Financial Glossary: SMA


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SMA

SMA

Special Memorandum Account.

A special account where excess Margin generated from a client's Margin account is deposited. Also known as "special miscellaneous account".

The purpose of an SMA is to lock in any increase 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 buy additional securities for their Margin account.

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