Margin Calls in a Cash Account

What is a Money Due Call (MD Call)?

A Money Due (MD) call occurs when you exceed your buying power in a cash account, often during volatile market conditions. It can be triggered by placing market orders for volatile securities or failing to maintain equity requirements for cash-secured puts, resulting in a negative balance. Until the call is met by the due date, no additional purchases are allowed.

What restrictions apply during an MD Call?

• No additional purchases unless the call is met by the due date.
• Further restrictions may apply if the call is not met after the due date.
• No instant buying power will be credited from pending ACH deposits until the call is satisfied.

How do I resolve an MD Call?
An MD call can only be resolved by depositing funds equal to or greater than the call amount. Until the call is met, no additional purchases are allowed, and instant buying power from pending ACH deposits is restricted.

What is a Good Faith Violation (GFV)?

A Good Faith Violation occurs when a stock is bought using unsettled funds and then sold before the original funds have settled.

Example:

You sell 100 shares of ABC on Monday (settling Tuesday), use the proceeds to buy XYZ the same day, then sell XYZ that same day. This creates a GFV because the funds from ABC hadn’t settled yet.

What happens if I get multiple GFVs?

• After 3 violations in 12 months: Your account will be restricted to settled cash only — you may still access provisional cash from recent deposits.
• After 4 violations: Your account will be restricted to closing positions only for 90 days (restriction begins from the Due Date of the 4th GFV).
• After 5 violations: Your account will be closed.

How do I resolve a GFV?
There is no way to resolve a GFV through deposits or liquidation.

Each violation expires automatically at the beginning of the 13th month from the trade date.

What is a Required Maintenance Call (RM Call)?

An RM call occurs when your cash balance becomes negative, usually from:

• Fees
• Interest charges

How do I resolve an RM Call?
You can either:

• Deposit funds
• Liquidate securities

RM Calls are based on 4 PM EST closing prices and holdings as of 8 PM EST.

Important to note

Pending ACH deposits won’t credit provisional buying power until the call is satisfied.

What is an S1 Call?

An S1 Call occurs when a short position appears in a cash account, which should not typically happen.

Potential causes include:

• Simultaneous execution of stop-loss and take-profit orders.
• Corporate actions creating a short balance.
• Debit balance from ACAT in/out transfers.

S1 Calls require immediate review and resolution with the brokerage.