Margin Accounts
The agreement that allows a broker-dealer to pledge a customer's securities as collateral for margin loans is called:
The hypothecation agreement allows the broker to pledge (hypothecate) the customer's securities as collateral for margin loans. The broker can rehypothecate up to 140% of the customer's debit balance. Loan consent (optio
Complete Analysis & Legal Rationale
The hypothecation agreement allows the broker to pledge (hypothecate) the customer's securities as collateral for margin loans. The broker can rehypothecate up to 140% of the customer's debit balance. Loan consent (optional) allows lending of fully paid securities; the margin agreement authorizes borrowing.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Federal Reserve Regulation T margin/credit rules for broker-dealers (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.