SIE 6.3 Account Features

Cash accounts are basic: pay in full for any securities purchased.
Margin accounts allow trading capital via borrowed cash/securities
- Long accounts: purchase securities and borrow cash (pay interest)
- Short accounts: borrow securities to sell them short
- The BD gets interest and also increased commission, since customers get to trade larger amounts.
- Hypothecation: collateral of securities for margin loans (from customer to BD)
  - BD rehypothecates or repledges (from BD to bank) to obtain loan
- Most individal/joint accounts can become margin accounts after sigining papes. Not retirement ones though.
  - Credit agreement: e.g. interest
  - Hypothecation agreement:
    - BD is nominal/named owner of securities in street name
    - Customer is beneficial owner
  - Consent to Loan agreement (optional): permission to firm to loan the customer's margin securities
Options cannot be traded on margin or used as collateral
Regulation
- Regulation T: 50% of market value required for collateral
- FINRA: minimum($2k, 100%)
- Customer required to deposit max(Reg-T, FINRA)
Maintenance Call: if market prices cause a customer's equity to drop below 25% of account's market value, they get a call asking for more funds.
- FINRA min: 30%
- BD can choose a higher min, called a house call.
Accounts can be either fee-based (monthly or quarterly, typically based on account valuea) or commission-based (per trade)
Solicited trades (solicited by BD / rep) must be marked as solicited on order form.
Discretionary trades, when given permission, are trades made by rep without any preauthorization by customer - must be marked as discretionary!
- If any of Action, Amount, or Asset is decided by rep, the whole trade is considered discretionary.
Wrap accounts are accounts for a combo of services.