Series 14: 8.5.2.2.2. Maintenance Margin Requirement

8.5.2.2.2. Maintenance Margin Requirement

A margin account also has a maintenance margin requirement, which is the amount of margin that must remain in the account at all times, even when the customer is making no additional purchases. The Fed allows FINRA to set maintenance margin requirements. In most situations, the requirement is that the account’s equity must be at least 25% of the LMV.

The consequences of falling below the 25% maintenance margin requirement are more serious than a restricted account. The customer will immediately get a margin call from her broker-dealer informing her that she must make a deposit sufficient to bring equity up to 25% of LMV, or else the broker-dealer will sell off enough of the account’s securities to meet the 25% requirement. If the broker-dealer has to sell off securities, the customer has no control over which securities are sold. You should be aware that for short positions, such as would result from using a margin account for short selling, the maintenance margin requirement is 30%. For the examples below,