Undermargined Account

Undermargined account: An undermargined account is a margin account where the value of the securities held in the account has fallen below the maintenance requirement of the account.  A margin account necessitates the holder to maintain a stated minimum amount of money or securities in the account as collateral in order to continue trading. This rule safeguards the broker from any irresponsible trading or financial excesses on part of the account holder. Usually this occurs when the current market price of the financial instruments held in the account such as securities, stocks has fallen below the original purchase price.

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An undermargined account may result in a margin call or the account being restricted. A margin call is basically a demand for the account holder to deposit more funds when the value of the money or securities held in the account has fallen below the stated maintenance margin requirement. The maintenance margin varies from broker to broker, with some brokerages requiring a maintenance margin of up to 50%.

Edited and Updated 08th March 2014

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