Special Memorandum Account - SMA

What is a 'Special Memorandum Account - SMA'

A special memorandum account (SMA) is a special account where excess margin generated from a client's margin account is deposited. Also known as "special miscellaneous account".

BREAKING DOWN 'Special Memorandum Account - SMA'

The purpose of an SMA is to lock in any gains realized in a client's margin account. Consider the situation where stock within a client's margin account realizes a capital gain and creates excess margin. If this excess amount is held in the account and the stock position produces a capital loss at a later date, the client would lose his or her gain entirely.

An SMA can also hold interest and dividend payments from long positions and proceeds from closing out a securities position. Clients can use funds in their SMA to purchase additional securities for their margin account.
RELATED TERMS
  1. Cross Margining

    An offsetting position where market participants are able to ...
  2. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  3. Margin Loan Availability

    1. The dollar amount in an existing margin account that is currently ...
  4. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  5. Exhaust Price

    A discount price at which a broker must liquidate a client's ...
  6. Remargining

    The process of bringing an account up to minimum equity standards ...
Related Articles
  1. Markets

    Intermediate Guide To E-Mini Futures Contracts - Margin

    Margin is essentially a loan that a brokerage firm extends to a client (the trader or investor) that is used for the purchase of trading instruments. Margin trading allows traders and investors ...
  2. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  3. Active Trading Fundamentals

    Explaining Initial Margin

    Initial margin is the percentage of a stock’s price an investor must have in his account to buy that stock on margin.
  4. Active Trading Fundamentals

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  5. Professionals

    Private Banking Vs. Wealth Management: Not Quite the Same

    Discover the various ways in which private banking and wealth management services coincide, as well as the significant differences between them.
  6. Professionals

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  7. Investing Basics

    What Is A Trading Account?

    A trading account enables an investor to buy and sell securities.
  8. Pattern Day Traders

    If a day trader makes four or more day trades in a rolling five business day period, the account will be labeled immediately as a pattern day trade account. Certain limitations will then be applied ...
  9. Stock Analysis

    Margins Matter (MCD, WEN, BKC)

    Just how important are margins on your stocks' prices?
  10. Options & Futures

    Spreading The Word About Portfolio Margin

    An underused opportunity provided in an SEC rule can enhance returns and lower risk for spread traders.
RELATED FAQS
  1. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Answer >>
  2. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
  3. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  4. How does margin trading in the forex market work?

    When an investor uses a margin account, he or she is essentially borrowing to increase the possible return on investment. ... Read Answer >>
  5. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  6. 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 >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center