Series 65: 7.2.1.2.1.1 Price Declines And Restricted Margin Accounts

7.2.1.2.1.1  Price Declines and Restricted Margin Accounts

Once the securities are bought, they may either rise or fall in value. All margin accounts are “marked to the market” daily. That is, securities in the margin account are continuously revalued consistent with their current market price, as measured by the previous day’s last sale.

If the securities fall in value, the long market value falls, and the equity also falls.

For example, if the security’s price drops to $50 per share, long market value in the customer’s margin account also drops to $50 per share.

The equity has now dropped from 50% to 40% of the LMV, creating a margin deficiency. A margin deficiency is the amount by which the required margin (50% of LMV) exceeds the equity in the margin account.

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