Fed. Sec. L. Rep. P 95,384 Gary Cooper v. Union Bank, a Banking Corporation, John Doe One to John Doe Ten

Union Bank has taken this appeal from judgment cancelling the unpaid balance on a promissory note executed by appellees upon the ground that the loan for which the note was executed was in violation of Regulation U, 12 C.F.R. § 221 , promulgated by the Board of Governors of the Federal Reserve System pursuant to § 7 of the Securities and Exchange Act of 1934, 15 U.S.C. § 78g.

Section 78g provides in part:

Regulation U provides in part, § 221.-1(a):

The sole question presented on this appeal is whether, under the facts of this case, the district court was in error in holding that the loan was indirectly secured by stock.

Plaintiffs Gary Cooper, Richard A. Schulman and one Kosman (not a party to this action) formed a venture under the name of Wilshire Mining Co., for the purpose of engaging in the “put-and-call” business which involved the purchasing of margin stocks. A loan was obtained from Union Bank for the purpose of purchasing margin stock and the note here involved was executed to cover that loan. Since, as a practical matter, sale of put-or-call options must be guaranteed by a member of the New York Stock Exchange to insure performance by the writer of the…