Simple English definitions for legal terms
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Good-Faith Margin: Good-faith margin is the amount of money that a creditor would typically require for a specific investment, without considering the customer's other assets or securities positions. It is the cash or collateral that an investor must pay to a securities broker to protect the broker against losses from securities bought on credit. In simple terms, it is the money that an investor must put down to show that they are serious about their investment and to protect the broker from potential losses.
Definition: Good-faith margin refers to the amount of margin that a creditor would typically require for a specific security position, based on good judgment. This amount is established without considering the customer's other assets or securities positions held with respect to unrelated transactions.
These examples illustrate how good-faith margin is used to protect creditors against potential losses. By requiring a certain amount of margin, creditors can ensure that they have some protection if the value of the securities or collateral decreases. Good-faith margin is typically based on industry standards and the creditor's assessment of the risk involved in the transaction.