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.
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