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#381621 - 07/07/05 03:28 AM Reg U Question
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
I was doing some reading to try and answer a question concerning Reg U and just would like to confirm an understanding (or perhaps a misunderstanding). If the borrower is securing a loan in an amount that exceeds $100,000 by margin stock, Reg U applies in that the bank must complete Part I and Part III of FR U-1. This is regardless of the purpose of the credit. If the purpose of the loan is to purchase or carry margin stock, then part II is required. If the loan involves margin stock as collateral, Reg U will apply in some manner regardless of the purpose. Is that a correct understanding? Also I would like to understand "indirectly secured". If the loan is secured by a trust account and the trust does contain margin stock, is this considered indirectly secured and will Reg U be applicable? Thank you for your help.

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#381622 - 07/07/05 05:56 PM Re: Reg U Question
Anonymous
Unregistered

Bump - any Reg U gurus out there? Thanks!

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#381623 - 07/08/05 02:36 AM Re: Reg U Question
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 80,341
Galveston, TX
You are basically on point. As far as your last question, you should look closely at the definition of indirectly secured in the definitions section of Reg U (221.2). The answer is - it depends on a few other factors.
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#381624 - 07/08/05 04:07 AM Re: Reg U Question
Anonymous
Unregistered

Ok, if the trust account is restricted it would be "indirectly secured"; or if the bank was not relying on the margin stock in the trust account as collateral, it would not be "indirectly secured"? I did go back and try to read through the interpretation at 221.113 but felt like I needed a translator.

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#381625 - 07/13/05 03:46 PM Re: Reg U Question
Anonymous
Unregistered

diff poster...
Can anyone help me with the definition of margin stock?

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#381626 - 07/13/05 04:05 PM Re: Reg U Question
Anonymous
Unregistered

The only material I have found on what margin stock is, is based on if the stock is "registered". Even if it is openly traded, does not make it margin stock. Just not sure how to determine of the stock is "registered"

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#381627 - 07/13/05 04:06 PM Re: Reg U Question
Anonymous
Unregistered

sorry for the post, found complete definition of margin stock. It is on Federal Reserve Form U-1

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#381628 - 07/13/05 05:23 PM Re: Reg U Question
Anonymous
Unregistered

just an opinion on the question regarding the trust and the margin stocks...from other sections on interpretations if you took all assets, and margin stock was part of those assets, then it would fall under Reg U. As far as the lender depending on the collateral, I would think if you listed it as collateral/ secured it, then it would fall under Reg U regardless if the lender says they didnt depend on it.

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