Series 7 practice questioneasyMargin Accounts — Margin Agreement Components
Which of the following documents must a customer sign to open a margin account?
- AA credit agreement, a hypothecation agreement, and optionally a loan consent agreement✓ Correct answer
- BA trust agreement and a corporate resolution
- CA power of attorney and a discretionary authorization
- DA promissory note and a personal guarantee
Explanation
Why A — A credit agreement, a hypothecation agreement, and optionally a loan consent agreement
Opening a margin account requires the customer to sign a credit agreement (outlining terms of the margin loan), a hypothecation agreement (pledging the securities as collateral for the loan), and optionally a loan consent agreement (permitting the firm to lend the customer's securities to others for short selling). The loan consent is optional but commonly included.
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