Final answer:
A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The agreement allows the firm to lend the customer money, hypothecate securities in the account, commingle the customer's securities with securities owned by the firm, and loan out the customer's margin securities.
Step-by-step explanation:
A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The loan consent agreement allows the firm to:
- lend the customer money
- hypothecate securities in the account
- commingle the customer's securities with securities owned by the firm
- loan out the customer's margin securities
When a customer opens a margin account, it means that they are borrowing money from the broker to buy securities. The loan consent agreement gives the firm the rights mentioned above. For example, the firm can lend the customer money and use the securities in the account as collateral. They can also loan out the customer's margin securities to other investors.