Accounts Permitted to Trade on Margin

What this video covers

• Why a cash account customer must pay in full and cannot borrow from the broker-dealer for any securities transactions
• Why depositing marginable securities into a cash account does not transform it into a margin account or create lending authority
• The two non-negotiable requirements for ordinary customer borrowing: firm approval of the account and the customer's signed margin agreement
• What a margin agreement actually does: it authorizes the broker-dealer to extend credit and documents the customer's obligations in the credit relationship
• Why supervisor approval alone, or a signed margin agreement alone, is insufficient to authorize a margin trade
• What special purpose accounts are and how they provide a narrow exception to ordinary margin account rules for specified transactions
• How to spot the exam's favorite trap: marginable collateral presented as justification for borrowing in an unapproved or cash account