Margin Lending Toolkit | Practical Law

Margin Lending Toolkit | Practical Law

Different sets of margin rules apply depending on whether the party extending credit is a broker-dealer or a bank or other non-broker-dealer lender. This toolkit lists resources to assist bank and non-bank lenders and borrowers for complying with their applicable margin lending requirements.

Margin Lending Toolkit

Practical Law Toolkit 5-603-6967 (Approx. 4 pages)

Margin Lending Toolkit

by Practical Law Finance
Maintained • USA (National/Federal)
Different sets of margin rules apply depending on whether the party extending credit is a broker-dealer or a bank or other non-broker-dealer lender. This toolkit lists resources to assist bank and non-bank lenders and borrowers for complying with their applicable margin lending requirements.
Margin lending is the process of providing or arranging credit for the purpose of transacting in or holding securities. Different sets of margin rules apply depending on whether the party extending credit is a broker-dealer or a bank or other non-broker-dealer lender. In addition, another set of margin rules apply to US borrowers.
For a general introduction to US margin lending rules, see Practice Note, Margin Lending (Introduction).

Margin Rules for Banks and Other Non-bank Lenders (Excluding Broker-Dealers)

Banks and other non-broker-dealer lenders are subject to Section 7(d) of the Exchange Act (15 U.S.C. § 78g(d)) and the margin rules set out under Regulation U (12 C.F.R. §§ 221.1-221.125).
See Practice Note, Margin Rules for Banks and Non-Broker-Dealer Lenders (Reg. U).
Non-bank lenders must be particularly aware of filing requirements they may trigger when making margin loans. See Practice Note, Margin Lending Filing Requirements for Non-bank Lenders.

Margin Rules for Broker-Dealers

Broker-dealers are subject to:
  • Section 7(c) of the Exchange Act (15 U.S.C. § 78g(c)) (Section 7(c)).
  • The FRB's Regulation T (12 C.F.R. §§ 220.1-220.132).
  • Self-regulatory organization (SRO) Rules, as applicable, including:
    • NYSE Rule 431; and
    • Financial Industry Regulatory Authority (FINRA) Rule 4200 (formerly NASD Rule 2370).
  • Section 11(d) of the Exchange Act (15 U.S.C. § 78k(d)) (for new issues of securities).
  • If applicable, their own internally-formulated house margin rules, which may impose more stringent margin requirements.
See Practice Note, Margin Rules for Broker-Dealers (Reg. T and SRO Rules).

Margin Rules for US Borrowers

US borrowers are subject to Section 7(f) of the Exchange Act and the margin rules set out under Regulation X (12 C.F.R. §§ 222.1-222.91)
See Practice Note, Margin Rules for US Borrowers (Reg. X).