In Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930 (2d Cir.), cert. denied, U.S. 105 S.Ct. 253, 83 L.Ed.2d 190 (1984), Frigitemp, a publicly held company, entered into a secured financing agreement with various banks in 1975, including Chemical. In this transaction, the banks provided Frigitemp with an $8 million line of credit and took a security interest in Frigitemp's customer notes receivables. Within a year, it became clear that Frigitemp would need to restructure its debt. A restructuring took place in August, 1977 pursuant to which the maturity dates of certain notes issued under the secured credit agreement were extended, certain unsecured notes were replaced with other unsecured notes, and $4 million in fresh cash was advanced to Elsters, a wholly-owned Frigitemp subsidiary. In exchange for the advance to Elsters, the banks received Elsters' promissory notes, which were guaranteed by Frigitemp, and a pledge by Frigitemp of 100% of Elsters' common stock as security. Frigitemp filed a petition in bankruptcy in March, 1978. The banks, holding substantial unpaid Frigitemp loans, sued three of Frigitemp's principal officers and Arthur Andersen, Frigitemp's auditor. The banks claimed that Arthur Andersen knew that Frigitemp had submitted false and misleading financial statements in order to obtain financing, and that these misrepresentations were in connection with the pledge of the Elsters stock for purpose of the antifraud provisions. The Court held that the pledge of the Elsters stock was a purchase and sale of a security for the purposes of Section 10(b) on the authority of Mallis v. Federal Deposit Insurance Corp., 568 F.2d 824 (2d Cir.), cert. granted, 431 U.S. 928, 97 S.Ct. 2630, 53 L.Ed.2d 243 (1977), cert. dismissed as improvidently granted, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978). We also held, however, that misrepresentations regarding the financial health of Frigitemp could not form the basis of a violation of Section 17(a), Section 10(b), or Rule 10b-5 despite the fact that Frigitemp had pledged securities in order to procure the advance for Elster. Judge Friendly's opinion noted: Andersen is not alleged to have deceived the Banks with respect to the pledge of the Elsters stock; the Banks got exactly what they expected.... The Act and Rule impose liability for a proscribed act in connection with the purchase or sale of a security; it is not sufficient to allege that a defendant has committed a proscribed act in a transaction of which the pledge of a security is a part. Chemical Bank, 726 F.2d at 943.