Series 7: Chapter Fifteen

Chapter Fifteen

Margin Accounts

Investors are allowed to purchase securities on loan if they open a margin account. Buying securities on margin means to purchase them with credit. The investor pays for part of the price of the security and the broker-dealer loans the investor funds for the rest. Margin is the amount or percent of money borrowed. The loans must be secured by the customer with money or securities and placed in a margin account held by the lender.

The Securities Exchange Act of 1934 gave the Federal Reserve Board the power to regulate margin requirements. In Reg