Overview
A margin account is a type of securities brokerage account in which the BD extends credit to the customer by lending that customer money, using the account itself as collateral for the loan. The purpose of the loan is to purchase securities in the account. Margin increases an investor's purchasing power but also exposes that investor to the potential for more significant losses based on the leveraged purchase.
Representatives should understand that margin in a futures account is not an extension of credit. Instead, it is analogous to the down payment or earnest money on a house purchase. This course will focus on the securities margin account and will not consider futures margin.
Learning Objectives
Upon conclusion of this course, you should:
- have a solid understanding of the regulation of margin accounts and rates by the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve (Fed), and other applicable laws and regulations
- understand the function of margin accounts, the risks they present, and the purposes for which they are used
- understand the suitability implications of recommending or permitting a margin account for a particular customer
- be able to determine when and for what needs the product is in the client's best interest
Designed For
Registered Representatives
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