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Equity Funding
Source:
Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order
it here)
A combination of
mutual fund shares and insurance.
Under equity funding plans, the investor buys the mutual fund shares.
The shares are then pledged as collateral for a loan whose proceeds
are used to defray the cost of the premium on the insurance policy.
Effective September
5, 1972, the Board of Governors of the Federal Reserve System amended
its Regulation T (Credit by Brokers and Dealers) with respect to credit
for the combined acquisition of mutual fund shares and insurance.
The amendment eliminated the requirement that in order to be eligible
for the provisions relating to “special insurance premium funding account,”
which designation was changed from “special equity funding account,” a
creditor must be the issuer, or a subsidiary or affiliate of the issuer,
of programs that combine the acquisition of mutual fund shares and insurance. Also the amendment clarified that creditors who arrange credit
for the acquisition of mutual fund shares and insurance are permitted
to sell mutual fund shares without insurance under the provisions of the
section relating to special cash accounts.
See
MARGIN, MARGIN
ACCOUNT, MARGIN BUYING
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