Requirements and Characteristics of Margin Accounts

What this video covers

• What a margin account is, how it creates financial leverage, and why the broker-dealer charges interest while holding securities as collateral
• The three levels of margin regulation: Federal Reserve Board Regulation T (Reg T) for initial margin, Financial Industry Regulatory Authority (FINRA) for maintenance margin, and firm house requirements that can only be stricter
• The three components of the margin agreement (credit agreement, hypothecation agreement, and loan consent form) and which one is the only optional document
• The margin disclosure statement requirement at account opening and the annual delivery rule for non-institutional customers
• Hypothecation versus rehypothecation, and why the 140% rehypothecation limit applies to the customer's debit balance rather than market value
• The $2,000 minimum equity requirement to open a margin account, and why purchases under $2,000 must be paid in full with no borrowing
• Which securities are marginable versus non-marginable, including the 30-day restriction on initial public offerings (IPOs) and mutual fund shares, and the distinction between buying options on margin versus using options strategies with stock collateral