Advisor Flipbooks

securities-backed line of credit (sbloc) for financial professional use only. You'll probably have some questions How your client's investment portfolio will change Q: Is trading permitted within the securities account being used as collateral for an SBLOC? A: Yes, but please be aware that major changes in the asset allocation of this account might reduce the amount available to borrow against the line of credit. Q: Can your client request recurring distributions from their securities account? A: Most preauthorized recurring distributions will be discontinued when the account is pledged and becomes the collateral for an SBLOC. In certain circumstances, distributions may continue — for instance, if the account holds sufficient value. All recurring distributions should be disclosed for evaluation prior to the establishment of the SBLOC. Q: Can a distribution be made from your client's securities account to make an interest or principal payment on their SBLOC? A: Yes, your client may use their securities account for the payment, provided there is sufficient value to support the transaction. 1 Your client can access their account balance and transaction information by phone or online. 1 Changes in your client's credit limit Q: Will your client's credit limit increase if the underlying collateral increases in value? A: Unless your client chooses a specific credit limit, a maximum credit limit will be assigned at account opening. As securities gain in value, your client's credit limit will automatically be increased up to that maximum limit. If you and your client chose a specific limit, their maximum credit limit will remain unchanged regardless of the increased value in the account. Q: What would cause the credit limit on your client's SBLOC to be reduced? A: Your client's credit limit will automatically be reduced if the borrowing power or "Advance Rate" value of their pledged securities no longer supports their approved credit limit. It is important that your client verify their current credit limit and available credit before requesting advances or writing checks, as they will not receive specific notice when the credit limit changes. Q: How does your client verify their credit limit, available credit and view information about their SBLOC? A: Your client can access their credit limit, available credit, account balance and transaction information by phone or by logging in to his or her account online. Q: What if a security in the pledged account is no longer eligible to serve as collateral, or if while trading in the account, an ineligible security is purchased? A: Ineligible securities are automatically excluded from your client's securities account for collateral valuation purposes, and their credit limit is adjusted accordingly. In certain circumstances, this could trigger a request for additional assets or a principal repayment. Q: What happens if your client's securities account loses value? A: Depending on the relation between their account value, credit limit and amount borrowed, collateral devaluations may: (1) have no consequence; (2) limit your client's available credit; or (3) require a deposit of additional assets or an immediate payment. 1 Please tell your client to consult with their financial professional.

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