Series 7 practice questionhardMargin Accounts — Restricted Accounts
A restricted long margin account has a market value of $60,000 and a debit balance of $40,000. If the client sells $10,000 worth of securities, what happens to the SMA?
- ASMA increases by $10,000
- BSMA increases by $5,000✓ Correct answer
- CSMA is not affected
- DSMA decreases by $5,000
Explanation
Why B — SMA increases by $5,000
When securities are sold in a restricted account, 50% of the sale proceeds are released to SMA (per the retention requirement). Sale proceeds = $10,000; SMA increase = 50% x $10,000 = $5,000. The other 50% ($5,000) reduces the debit balance. After the sale: MV = $50,000, Debit = $35,000, Equity = $15,000 (30% — still restricted). The client can withdraw the $5,000 SMA or use it for buying power.
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