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Series 7 practice questionmediumMargin Accounts — Margin Calls

If a client fails to meet a maintenance margin call, the broker-dealer may:

  1. ADo nothing and wait for the market to recover
  2. BLiquidate securities in the account to bring it back to maintenance levels✓ Correct answer
  3. CTransfer the account to another broker-dealer
  4. DConvert the margin account to a cash account
Explanation

Why B — Liquidate securities in the account to bring it back to maintenance levels

If a client fails to meet a maintenance margin call, the broker-dealer has the right to sell (liquidate) securities in the account without the client's consent to bring the account back to the required maintenance level. The margin agreement signed when opening the account gives the broker this authority. The broker-dealer is not required to give the client additional time to meet the call.

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