What are the Guarantees of Margin Trading Account?
In accordance with the executive regulations of the law establishing the Capital Markets Authority and regulating securities activity, the capital and stock market lawyers in RHR Law Firm respond to this question.
Concerning margin trading account guarantees, on April 22, 2021, the Capital Markets Authority issued Resolution No. 53 of 2021, which included the amendment of some provisions of Chapter Eleven (Dealing in Securities) of the Executive Regulations of the Law Establishing the Capital Markets Authority and Regulating Securities Activity, and that Regarding the Margin Trading Service, among these amendments was the addition of Article No. (8-17) related to the guarantee.
Where the article allows for the acceptance of guarantees in the margin trading account, and these guarantees are either securities or cash balances deposited in the margin trading account, the margin trading service provider may accept additional guarantees in the margin trading account in the following two cases:
- The continuous decline in the market value of the security in the margin trading account as a result of unusual circumstances in the security or the stock exchange.
- Suspension of margin trading on the security for more than five working days.
The article clarified that it is not permissible to mortgage securities financed on margin, other than in favor of the margin trading service provider, and that it is not permissible to transfer these securities from the margin trading account to any other account of the client unless the margin trading service provider approves the transfer.
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