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#2199505 - 11/30/18 04:10 PM Reg U form U-1
burke116 Offline
Platinum Poster
Joined: Jun 2014
Posts: 542
If we failed to obtain the Regulation U FR U-1 form for a few loans secured by stock in excess of $100,000, is it worth it to try and get it now after the fact? It doesn't appear that any of these were "purpose credit" (not that it matters since we didn't get them to sign something saying it wasn't).

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Lending Compliance
#2199537 - 11/30/18 05:25 PM Re: Reg U form U-1 burke116
rlcarey Offline
10K Club
Joined: Jul 2001
Posts: 79,293
Galveston, TX
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.
The opinions expressed here should not be construed to be those of my employer:

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