Type of Accounts

• Cash Account – This is the basic account where you buy and pay for securities. The securities can be registered in your name and the certificates will be issued to you, or you can keep the securities in street name. They will be stored and insured at the brokerage firm, and you will be given credit for them on your statement. All purchases must be paid for by the settlement date. The larger firms also offer extensive Financial / Cash Management Accounts that consolidate check writing, expense tracking, credit and debit cards, funds transfers and daily cash sweeps into one comprehensive account.
  
   
• Margin Account – This account allows you to borrow money on securities that you own. Depending on the firm, normally up to 50% of the value of eligible securities can be borrowed against. Typically, margin is used to leverage one’s account to purchase additional securities that hopefully will increase in value at a greater rate than the margin’s interest rate. Most firms also allow you to withdraw your available funds and spend it as you see fit.

Margin is extremely risky! Margin accounts are automatically marked-to-market, if the value of your stocks drop below the firm’s minimum equity maintenance requirement, then you will be immediately required to deposit more cash or stock, or sell a portion of your investments. A firm can change their margin maintenance requirements at a moment’s notice. When a margin call is made, time is of the essence. If unavailable when the call or e-mail is made, your stocks can automatically be liquidated, until the equity to margin ratios of your account are back in compliance with the firm’s credit policies. If the equity in the account drops below the loan amount, the account holder is responsible to make up the deficit and pay off the remaining margin loan.

Margin accounts also authorize security lending! When opening a margin account, you are responsible for accrued interest on your loan. Additionally, you authorize the broker to lend out your securities to his clients, without further notice or remuneration to you. Usually, marginable securities are loaned to clients who are involved with short-selling.

• Option Account – This account allows you to buy or sell derivative instruments. You usually need to execute a written acknowledgment form, notifying the firm that you understand the risks that are involved.
   
• Discretionary Account – The financial advisor manages your account and has authorization to make trades without notification.

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