a violation of this part.
