Series 7 Exam Question 52: Answer and Explanation

Question: 52

Which TWO of the following are TRUE regarding SMA?

I. 50% of dividends or interest received in a margin account go to SMA

II. 100% of dividends or interest received in a margin account go to SMA

III. When an investor withdraws cash from a margin account, the SMA is reduced by 50% of the withdrawal

IV. When an investor withdraws cash from a margin account, the SMA is reduced by 100% of the withdrawal

• A. I and III
• B. I and IV
• C. II and III
• D. II and IV

Correct Answer: D

Explanation:

D. When receiving dividend or interest on securities held in a margin account, 100% of the dividends and/or interest received goes to the SMA (Special Memorandum Account). Also, when withdrawing cash from a margin account, the SMA is reduced by the full amount of the withdrawal.