Certified Regulatory Compliance Manager (CRCM) — Question 116
In evaluating the coverage of a bank's Regulation U compliance for loans to purchase or carry margin stocks, which of the following securities is NOT covered in the regulatory definition of "margin stock"?
Answer options
- A. Any OTC stock
- B. A security issued by an investment company that is licensed under the Small Business Administration Act
- C. A warrant or right to subscribe to, or purchase, a margin stock
- D. An equity security registered, or having unlisted trading privileges, on a national exchange
Correct answer: B
Explanation
The correct answer is B because securities issued by investment companies licensed under the Small Business Administration Act do not fall under the definition of margin stock as per Regulation U. Options A, C, and D are included in the definition of margin stock, as they pertain to various equity securities and rights to purchase such stocks.