SIE practice questioneasyMargin Account Disclosures
Before opening a margin account, a broker-dealer must provide the customer with:
- AThe firm's proprietary trading history
- BA guarantee that margin calls will never be issued
- CA margin disclosure statement explaining the risks of margin trading✓ Correct answer
- DA list of all stocks available for margin trading
Explanation
Why C — A margin disclosure statement explaining the risks of margin trading
Before opening a margin account, FINRA rules require the firm to provide the customer with a margin disclosure statement that explains: the risks of margin trading, how margin works, that the firm can sell securities without notice in a margin call, that the customer can lose more than the initial deposit, and that the customer is not entitled to an extension of time on a margin call. The customer must also sign a margin agreement.
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