Margin calls have become a major issues for investors as a result of the market turbulence caused by the coronavirus (COVID-19) pandemic. Many investors use margin loans through their brokerage firm that are collateralized by the securities in their investment accounts. FINRA has reported that, as of February 2020, the total balance of outstanding margin loans was in excess of $545 billion. When the value of investment accounts decline, as many did after the onset of the pandemic, margin contracts generally give brokerage firms the right to demand additional collateral from their customer, typically in the form of additional deposits into their brokerage account. If the investor does not meet the margin call, firms may have the right to liquidate some or all of the positions held in the account to repay the balance of the margin loan.
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