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Title 12: Banks and Banking
CHAPTER II: FEDERAL RESERVE SYSTEM (CONTINUED)
SUBCHAPTER A: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 221: CREDIT BY BANKS AND PERSONS OTHER THAN BROKERS OR DEALERS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCK (REGULATION U)
: Interpretations
221.109 - Loan to open-end investment company.
In response to a question regarding a possible loan by a bank to an open-end investment company that customarily purchases stocks registered on a national securities exchange, the Board stated that in view of the general nature and operations of such a company, any loan by a bank to such a company should be presumed to be subject to this part as a loan for the purpose of purchasing or carrying margin stock. This would not be altered by the fact that the open-end company had used, or proposed to use, its own funds or proceeds of the loan to redeem some of its own shares, since mere application of the proceeds of a loan to some other use cannot prevent the ultimate purpose of a loan from being to purchase or carry registered stocks.
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