I would suggest it:
Consequences of Violations
Violations of the margin regulations are violations of the Exchange Act. They may expose the violator to:
• SEC enforcement actions, which can result in injunctive relief, civil monetary penalties or cease and desist orders.
• Criminal prosecution
– Ken Lay (Enron founder) was convicted of bank fraud and making false statements to banks by certifying on Form U‐1 that certain loans were not purpose credit and then using the proceeds to buy margin stock. Each of the four counts had a maximum sentence of 30 years.
•Avoidance under Exchange Act Section 29(b).
–Although there is contrary authority, a number of cases have allowed rescission of bank loans made in violation of the margin regulations, and precluded the banks from recovering the unpaid balance.
• Private rights of action.
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