Series 7: Margin

Front 1

If a decline in the market value of a security puts the equity below $2000, the client is required to pay in cash to meet the minimum. True/False

Back 1

False.

Front 2

Margin accounts are never ____, only cash accounts.

Back 2

frozen

Front 3

The loan value is the difference between the Current Market Value and ___

Back 3

the Equity

Front 4

Purchases of new securities in a restricted margin account are treated in what way?

Back 4

The same as a purchase in a non-restricted account, with the same Reg T margin call.

Front 5

Due to the high degree of risk, Selling Short is only permitted in a ____ _____.

Back 5

margin account

Front 6

When there is both buying and selling of securities in one day with a restricted account they determine the ____ _____ or ____ at the end of the _____.

Back 6

Net purchase; sale; day

Front 7

Excess equity is ____.

Back 7

the unused increase in the equity of the margin account created by an increase in current market value.

Front 8

An account that is below the NYSE/NASD minimum maintenance requirement is called __________.

Back 8

Undermargined.

Front 9

A client may not withdraw money or securities from his account if what two conditions would occur?

Back 9

1. The equity in the account would fall below $2,000.
2. The equity would fall below the minimum maintenance requirements.

Front 10

When a customer sells holdings in a restricted margin account, the Retention Rule says the stockbroker must do what?

Back 10

Retain 50% of the proceeds to reduce the client's debit balance.

Front 11

The credit balance in a Short Margin account is a _____.

Back 11

constant

Front 12

If a client fails to meet the margin call, what happens?

Back 12

The firm is required to sell off securities in the amount of twice the margin call.

Front 13

A customers Margin Call is the _____ he puts in the transaction.

Back 13

equity

Front 14

If a customer feels his reasons are exceptional for not paying for his stock on a Regular Way Trade, he can ask for ______.

Back 14

a 2 day extension.

Front 15

What is Debit Balance?

Back 15

The amount of the loan to finance the purchase of marginable securities.

Front 16

To quickly determine how far the minimum market value may drop without incurring a maintenance call, multiply the ____ ___ by ____.

Back 16

debit balance; 4/3

Front 17

Marking To The Market means what?

Back 17

A clients securities in his margin account are updated daily to that day's close.

Front 18

A brokerage firm _____ a client's securities in order to obtain financing from a bank for part of the margin purchase. The maximum amount of securities pledged can be no greater than ____ of the clients' debt.

Back 18

Rehypothecates; 140%

Front 19

The NYSE/NASD stipulates that no credit may be extended to any client unless they have a minimum ____ equity.

Back 19

$2,000

Front 20

Dividends and interest received in a Restricted account are automatically ____ ___ of the account in into the ____ ____ on the day received.

Back 20

journaled out; SMA Account

Front 21

If the credit balance in a short margin account is a constant, what does change with market fluctuations?

Back 21

1. The cost of buying back the borrowed property to cover the short sale.
2. The equity in the account.

Front 22

What is the Minimum Maintenance Requirement?

Back 22

A client is required to keep equity of at least 25% of the market value of the stock.

Front 23

Use of the SMA as a source of equity in another short sale is called _____ ____.

Back 23

shorting power

Front 24

In a cash account Reg T allows how much time to pay in full after the trade date if no extension is granted.

Back 24

5 business days.

Front 25

A client must maintain an equity in a short margin account of the greater of the following.

Back 25

1. 30% of the CMV
2. $2,000
3. The Cheap Stock Rules.

Front 26

Regulation T requires the broker/dealer to cancel ____ if _____ is not made on time.

Back 26

the trade; payment

Front 27

The margin call for a short sale is ___ for a long purchase.

Back 27

the same

Front 28

What is Street Name Registration?

Back 28

In order for a broker to be able to liquidate the loan collateral quickly, the securities are registered in the name of the brokerage firm or its nominee.

Front 29

The maximum potential loss on a short sale is _____.

Back 29

unlimited

Front 30

The client whose securities are registered in Street Name, remains the actual owner of ___, and he is referred to as the ___ ____.

Back 30

all benefits of ownership;

Beneficial Owner.

Front 31

The minimum maintenance equity in a short margin account is ______.

Back 31

30% of CMV

Front 32

A margin account is also referred to as a ____ ____.

Back 32

General Account

Front 33

Any margin account with equity below Reg T is considered _______.

Back 33

restricted.

Front 34

Determining the Buying Power from the SMA amount is best remembered by the acronym SMART which means what?

Back 34

SMA account x Reg T = Buying Power.

Front 35

Cheap Stock Rules Require what equity per share?

0 to $2.50 : ______
$2.50 to $5: ______
$5 per share+: _____

Back 35

$2.50 per share;
100% of share price;
$5 per share.

Front 36

The consequences for a customer who violates Reg T are?

Back 36

His trades will be cancelled or the unpaid portion will be liquidated and his cash account will be frozen for the next 90 days.

Front 37

What is a Restricted Margin Account?

Back 37

One where a decline in the market value of the stock has caused the owners equity to fall below the Reg T percentage.

Front 38

Hypothecation is what?

Back 38

Pledging the securities as collateral for a margin loan.

Front 39

What is it called when a brokerage firm mixes or combines its own securities with those of clients to obtain loans and other benefits beyond what is fair and reasonable.

Back 39

Co-mingling