Accounts and Margin

Accounts and Margins

A customer may buy securities either in cash, by paying the entire amount of the purchase or on margin by depositing the required amount and borrowing the balance from the brokerage firm. A new account form is required for all types of accounts with the following information from the owner of the account: Name, Address, Age, Marital Status, Occupation, Tax ID Number, Citizenship, Bank Reference, Listing of other brokerage accounts, Investment objectives, Relationship, if any, to the broker, Signature of the customer (s), broker and manager.

Joint Account Forms

Joint Tenants Agreement - This form establishes joint tenancy with rights of survivorship (JTWROS) between two parties to an account. Each party owns an undivided and equal interest in the account. In the event of death, his or her portion of the account belongs to the surviving party and bypasses the decedents estate.

Joint Tenants in Common - This agreement states the account is shared by two or more persons and specifies the percentage ownership of each. Upon death of any party, that person's equity in the account belongs to his or her estate.

Community Property Agreement - This establishes that funds and securities held in this account are the community property of a married couple.

Margin and Loan agreements

The margin agreements must be signed by the customer and returned to the firm prior to placing an order to buy on margin or sell short for the customer's account. When purchasing and maintaining securities on margin, the customer must agree to abide by exchange and Federal Reserve requirements. (again, margin will be handled in detail later).

Options Agreement

This agreement is required before options may be traded in a cash or margin account. The options agreement includes a statement of the client's net worth, liquid assets and investment experience. Brokerage firms require varying amounts of income and net worth depending on the types of option strategies a client intends to use. (Since our entire trading system uses specific option strategies, we will get into more detail later regarding these limits and how to get accounts open without necessarily proving any such figures). All customers opening an option account must receive the "full disclosure" document approved by the options exchanges and the Options Clearing Corporation (OCC) at or prior to the account being approved.

Limited Power of Attorney

This agreement allows someone other than the customer to place buy and sell orders in the account. However, the third party may not withdraw funds or securities from the account. This is commonly set up when an investment advisor or money manager is trading on the customer's behalf.