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.

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  1. Hypothecation

    The established practice of a borrower pledging an asset as collateral ...
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    The value associated with being able to invest in securities ...
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    1. The dollar amount in an existing margin account that is currently ...
  4. Initial Margin

    The percentage of the purchase price of securities (that can ...
  5. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  6. Collateral

    Property or other assets that a borrower offers a lender to secure ...
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