A hypothecation agreement allows a broker-dealer to

By Investopedia AAA
A:

A. approve the client for "hot" IPOs.

B.
hold the margined securities in a street name loan - using the securities as collateral for other means (i.e. bank loans and short sales of other customers).



C. hold margined securities in mutual fund accounts and keep the dividends.



D. invest the client's proceeds from hypothetical dividends.



Answer: B
The Hypothecation agreement is an addendum to the margin agreement, and more often than not, is required by broker-dealers.



RELATED FAQS

  1. What lessons did the tech bubble crash give to investors in the Internet sector?

    Learn how investors contributed to the dot-com bust and how Internet services and investing has changed since the market ...
  2. What are the most unsuccessful tech IPOs of all-time?

    Learn about theGlobe.com, eToys, Shanda Games and Vonage, some of the most unsuccessful tech IPOs of all time, and why their ...
  3. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ...
  4. What is the difference between an IPO and a private placement?

    Learn the differences between private placements and initial public offerings that companies use to raise capital through ...
RELATED TERMS
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or ...
  2. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  3. Muppet Bait

    Naive investors who are lured into buying hot stocks or securities ...
  4. At A Discount

    This specifically refers to stock that is sold for less than ...
  5. Aftermarket Report

    A summary of how shares of an initial public offering (IPO) performed ...
  6. Small Corporate Offering Registration - SCOR

    A form of corporate securities registration designed to reduce ...

You May Also Like

Related Articles
  1. Investing Basics

    Social Media: High Risk, High Potential ...

  2. Investing

    4 Hottest IPOs in 2015

  3. Investing News

    Investing In Social Media Startups? ...

  4. Investing

    Top 10 Largest Global IPOs Of All Time

  5. Investing News

    5 IPOs That Broke The Markets In 2014

Trading Center