What does 'Fully-Secured' refer to in an account?

What does 'Fully-Secured' refer to in an account?

• A. A negative net equity position
• B. A positive net equity position
• C. A balanced account with no securities
• D. A margin call situation

Answer: (B)

The term 'Fully-Secured' in the context of an account typically refers to a positive net equity position. This means that the total value of the securities held in the account exceeds any margin loans or other liabilities associated with that account. When an account is fully secured, it indicates that the investor has sufficient collateral to cover their borrowing, reducing the risk for the lender and the likelihood of a margin call.

In contrast, a negative net equity position would indicate that the liabilities exceed the assets, which does not signify a secure account. A balanced account with no securities suggests that no investments are held, which also does not reflect a fully secured status. Lastly, a margin call situation arises when the account value falls below the required collateral, necessitating additional funds or securities to be deposited. Thus, stating that an account is 'fully secured' emphasizes a healthy financial status, characterized by excess assets over liabilities.