A client`s credit agreement is not mandatory, but a broker may refuse to open a margin account without an account. Charles Schwab co. included, for example, this fairly standard disclosure in his credit agreement (section 11: Credit Agreement): If you see a question about your review related to the credit agreement, it will most likely test the fact that this is the only part of the margin agreement that does not have to be signed. “You agree that the property held now or in the future in your margina account may be borrowed by us (as a sponsor) or by others (separately or with the property of others). You agree that Schwab may receive and withhold certain benefits (including, but not limited to interest on the security reserved for these loans) to which you are not entitled. You acknowledge that such obligations may, in certain circumstances, restrict your ability to exercise voting rights or to receive all or part of the dividends related to the property borrowed. You understand that for real estate loaned by Schwab, the dividends paid for this property go to the borrower. As far as these obligations are concerned, you will not be entitled to compensation or other refunds. However, if a replacement payment is awarded to you in lieu of dividends, you understand that such a payment may not receive the same tax treatment that could have been applied when a dividend was received.
You agree that Schwab will not be required to compensate you for a different tax treatment between dividends and dividends. Schwab can distribute payments instead of dividends through a mechanism authorized by law, including using a lottery allocation system. A client`s credit consent form is one of the few initial documentation work when a client wants to open a margin account with their broker-cum. The margin agreement contains the terms and conditions under which the broker would grant the client credit for the purchase of securities or assets. For a broker-trader, a client`s credit agreement would give him greater flexibility in the settlement of clients` marginal accounts. The broker is authorized to lend assets to many account holders in order to obtain sufficient shares to facilitate the short selling of other clients. By signing the client`s credit authorization form, it authorizes the merchant broker to lend assets from the client`s account to the client`s receivable balance. When a customer opens a margina account, the customer must sign the margin agreement setting out the conditions under which the credit is renewed.