Series 28: Loan Consent Agreement

Loan Consent Agreement

The loan consent agreement permits the broker-dealer to borrow the customer’s margined securities to cover short sales by other customers or on its own behalf. This agreement may seem unnecessary since loan consent is generally included in the hypothecation agreement, but a separate signature is required by law if the customer agrees to cover other customers’ short sales.

Finally, alongside the margin agreement, non-institutional customers opening a margin account must be given a disclosure document explaining the risks of margin trading. This disclosure must be delivered again to the margin customers annually.

Customers must sign the credit agreement and hypothecation agreement to open a margin account. The loan consent agreement is optional.

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