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October 28, 1977


The opinion of the court was delivered by: LASKER



 Halcyon Securities, Inc., claims that Chase Manhattan Bank and Edgar W. Heisler have committed various violations of the 1934 Securities Exchange Act. Chase moves to dismiss the complaint under Rule 12(b)(6) of the F.R. Civ. P. for failure to state a claim upon which relief can be granted. The motion is granted.

 In August of 1975, Stein Associates ("Associates") opened a brokerage account with Halcyon Securities, a registered broker dealer, through which it traded securities. Commencing in October, 1975, Halcyon made three requests to Stein Associates for margin payments to conform with Regulation T of the Federal Reserve Board. Associates made the three payments of $9,500., $68,900., and $14,125.28, respectively, by drawing on its account with Chase although, according to the complaint, at the time each of these checks was honored, Stein Associates had insufficient funds in its account to cover the payments. In December, 1975, Halcyon requested a further margin payment of $77,333. Associates drew and delivered two checks, for $55,966. and $21,367., on its account at Chase but placed a stop payment order on the checks, preventing their negotiation by Halcyon's clearing agent. Plaintiff claims that it suffered such severe losses as a result of this transaction that it was forced to cease operations. Halcyon accuses Chase and Edgar W. Heisler, the branch manager who handled these transactions, of having induced it to continue dealing with Associates by honoring the overdrafts and thus creating a false aura of solvency. Specifically, plaintiff claims that defendants have violated Regulations U and X of the Exchange Act, have conspired with and aided and abetted Associates in a fraudulent scheme in violation of Rule 10b-5, and are guilty of negligence. Since the allegations of Halcyon's complaint are inadequate to permit recovery on any of these grounds, the motion to dismiss is granted. *fn1"


 Regulation U

 Plaintiff claims that defendants have violated Regulation U, promulgated by the Board of Governors of the Federal Reserve Board pursuant to § 7(d) of the Exchange Act, which regulates loans by banks for the purchase of margin stock. Regulation U directs that: "no bank shall extend any credit secured directly or indirectly by any stock for the purpose of purchasing or carrying any margin stock in an amount exceeding the maximum loan value of the collateral . . ." 12 C.F.R. § 221.1(a) (1977). Chase and Heisler argue that this regulation is inapplicable to the transactions specified in the complaint since payment of an overdraft is not an extension of credit and, even if it were, the payments were not secured by stock. We find it unnecessary to reach the question whether the payments constituted extension of credit since plaintiff has failed to allege that the payments were directly or indirectly secured by stock as defined by the Regulation.

 "Indirectly secured" is defined by Regulation U to apply to "any arrangement with the customer under which the customer's right or ability to sell, pledge, or otherwise dispose of stock owned by the customer is in any way restricted . . ." 12 C.F.R. § 221.3(a) (1977). Halcyon has not alleged that the payments made by Chase were directly secured by stock, nor that any "arrangement" existed which limited Associates' ability to dispose of the stock. *fn2" This claim is dismissed.


 Regulation X

 Halcyon also alleges a concurrent violation of Regulation X of the Exchange Act, which extends to borrowers the obligation of complying with the margin requirements. Regulation X is intended:

"to prevent the infusion of unregulated credit obtained both outside and within the United States into U.S. securities markets in circumvention of the provisions of the Board's margin regulations or by borrowers falsely certifying the purpose of a loan or otherwise wilfully and intentionally evading the provisions of those regulations." 12 C.F.R. § 224.1 (1977).

 While Halcyon has not alleged in what particular respect defendants are guilty of violating Regulation X, it apparently relies on a theory of aider and abettor liability. (See Plaintiff's Memorandum at 7) The claim is insufficient on two grounds. First, Halcyon has not alleged that any of the margin requirements has been circumvented or evaded, a prerequisite to violation of Regulation X. Second, defendant's conduct does not fall within the definition provided by the Regulation, which states that "the term 'aids or abets' shall include, but not be limited to, counsels, commands, induces, or procures." 12 C.F.R. § 224.6(b) (1977) It is recognized that the regulation is not intended to be all-inclusive. Nevertheless, the phrase "not limited to" certainly cannot be construed to go beyond the generally accepted meaning of aiding and abetting as knowing involvement. See Hirsch v. duPont, 553 F.2d 750 (2d Cir., 1977). The actual language of the regulation strongly suggests that this ...

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