[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR221.103]

[Page 42]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 221--CREDIT BY BANKS AND PERSONS OTHER THAN BROKERS OR DEALERS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCK (REGULATION U)--Table of Contents
 
Sec. 221.103  Loans to brokers or dealers.

    Questions have arisen as to the adequacy of statements received by 
lending banks under Sec. 221.3(c), ``Purpose Statement,'' in the case of 
loans to brokers or dealers secured by margin stock where the proceeds 
of the loans are to be used to finance customer transactions involving 
the purchasing or carrying of margin stock. While some such loans may 
qualify for exemption under Secs. 221.1(b)(2), 221.4, 221.5 or 221.6, 
unless they do qualify for such an exemption they are subject to this 
part. For example, if a loan so secured is made to a broker to furnish 
cash working capital for the conduct of his brokerage business (i.e., 
for purchasing and carrying securities for the account of customers), 
the maximum loan value prescribed in Sec. 221.7 (the Supplement) would 
be applicable unless the loan should be of a kind exempted under this 
part. This result would not be affected by the fact that the margin 
stock given as security for the loan was or included margin stock owned 
by the brokerage firm. In view of the foregoing, the statement referred 
to in Sec. 221.3(c) which the lending bank must accept in good faith in 
determining the purpose of the loan would be inadequate if the form of 
statement accepted or used by the bank failed to call for answers which 
would indicate whether or not the loan was of the kind discussed 
elsewhere in this section.