Margin Accounts

Apply for a margin account. Once you have opened an Account, please print and sign the Margin Agreement. Send the Margin Agreement to our New York office along with the Customer Agreement form and your initial deposit (if you are funding your new account with a check). If you plan to wire the initial deposit, you may fax the forms to (212) 202-6097. Be sure to mail in the hard copy of these forms after faxing them.

Please note: Margin accounts are not available for Custodial Accounts, IRAs, IPOs, and Private Placement investment opportunities.

Buying on Margin. You must specify each time you make a transaction whether you want to buy, margin buy, sell, or margin sell. You may pay fully for marginable securities if you choose. The Positions section in your account page will specify whether each of your positions is held on margin or cash. Investing in a margin account will increase your buying power since you will have the capability to borrow against your fully paid securities that are marginable.

For example, if you have $10,000 cash in your account, you can:

a) buy $10,000 of stock by fully paying for it. This would then give you $5,000 borrowing power from that fully paid position (held in cash) if that stock is marginable at 50%.

b) margin buy $20,000 of stock by borrowing 100% of your cash and putting it toward the purchase of the 50% marginable security.

Please note: You are not allowed to buy mutual funds with a margin account, but you can use mutual funds and new offerings as collateral in a margin account if they have been owned and paid in full for 30 days. You can borrow against these securities only if you request that they be moved to your margin account by calling (800) 361-8150.

What is Margin Trading? When you trade "on margin," you borrow a portion of the funds you use to buy stocks so that you can take advantage of opportunities in the market. This is considered a loan from your clearing firm and you pay interest on these borrowed funds up until you repay the loan.

What you can and can't buy on margin. You can only buy securities on margin if they are marginable. There are some limitations to what you can buy with your margin account: The Federal Reserve Board's Regulation T (Reg T) stipulates which securities you can buy on margin. McGinnSmith has its own list of marginable securities that you can purchase. Note that this list may not include some securities that the Federal Reserve Board considers marginable. The Federal Reserve also stipulates how much of your own funds you must use to buy marginable securities. This amount, called the initial margin requirement, is currently 50% of the security's value. McGinnSmith has the right to use a more stringent initial margin requirement where applicable (volatile securities, etc.).

For example: if you want to buy $10,000 of stock on margin, you must contribute at least $5,000 of your own money towards the purchase. If McGinnSmith decides to have a 60% margin requirement due to the volatility of the equity, than the customer must contribute at least $6,000 of their own money towards the purchase.

You can sell stocks short (a sale where you borrow stock from McGinnSmith to sell at a higher price in hopes of repurchasing at a later time and a lower price). You may also short stocks you already own with your margin account thus allowing you to realize a profit when the security declines in value. Not ALL securities can be borrowed for short selling. If the system does not allow you to short a stock, call our office to inquire about short approval for that particular stock. There will be a representative that will assist you. You cannot purchase options or new issues with a margin account.

It is important that you:

Maintain a sufficient balance in your margin account to avoid Margin Calls.

Know how much margin interest you'll have to pay on borrowed funds.

Know how Margin maintenance requirements will affect your account.

Know your Buying Power and Excess Equity before you make your margin purchases.