Special Memorandum Account (SMA)

Read the Free Lesson โ†’ free ยท no signup wall

What this video covers

  • Why the Special Memorandum Account (SMA) is a bookkeeping line of credit, not cash, and how exam writers disguise this distinction
  • How SMA is created through excess equity, sale proceeds, cash dividends, interest, and deposits of marginable securities
  • The critical trap that cash deposits only increase SMA when not needed to satisfy an existing Regulation T (Reg T) call
  • All actions that reduce SMA: security purchases, cash withdrawals, and securities withdrawals, with the correct percentage reductions for each
  • Why SMA acts as a high-water mark and is never reduced by market declines, even when the account becomes restricted
  • The 2x multiplier relationship: buying power equals 2 x SMA in long accounts, and selling power equals 2 x SMA in short accounts
  • When Sam the supervisor blocks SMA use: any withdrawal or purchase that would drop equity below the greater of $2,000 or the maintenance requirement (25% long, 30% short)

Read the full lesson, free

This video's complete written lesson is free to read in the CertFuel app, no signup wall. When you're ready to drill the topic, the full Series 7 course adds adaptive practice questions and spaced-repetition flashcards.

Read the Free Lesson โ†’ free ยท no signup wall