A margin account allows you to borrow money using eligible securities in your brokerage account as collateral. Margin accounts can be used to purchase investments or access cash without selling your holdings.
Before opening a margin account, you should understand the account requirements along with the characteristics and risks. You will receive the Margin Disclosure Statement and need to sign a Margin Agreement. You must deposit at least $2,000 in cash or generally twice that in fully-paid eligible securities to open a margin account. Once your account is opened, you can use margin to purchase securities or borrow against margin-eligible securities already held in your margin account. While using margin, you must meet Wells Fargo Advisors’ equity requirements. Review margin disclosure.
Margin-eligible securities generally include most exchange-listed stocks, preferred stocks, and warrants, as well as many government and investment-grade bonds, certain mutual funds, and unit investment trusts.
Not all securities are eligible for margin. Securities that are low-priced, newly issued (within 30 days), highly leveraged, or traded on over-the-counter (OTC) markets are typically not marginable.
Most taxable personal, partnership, and corporate-owned brokerage accounts are eligible for margin, however, margin is not permitted in the following account types:
- Retirement accounts (IRAs, retirement trusts, pension or profit-sharing plans)
- UGMA/UTMA accounts and 529 plans
- Accounts owned by banks, trust companies, credit unions, mortgage companies or insurance companies
- Accounts pledged as collateral to a creditor
- Investment Club accounts
- Prime Brokerage accounts
- Guardian / conservator / committee accounts
- Certain advisory or managed account programs
No. Margin loan proceeds can be used for a wide range of personal or business needs, such as covering unexpected expenses, real estate purchases or consolidating debt.
A margin account offers flexibility and convenience for managing your investments and accessing funds when you need them. Here’s what you can expect:
- Competitive interest rates
- Online access to view your margin loan balance, buying power, available funds, and account activity
- Convenient margin trading online, through our automated phone system or by contacting a Wells Fargo Advisors investment professional
- Easy money movement online between linked brokerage and Wells Fargo bank accounts. With a Wells Fargo Brokerage Cash Services Account, you can also access margin through checks, debit cards, ACH, or wire transfers.
Borrowing on margin to purchase securities always carries a degree of risk. You can help manage that risk by:
- Limiting your use of leverage by not using your entire margin availability or buying power
- Diversifying your investment portfolio
- Borrowing against less volatile securities
Margin call is a generic term that refers to both maintenance calls and Regulation T calls (also referred to as Reg T or Fed calls). A margin call can be caused by market value declines or trading activity in a margin account.
- Fed calls generally result when you purchase securities and do not have sufficient cash or equity on the trade date. Fed calls cannot be met by market appreciation. If you do not deposit the initial equity requirements on or before the settlement date, Wells Fargo Advisors reserves the right to sell your securities, and you would be responsible for any loss on the trade as well as any margin interest.
- Maintenance calls generally result when the value of your securities declines to a point where the account equity is below the minimum maintenance requirement. Wells Fargo Advisors sets maintenance requirements for each security class and individual securities. Maintenance requirements are the minimum equity required to support a margin loan. If the margin account equity drops below the minimum maintenance requirement, a call will be issued. Wells Fargo Advisors can increase maintenance requirements at any time without advance notice. These changes often take effect immediately and may result in the issuance of a call.
An investor who receives a margin call is required to pay down the margin debit balance, deposit fully paid, marginable securities or sell securities to satisfy the call. While we will try to notify you of your margin calls, we are not required to do so. If a call is not met in a timely manner, your securities will be liquidated to meet the call and may create excess equity in your account. You may not receive an extension of time to meet a call, and Wells Fargo Advisors is not required to contact you before selling your securities to meet a call. You are not entitled to choose which securities or other assets in your accounts(s) are liquidated or sold to meet a margin call. In falling markets, your securities may be liquidated prior to the margin call due date to prevent a negative equity position.
You should fully understand the account requirements and risks associated with using this kind of leverage in your brokerage account, especially when you borrow at or near the initial equity requirement.
- Monitor your account. You should monitor your portfolio and degree of leverage, especially during fluctuating, volatile markets.
- Be prepared for margin calls. Keep a reserve of funds available so that you can quickly meet a margin call.
- Borrow against a diversified portfolio of securities to potentially minimize your risk should any one security decline in value. Diversification may not avoid or reduce declines during times of broad market declines.
- Leverage can increase your risk. The greater the degree of borrowing against a portfolio, the more likely calls and liquidation become.
