People's Securities - Investments

What is a Margin Account?
There are two purposes for opening a margin account. First of all, margin allows you to borrow funds using the securities you have in your brokerage account as collateral. You can utilize this collateral to obtain a loan for any purpose. Once a Margin Agreement is signed and approved, you can simply call People's Securities and request a check or transfer funds to your People's United Bank account.

Second, you can use the excess funds in your margin account to purchase additional securities without paying for them in full. When using margin to purchase securities, a portion of the cost (usually 50%) is deposited, while the rest is loaned to you by People's Securities.

What are the advantages of a Margin Account?
Although there are risks associated with using a margin account, which you should fully understand, you may enjoy the following advantages:

Margin borrowing benefits you in ways that a traditional cash brokerage account does not. First, as mentioned above, a margin account gives you accessibility to funds, at favorable rates, without a lengthy approval process. Typically, margin lending rates are prorated depending upon, among other factors, the amount of your margin loan. Interest is calculated daily, and posted monthly, to the debit balance of your account. The debit balance represents the total amount you owe to People's Securities. Any dividends or interest earned on the securities in your account are posted to decrease the amount you owe, should you choose this option when opening your account.

Second, your margin account may be able to provide temporary coverage for funds due, but not yet paid, by settlement date. The settlement date is the date on which broker/dealers exchange payment and securities, thereby completing a trade.

Third, trading on margin gives you the ability to increase your security purchasing power. In the current regulatory environment, you may be able to purchase marginable securities valued at up to twice the dollar amount of your investment. With the increase in purchasing power, your potential for profit also increases.

Another advantage of having a margin account is that it gives you the ability to transact "short sales" in stocks. A short sale is the sale of a security that you do not own, but that you borrow from People's Securities because you anticipate that its market value is going to decrease. At some future time, you must cover this sale by purchasing the securities in the market to pay back the securities that you borrowed. If the purchase price for a borrowed security is less than the price at which you sold it short, your profit is equal to the difference in price, less any transaction and or/interest costs. Of course, if the repurchase price is greater than the original sale price, the result would be a loss.

What are the risks associated with Margin?
Borrowing funds from your margin account is a convenient way to obtain short-term cash, but you should be aware of the risks involved. When you borrow funds from your margin account, you increase the amount of your debit balance. As market conditions fluctuate, the value of your marginable securities will also fluctuate, causing a change in your overall account balance and debit ratio. As a result, if the market value of the securities held in your margin account depreciates, you may be required to deposit additional funds or make a full repayment of your margin loan to bring your account back to acceptable levels.

Although the increased purchasing power associated with margin trading does increase the potential for profit, it also increases the potential for loss. In a cash account, your risk is limited to the amount of money that you invested. In a margin account, your risk includes the amount of money you have invested plus the amount that has been loaned to you.

Reducing the risks associated with Margin
There are several ways to reduce the risk of leveraged losses in a margin account. The following are two suggestions:

Borrowing on margin is not for everyone and you should give careful consideration to your personal investment objectives, your financial situation, and your tolerance for risk. Margin financing involves the extension of credit, where you agree to all terms and conditions of the signed Margin Agreement. Signing a Margin Agreement does not obligate you to use the features of a margin account - you may still continue to pay for all of your purchases in full.

Margin Requirements
The Federal Reserve Board set margin requirements for various marginable securities. For instance, the current margin requirements for eligible equity securities is 50% of the purchase cost. In other words, you must pay for at least 50% of a trade in cash, or deposit an amount of marginable securities into your brokerage account valued at greater than or equal to 100% of the purchase price.

The following example summarizes the requirements for a typical margin transaction. There is a $2,000 minimum equity requirement.

You purchased $10,000 worth of equity securities on margin. You will have to deposit 50% in cash or $5000. You may also deposit $10,000 worth of marginable securities with a loan value of $5000 (50% multiplied by $10,000). You are required to have these funds in your account no later than three business days after the trade date (T+3) to coincide with the Securities and Exchange Commission's rule 15c6-1, effective June 7, 1995, which set the standard trade settlement cycle at three business days.

What is a Margin Call?
As is true with all investors, those who use margin should keep a watchful eye on the value of their portfolios. A depreciation in the market value of your portfolio can result in the issuance of a margin call, requiring you to deposit additional funds and/or marginable securities into your account. The Federal Reserve Board legislates the extension of credit by brokerage firms under Regulation T of the Federal Reserve Board. According to the regulation, a customer initiating a margin transaction must deposit the required funds into his or her account within the standard settlement cycle plus two business days of the trade date. This is known as a Reg T Call (or a "Fed Call"). The consequence of not depositing the necessary amount of cash or securities in the account will become restricted and may be liquidated. Liquidating transactions may still be done in a restricted account. However, all proceeds from the sale of the securities will go directly toward the account's debit balance in order to bring it up to an acceptable level.

If the amount of equity in your margin account drops below the margin account maintenance requirement mentioned earlier, you may receive a Maintenance Call (or "House Call). A Maintenance Call is payable on demand, and rapidly depreciating market conditions may require immediate action involving liquidation of sufficient securities in your account to satisfy the call without notice to you. People's Securities reserves the right to request additional margin maintenance at its discretion due to reasons that may include, but are not limited to:

Failure to satisfy a Maintenance Call by depositing additional funds and/or marginable securities into your account will result in restrictions on your account and liquidation of sufficient securities to cover the call.

How do I satisfy a Call?
You may choose from the following options to satisfy your call requirements:

What Securities are Marginable?
Most securities listed on the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE), securities traded on NASDAQ's National Market, and certain mutual funds held over 30 days are eligible to be used as collateral in a margin account. Precious metals, certificates of deposit, and annuities are not eligible. If you are not sure that a security is marginable, please contact People's Securities.

Click here to view stocks with higher margin requirements.

Investments & Insurance are available through People's Securities, Inc. (member FINRA and SIPC), a subsidiary of People's United Bank.

	Home \| Branches/ATMs \| Contact Us \| Careers \| Login
Investing Online Trading Self-Directed Investing Margin Trading Bonds Asset Management Account Employee Stock Options Investor Protection Online Trading Demo Products & Services Mutual Funds Funds Advisory Program Forms Center Investment Management	Online Services \| Checking \| Savings \| Borrowing \| Investing \| Insurance \| Credit Card
	Margin FAQ's What is a Margin Account? What are the advantages of a Margin Account? What are the risks associated with Margin Trading? How do I reduce the risks associated with Margin Trading? What are the Margin Requirements? What is a Margin Call? How do I satisfy a Call? What securities are Marginable? What is a Margin Account? There are two purposes for opening a margin account. First of all, margin allows you to borrow funds using the securities you have in your brokerage account as collateral. You can utilize this collateral to obtain a loan for any purpose. Once a Margin Agreement is signed and approved, you can simply call People's Securities and request a check or transfer funds to your People's United Bank account. Second, you can use the excess funds in your margin account to purchase additional securities without paying for them in full. When using margin to purchase securities, a portion of the cost (usually 50%) is deposited, while the rest is loaned to you by People's Securities. Back to Top What are the advantages of a Margin Account? Although there are risks associated with using a margin account, which you should fully understand, you may enjoy the following advantages: Easy borrowing access to short-term cash loans. Increased purchasing power for securities transactions. Short selling for potential profits. (for experienced investors only) Margin borrowing benefits you in ways that a traditional cash brokerage account does not. First, as mentioned above, a margin account gives you accessibility to funds, at favorable rates, without a lengthy approval process. Typically, margin lending rates are prorated depending upon, among other factors, the amount of your margin loan. Interest is calculated daily, and posted monthly, to the debit balance of your account. The debit balance represents the total amount you owe to People's Securities. Any dividends or interest earned on the securities in your account are posted to decrease the amount you owe, should you choose this option when opening your account. Second, your margin account may be able to provide temporary coverage for funds due, but not yet paid, by settlement date. The settlement date is the date on which broker/dealers exchange payment and securities, thereby completing a trade. Third, trading on margin gives you the ability to increase your security purchasing power. In the current regulatory environment, you may be able to purchase marginable securities valued at up to twice the dollar amount of your investment. With the increase in purchasing power, your potential for profit also increases. Another advantage of having a margin account is that it gives you the ability to transact "short sales" in stocks. A short sale is the sale of a security that you do not own, but that you borrow from People's Securities because you anticipate that its market value is going to decrease. At some future time, you must cover this sale by purchasing the securities in the market to pay back the securities that you borrowed. If the purchase price for a borrowed security is less than the price at which you sold it short, your profit is equal to the difference in price, less any transaction and or/interest costs. Of course, if the repurchase price is greater than the original sale price, the result would be a loss. Back to Top What are the risks associated with Margin? Borrowing funds from your margin account is a convenient way to obtain short-term cash, but you should be aware of the risks involved. When you borrow funds from your margin account, you increase the amount of your debit balance. As market conditions fluctuate, the value of your marginable securities will also fluctuate, causing a change in your overall account balance and debit ratio. As a result, if the market value of the securities held in your margin account depreciates, you may be required to deposit additional funds or make a full repayment of your margin loan to bring your account back to acceptable levels. Although the increased purchasing power associated with margin trading does increase the potential for profit, it also increases the potential for loss. In a cash account, your risk is limited to the amount of money that you invested. In a margin account, your risk includes the amount of money you have invested plus the amount that has been loaned to you. Back to Top Reducing the risks associated with Margin There are several ways to reduce the risk of leveraged losses in a margin account. The following are two suggestions: Borrow less than the full loan value of your securities. Loan value is defined as the maximum allowable amount you can borrow using your securities as collateral. This way, you pay off more of your purchase and lessen the chances of your account falling below required margin levels during market fluctuations. You still enjoy the benefits of leveraged buying power and low cost borrowing. Maintain a diversified portfolio. Diversification is the key to any balanced portfolio. This is especially true with a margin account. A mix of conservative investments can lessen, but not eliminate, the risk of loss. Borrowing on margin is not for everyone and you should give careful consideration to your personal investment objectives, your financial situation, and your tolerance for risk. Margin financing involves the extension of credit, where you agree to all terms and conditions of the signed Margin Agreement. Signing a Margin Agreement does not obligate you to use the features of a margin account - you may still continue to pay for all of your purchases in full. Back to Top Margin Requirements The Federal Reserve Board set margin requirements for various marginable securities. For instance, the current margin requirements for eligible equity securities is 50% of the purchase cost. In other words, you must pay for at least 50% of a trade in cash, or deposit an amount of marginable securities into your brokerage account valued at greater than or equal to 100% of the purchase price. The following example summarizes the requirements for a typical margin transaction. There is a $2,000 minimum equity requirement. You purchased $10,000 worth of equity securities on margin. You will have to deposit 50% in cash or $5000. You may also deposit $10,000 worth of marginable securities with a loan value of $5000 (50% multiplied by $10,000). You are required to have these funds in your account no later than three business days after the trade date (T+3) to coincide with the Securities and Exchange Commission's rule 15c6-1, effective June 7, 1995, which set the standard trade settlement cycle at three business days. Back to Top What is a Margin Call? As is true with all investors, those who use margin should keep a watchful eye on the value of their portfolios. A depreciation in the market value of your portfolio can result in the issuance of a margin call, requiring you to deposit additional funds and/or marginable securities into your account. The Federal Reserve Board legislates the extension of credit by brokerage firms under Regulation T of the Federal Reserve Board. According to the regulation, a customer initiating a margin transaction must deposit the required funds into his or her account within the standard settlement cycle plus two business days of the trade date. This is known as a Reg T Call (or a "Fed Call"). The consequence of not depositing the necessary amount of cash or securities in the account will become restricted and may be liquidated. Liquidating transactions may still be done in a restricted account. However, all proceeds from the sale of the securities will go directly toward the account's debit balance in order to bring it up to an acceptable level. If the amount of equity in your margin account drops below the margin account maintenance requirement mentioned earlier, you may receive a Maintenance Call (or "House Call). A Maintenance Call is payable on demand, and rapidly depreciating market conditions may require immediate action involving liquidation of sufficient securities in your account to satisfy the call without notice to you. People's Securities reserves the right to request additional margin maintenance at its discretion due to reasons that may include, but are not limited to: Any undue concentration of one or more securities in your account: A significant decline of your credit worthiness;or Market or portfolio volatility. Failure to satisfy a Maintenance Call by depositing additional funds and/or marginable securities into your account will result in restrictions on your account and liquidation of sufficient securities to cover the call. Back to Top How do I satisfy a Call? You may choose from the following options to satisfy your call requirements: Deposit sufficient cash into your account to satisfy the entire amount of the call Deposit acceptable marginable securities with sufficient loan value to meet the call and/or Self sufficient securities in your account Back to Top What Securities are Marginable? Most securities listed on the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE), securities traded on NASDAQ's National Market, and certain mutual funds held over 30 days are eligible to be used as collateral in a margin account. Precious metals, certificates of deposit, and annuities are not eligible. If you are not sure that a security is marginable, please contact People's Securities. Back to Top Click here to view stocks with higher margin requirements. Investment & Insurance Products: •Not Insured by FDIC or any Federal Government Agency •Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate•May Lose Value Investments & Insurance are available through People's Securities, Inc. (member FINRA and SIPC), a subsidiary of People's United Bank.	Complete the New Margin Account Application Higher Margin Stocks Learn About Margin Trading Margin Trading Fact Sheet (PDF) Margin Trading Disclosure (PDF)
About People's United \| Investor Relations \| Press Room
© 2008 People's United Bank. It's Possible. At People's. Privacy \| Terms & Conditions \| Security Information \| Online Guarantee BPT