Customer's Loan Consent

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Debit Balance

    In a margin account, money owed by the customer to the broker ...
  2. Customer

    An individual or business that purchases the goods or services ...
  3. Customer Service

    The process of ensuring customer satisfaction with a product ...
  4. Customer Relationship Management ...

    The principles, practices, and guidelines that an organization ...
  5. In-House Financing

    A type of seller financing in which a firm extends customers ...
  6. Trading Ahead

    When a specialist trades securities for his or her own firm's ...
Related Articles
  1. Financial Advisor

    Be A One-Stop Shop For Your Clients

    Offering comprehensive financial services can bring in business, but coordination is the key to success.
  2. Investing

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  3. Trading

    Advanced Guide To MetaTrader 4 - Custom Indicators

    Custom Indicator CreationIndicators are used to analyze past and current price information to help traders predict future price movement. In addition to a wide variety of technical indicators ...
  4. Trading

    Uncovering The Securities Firm

    Learn about the various departments of a securities firm and the professionals who make it work.
  5. Markets

    NYIF Instructor Series: SEC Customer Protection Rule

    In this short instructional video Jack Farmer explains what SEC Rule 15c3-3 is and how it applies to you as an investor.
  6. Investing

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  7. Entrepreneurship & Small Business

    Understanding Marketing

    Marketing includes all of the activities of a company associated with buying and selling a product or service.
  8. Managing Wealth

    Top 10 Brokerage Firms For Day Trading

    Day traders have different needs from long-term investors. Investopedia rates the top 10 brokerage firms for day traders.
  9. Trading

    The Top U.S. Regulated Stock Brokers (AMTD, IBKR)

    To operate in the United States, stock brokers must comply with SEC regulations that protect investors. Here is a look at some of the best.
  10. Financial Advisor

    Wall Street: Where The Customer Is Always Wrong

    In the financial industry, there's not much emphasis placed on dealing with customer complaints, but there should be.
RELATED FAQS
  1. How long can you short sell for?

    When an investor or trader enters a short position, he or she does so with the intention of profiting from falling prices. ... Read Answer >>
  2. What happens when the lender of the borrowed shares in a short sale transaction wants ...

    In a short sale transaction, shares are borrowed from the lender by the short seller and sold in the market. The lender of ... Read Answer >>
  3. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    Learn how FINRA and the Federal Reserve regulate margin account trading, and understand how pattern day trading can impact ... Read Answer >>
  4. Does the party loaning shares in a short sale transaction benefit in any way other ...

    To answer this question, we first need to clarify who is doing the lending in a short sale transaction. Many individual investors ... Read Answer >>
  5. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
  6. When short selling a stock, how long does a short seller have before covering?

    There are no general rules regarding how long a short sale can last before being closed out. A short sale is a transaction ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center