A home call is a margin call by the brokerage firm for a client whose equity has fallen below the margin maintenance requirement of that brokerage firm. If the client fails to make up the deficit in the margin account within the period specified by the “house”, the positions will be liquidated without notice to the account holder until the requirement of the house is met.
Break down the home visit
If a customer opens a margin account with a brokerage firm, up to 50% of the purchase price of the first stock in the account can be borrowed by the customer in accordance with Federal Reserve Board T regulations. However, individual brokerage firms have the discretion to decide the percentage amount; for example, it may allow an investor to borrow only 30% of the purchase price of the original security. After purchasing a security on margin, the Financial Industry Regulatory Authority (FINRA) requires margin accounts to hold at least 25% of the market value of the securities. Again, a brokerage firm can define its policy regarding the minimum percentage as long as it exceeds the 25% FINRA threshold. If it is a higher number, it effectively becomes the “house requirement” on which the home calls are made. When a home call is made, the account holder will be informed that he must act to meet the margin maintenance requirement “immediately” or within a specified period.
The home call percentage triggers may vary depending on the brokerage firms as well as their time limits before the start of the unilateral liquidation in a deficient margin account. Fidelity Investments has a 30% margin maintenance requirement, and this home visit allows an account holder four business days to sell margin-eligible securities or deposit cash or margin-eligible securities before starting the liquidation of securities. Charles Schwab, another brokerage firm, has the same 30% maintenance requirement, but home visits are due “immediately” by the company.