Margins

Question 0

Government securities are:

Answer 0

Exempt from reg t

Question 1

Reg T

Answer 1

Customer purchases securities in either special cash acct or margin acct must be received by 5th business day after trade date

Question 2

Failure to make prompt payment, then:

Answer 2

Acct must be frozen for 90 days

Question 3

Frozen period:

Answer 3

If a customer wants to place trade during this period needs to have cash sufficient to cover the total trade in acct before purchase

Question 4

Cash acct

Answer 4

Pay cash in full for all securities

Question 5

Margin acct:

Answer 5

Customer can purchase securities worth twice the amount of $ by using borrowed from BD or borrow securities to sell short the stock.

Question 6

3 types of margin accts:

Answer 6

Margin long-buy stock, borrow $
Margin shirt-sell stock short- customer borrows stock
Margin mixed- long and short positions

Question 7

Reg T margin deposit is:

Answer 7

50% of purchase price

Other 50% is loan value of BD

Question 8

Securities purchased on margin must be in:

Answer 8

Street name(BD name)

Question 9

Hypothecation:

Answer 9

Margin loan to a customer using securities purchased as collateral

Question 10

Rehypothecation:

Answer 10

BD of customer securities to the bank in exchange for a loan of cash to BD to cover margin loans made to customers

Fully paid securities cannot be rehypo

Question 11

Debit balance:

Answer 11

The amount of money has borrowed from BD.

Question 12

When BD request a loan from a bank to fund a customers margin acct….

Answer 12

It can use up to 140% of the value of the customers debit balance.

Question 13

Margin agreement/customer agreement/ Hypothecation agreement

Answer 13

Customers cannot purchase securities on margin without signed margin agreement on file

Question 14

Margin agreement regulations:

Answer 14

Rules and regs of trade SROs
Securities are subject to rehypo 140%
May sell out of securities with/w/o written notice
Interest will b charge on all DB

Question 15

Interest charges increase customers:

Answer 15

DEBIT BALANCE.

Question 16

If RR has discretionary authority on an acct and they want margin:

Answer 16

Margin agreement and supervisory approval before exercising discretion on the margin.

Question 17

Margin Long

Answer 17

Must deposit 50% of purchase price or $2000, whichever is greater

Exception: if the full purchase cost is less than 2k customer has to deposit the full amount

Question 18

Min equity to open a short acct is:

Answer 18

$2,000.00 no exceptions

Question 19

Maint requirements for short sale:

Answer 19

0-5 = 2.50 per share or 100% of mkt val whichever is greater

5-17 = $5 per share

17-up = reg t, (50%)

Question 20

Equity in margin acct.

Answer 20

CMV-DB=EQ

Question 21

Excess equity is:

Answer 21

Half of appreciation in the mkt value of the securities

Question 22

NYSE Min maint on long margin is

Answer 22

25% or CMV x .25

Question 23

Debit balance ◀️ half the mkt value:
Debit balance ▶️half the mkt value:
Debit balance is = Half the mkt value:

Answer 23

Excess equity
Restricted
Reg T

Question 24

Excess equity:

Answer 24

Withdraw ex EQ in cash or securities from the acct. a w/draw increases DB and decreases the equity in acct

Question 25

Buying power is:

Answer 25

Full amount of appreciation in mkt value of securities or 2x excess equity

Question 26

SMA:

Answer 26

It is a ledger recording of $ which was available to the customer but not used. NO MONEY IN SMA. Like a line of credit

Question 27

SMA can be increased by:

Answer 27

Appreciation in mkt vale
Cash deposits which were not required cash dividends on stocks
Long sale securities

Question 28

SMA depleted by

Answer 28

New margin purchases cash withdrawals

It is not depleted by mkt value of securities in acct.

Question 29

Restricted long acct:

Answer 29

Long acct is restricted when the debit balance is more than Half mkt value of securities

Question 30

Maintenance margin call liquidating securities is:

Answer 30

4x amount of the call

Question 31

Margin short deposits:

Answer 31

$2000, no exceptions

Question 32

Min maint on Short margin acct is

Answer 32

30% of the CMV, and there is never a debit balance. Customer owes stock THERE WILL ALWAYS BE A CREDIT BALANCE

Question 33

For short margin acc is interest charged on credit balances?

Answer 33

No, can’t earnin. Interest.

Question 34

Formula to determine equity in S margin acct:

Answer 34

Proceeds of the short sale + Reg T deposit = CB - CMVSHORT = EQ

Question 35

Formula for mixed margin acct:

Answer 35

MVLong - DB + CB - SMV = EQ

Question 36

WI = when issued

Answer 36

Requires a deposit of cash equal to 25% of the issued cost or $2000 whichever is greater.

If a Bond issue initial confirm must contain the par value of the bonds purchased

Question 37

Margin accts for fiduciaries

Answer 37

Require written authorization. And are prohibited to minors

Question 38

A stock dividend is paid

Answer 38

Number of shares in the acct is increased, mkt value per shares decreases but the DB remains unchanged.

Question 39

Cash dividends in margin acct:

Answer 39

Reduce the DB, interest charges increase the DB

Question 40

Standardized or traditional options have:

Answer 40

No loan value in margin acct and cannot be Purchased on margin

Question 41

Interest charges on municipal margin acct

Answer 41

Debit balances are not tax deductible

Min maint is - 15% of MV or 7% of principal whichever is greater.

Question 42

Transactions In which of the following May take place in a margin account?

Answer 42

US GOVT Securities, Corp Convertible bonds, corporate non convertible, state and municipal!!!

Question 43

Listed securities can:

Answer 43

Sold short in margin acct
Are subject to being delisted
Can be trade in 3rd market
They are marginable

Question 44

What is true about cash acct vs a cash transaction?

Answer 44

Cash acct- pay for cash in full

Cash transaction - same day settlement

Question 45

The initial action of a BD must take if a customer fails to promptly pay for a purchase of securities and no extension is obtained

Answer 45

Cancel or liquidate the transaction

Now if it had already been liquidated it would then be frozen