The investor can also, by sending you a memo to this effect, credit a portion of excess equity to a separate bucket called a special memorandum account (SMA), which functions like a line of credit.

Whenever he sells a security, 50% of the proceeds can be marked for SMA. Let's say he sells another $1,000 in stock:

$4,000 Long Market Value
($1,000) Debit Balance
$3,000 Credit Balance
$500 SMA


Both the debit and the equity change by $1,000. SMA is enhanced - from $0 in this case - by 50% of that. This is the amount the client has available to purchase new securities or withdraw in cash. If he chooses the latter and writes a check against his margin account for $100, this is what it will look like:
$4,000 Long Market Value
($1,100) Debit Balance
$2,900 Credit Balance
$400 Excess Equity



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