Margin Stock Includes:

D

Margin stock refers to securities that can be used as collateral to borrow funds from a broker-dealer in order to purchase additional securities. Regulation T of the Federal Reserve Board governs the extension of credit by broker-dealers to customers for securities transactions.

According to Regulation T, margin stock includes:

A. Equity securities registered or having delisted trading privileges on a national securities exchange:

Equity securities that are registered on a national securities exchange or have delisted trading privileges on a national securities exchange are included in the definition of margin stock. A national securities exchange is a self-regulatory organization (SRO) that has been registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934.

B. Over-the-counter (OTC) securities that do not qualify for trading in the National Market System:

OTC securities that do not meet the listing requirements for the National Market System (NMS) are also included in the definition of margin stock. The NMS is a system for trading securities that meet certain listing requirements, such as minimum market capitalization, share price, and trading volume.

C. Warrants or rights to subscribe to or purchase a common stock:

Warrants or rights to subscribe to or purchase a common stock are also included in the definition of margin stock. Warrants and rights are derivative securities that give the holder the right to purchase or sell the underlying security at a specified price within a certain time frame.

D. Securities issued by an investment company registered under the Investment Company Act, except for: A company licensed under the Small Business Investment Company Act, a company that has at least 95 percent of its assets continuously invested in exempted securities, a company that issues face-amount certificates, or a company that is considered a money market fund under the SEC Rules:

Securities issued by an investment company registered under the Investment Company Act are generally considered margin stock. However, there are certain exceptions to this rule. Securities issued by a company licensed under the Small Business Investment Company Act, a company that has at least 95 percent of its assets continuously invested in exempted securities, a company that issues face-amount certificates, or a company that is considered a money market fund under SEC rules are not considered margin stock.

It is important for broker-dealers and their customers to be aware of what securities are considered margin stock because the purchase of these securities on margin involves the use of borrowed funds and carries a higher degree of risk. Margin trading can result in substantial losses, and customers should carefully consider their investment objectives, risk tolerance, and financial situation before engaging in margin trading.