Regulation U Requirements
Question
Under Regulation U, prior to extending credit secured by margin stock for more than $100,000, a national bank must obtain which of the following?
Answers
Explanations
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A. B. C. D.B
Under Regulation U, a national bank is required to obtain certain information and take certain actions before extending credit that is secured by margin stock. Margin stock refers to securities that are listed on a national securities exchange, certain securities issued by registered investment companies, or certain debt securities that are convertible into margin stock.
When a national bank wants to extend credit secured by margin stock for more than $100,000, it must comply with the requirements of Regulation U, which include obtaining a written statement from the borrower as to the purpose of the loan, a written statement certifying the borrower's business address and daytime phone number, and a notice from the borrower as to their willingness to provide additional margin stock as collateral.
However, none of the options listed in the question fully matches the requirement. Here's a breakdown of each option:
A. Certificate of value for the collateral - This is not a requirement under Regulation U. However, Regulation U does require that the bank obtain an appraisal of the collateral's value.
B. Written statement from the borrower as to the purpose of the loan - This is one of the requirements under Regulation U. The written statement must include a detailed explanation of the purpose of the loan and the use of the funds.
C. Written statement certifying the borrower's business address and daytime phone number - This is also a requirement under Regulation U. The borrower must provide a written statement certifying their business address and daytime phone number.
D. Notice from the borrower as to his willingness to provide additional margin stock as collateral - This is also a requirement under Regulation U. The borrower must provide a notice as to their willingness to provide additional margin stock as collateral if required.
Therefore, the correct answer to the question is a combination of options B, C, and D. The bank must obtain a written statement from the borrower as to the purpose of the loan, a written statement certifying the borrower's business address and daytime phone number, and a notice from the borrower as to their willingness to provide additional margin stock as collateral if required.
