Bank arranging for extension of credit by corporation.

CFR · 2024-01-01 · US · Title 12

(a) The Board considered the questions whether: (1) The guaranty by a corporation of an “unsecured” bank loan to exercise an option to purchase stock of the corporation is an “extension of credit” for the purpose of this part; (2) Such a guaranty is given “in the ordinary course of business” of the corporation, as defined in § 221.2; and (3) The bank involved took part in arranging for such credit on better terms than it could extend under the provisions of this part. (b) The Board understood that any officer or employee included under the corporation's stock option plan who wished to exercise his option could obtain a loan for the purchase price of the stock by executing an unsecured note to the bank. The corporation would issue to the bank a guaranty of the loan and hold the purchased shares as collateral to secure it against loss on the guaranty. Stock of the corporation is registered on a national securities exchange and therefore qualifies as “margin stock” under this part. (c) A nonbank lender is subject to the registration and other requirements of this part if, in the ordinary course of his business, he extends credit on collateral that includes any margin stock in the amount of $200,000 or more in any calendar quarter, or has such credit outstanding in any calendar quarter in the amount of $500,000 or more. The Board understood that the corporation in question had sufficient guaranties outstanding during the applicable calendar quarter to meet the dollar thresholds f

official document · source cfr-2024 · id 12:§ 221.118