Requirements and Characteristics of Margin Accounts
Chapters in this video
- 0:00 What a margin account is: borrowing to buy or sell short
- 1:25 The three margin regulators: Reg T, FINRA, and house rules
- 2:20 Mandatory and optional margin agreements
- 3:37 Rehypothecation, the 140% debit balance ceiling, and minimum equity
- 5:21 Marginable accounts and securities: mutual funds, options, new issues
- 7:19 Rapid-fire exam recap
What this video covers
- How Regulation T (federal), FINRA (self-regulatory organization, or SRO), and firm house requirements stack up, and why a firm can only be stricter, never looser
- Which documents in the margin agreement are mandatory (credit agreement and hypothecation agreement) versus optional (loan consent form)
- The rehypothecation ceiling of 140% of the customer's debit balance, not market value, and what happens to excess margin securities
- The $2,000 minimum equity requirement to open a margin account, and when the full purchase price must be deposited instead
- Why custodial accounts, individual retirement accounts (IRAs), most trusts, and cash accounts are ineligible for margin trading
- The 30-day waiting period for mutual fund shares and new issues (the latter only when the broker-dealer was a selling group member) before they become marginable
- Why standard options cannot be purchased on margin but can be used as collateral in a margin account
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