11:12
The way they act is so cringe and gives mad ick
Warning
Info
Warning
Info
LSDefine
Simple English definitions for legal terms
good-faith margin
Read a random definition: political-offense exception
A quick definition of good-faith margin:
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.
A more thorough explanation:
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.
- When an investor buys securities on credit through a broker, they may be required to pay a good-faith margin to protect the broker against losses. For example, if an investor wants to buy $10,000 worth of stock on margin, the broker may require a good-faith margin of $2,000.
- Another example of good-faith margin is when a borrower takes out a loan and uses collateral to secure it. The lender may require a good-faith margin, which is the difference between the loan's face value and the market value of the collateral. For instance, if a borrower wants to take out a $50,000 loan and uses their car as collateral, the lender may require a good-faith margin of $10,000 if the car is worth $40,000.
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.