Activity in Margin Accounts
Chapters in this video
- 0:00 Restricted versus unrestricted: the frozen account trap
- 1:44 The 50% purchase rule in restricted accounts
- 2:33 Sale proceeds: 100% to SMA or the 50% retention split
- 3:48 Withdrawals, cash and stock: maintenance is king
- 5:25 Same-day trades and netting the difference
- 6:09 Cash dividends versus interest charges
- 7:07 Rapid-fire exam recap
What this video covers
- Why a restricted account is not frozen, and the 50% Regulation T (Reg T) deposit requirement for new purchases in restricted accounts
- How sale proceeds are treated differently: 100% to the Special Memorandum Account (SMA) in unrestricted accounts versus the 50% retention rule in restricted accounts
- Why the 50% retention rule exists: it automatically pays down the debit balance and steadily restores the account toward the Reg T requirement
- How maintenance requirements act as the ultimate gatekeeper for both cash and securities withdrawals, regardless of SMA balance
- The mechanical impact of cash withdrawals (debit balance up, equity down) versus securities withdrawals (long market value down, SMA reduced by 50% of withdrawn value)
- How to net same-day purchases and sales to find the Reg T requirement on the net increase in market value
- Why cash dividends credit to SMA dollar-for-dollar while interest charges increase the debit balance and erode equity over time
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