Customer's Loan Consent

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DEFINITION of 'Customer's Loan Consent'

An agreement signed by the customer of an investment firm. The customer's loan-consent form authorizes the firm to borrow margined securities to the limit possible, given the customer's debit balance. This is done if it is necessary for the firm to cover other short positions by the firm, or the customer's failure to complete delivery.

INVESTOPEDIA EXPLAINS 'Customer's Loan Consent'

Since only securities that trade above a certain dollar amount are maginable - $5 for some brokers - the broker would not be able to borrow securities that trade below that threshold. This makes it very difficult, or impossible, to find shares to borrow for a short sale for securities trading at low prices.

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