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. How do spinoffs differ from initial public offerings (IPOs)?

    Learn about the differences between a spinoff and an initial public offering, and understand why spinoffs may be attractive ...
  2. What are some common questions an interviewer may ask during an interview for a position ...

    Discover the world of investment banking and learn what questions are likely during an interview for a position with an investment ...
  3. What are the primary differences between a closed end investment and an open end ...

    Learn what the primary differences are between open-end investments and closed-end investments, and the implications for ...
  4. What are some roles of an investment bank?

    Explore the world of investment banking and discover the various functions that investment bankers serve, such as handling ...
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