Margin Stock [Banks & Banking] Law and Legal Definition
According to 12 CFR 221.2 [Title 12 -- Banks and Banking; Chapter II -- Federal Reserve System; 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) margin stock means:
“(1) Any equity security registered or having unlisted trading privileges on a national securities exchange;
(2) Any OTC security designated as qualified for trading in the National Market System under a designation plan approved by the Securities and Exchange Commission (NMS security);
(3) Any debt security convertible into a margin stock or carrying a warrant or right to subscribe to or purchase a margin stock;
(4) Any warrant or right to subscribe to or purchase a margin stock; or
(5) Any security issued by an investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), other than:
(i) A company licensed under the Small Business Investment Company Act of 1958, as amended (15 U.S.C. 661); or
(ii) A company which has at least 95 percent of its assets continuously invested in exempted securities (as defined in 15 U.S.C. 78c(a)(12)); or
(iii) A company which issues face-amount certificates as defined in 15 U.S.C. 80a-2(a)(15), but only with respect of such securities; or
(iv) A company which is considered a money market fund under SEC Rule 2a-7 (17 CFR 270.2a-7).”
