---
kind: "section"
citation: "12 C.F.R. § 220.7"
title: "12"
number: "220.7"
heading: "Broker-dealer credit account."
url: "https://uscodex.org/cfr/12/220.7"
---

# §220.7. Broker-dealer credit account.

- (a) **Requirements.** In a broker-dealer credit account, a creditor may effect or finance transactions in accordance with the following provisions.
- (b) **Purchase or sale of security against full payment.** A creditor may purchase any security from or sell any security to another creditor or person regulated by a foreign securities authority under a good faith agreement to promptly deliver the security against full payment of the purchase price.
- (c) **Joint back office.** A creditor may effect or finance transactions of any of its owners if the creditor is a clearing and servicing broker or dealer owned jointly or individually by other creditors.
- (d) **Capital contribution.** A creditor may extend and maintain credit to any partner or stockholder of the creditor for the purpose of making a capital contribution to, or purchasing stock of, the creditor, affiliated corporation or another creditor.
- (e) **Emergency and subordinated credit.** A creditor may extend and maintain, with the approval of the appropriate examining authority:
  - (1) Credit to meet the emergency needs of any creditor; or
  - (2) **Subordinated credit to another creditor for capital purposes, if the other creditor—**
    - (i) Is an affiliated corporation or would not be considered a customer of the lender apart from the subordinated loan; or
    - (ii) Will not use the proceeds of the loan to increase the amount of dealing in securities for the account of the creditor, its firm or corporation or an affiliated corporation.
- (f) **Omnibus credit—**
  - (1) A creditor may effect and finance transactions for a broker or dealer who is registered with the SEC under section 15 of the Act and who gives the creditor written notice that:
    - (i) All securities will be for the account of customers of the broker or dealer; and
    - (ii) Any short sales effected will be short sales made on behalf of the customers of the broker or dealer other than partners.
  - (2) The written notice required by [paragraph (f)(1)](#f-1) of this section shall conform to any SEC rule on the hypothecation of customers' securities by brokers or dealers.
- (g) **Special purpose credit.** A creditor may extend the following types of credit with good faith margin:
  - (1) Credit to finance the purchase or sale of securities for prompt delivery, if the credit is to be repaid upon completion of the transaction.
  - (2) Credit to finance securities in transit or surrendered for transfer, if the credit is to be repaid upon completion of the transaction.
  - (3) Credit to enable a broker or dealer to pay for securities, if the credit is to be repaid on the same day it is extended.
  - (4) **Credit to an exempted borrower.**
  - (5) Credit to a member of a national securities exchange or registered broker or dealer to finance its activities as a market maker or specialist.
  - (6) Credit to a member of a national securities exchange or registered broker or dealer to finance its activities as an underwriter.

## Notes

### Amendments

[Reg. T, 63 FR 2824, Jan. 16, 1998]

### Authority

Authority: 15 U.S.C. 78c, 78g, 78q, and 78w.

### Amendments

[Reg. T, 63 FR 2824, Jan. 16, 1998]