What happens when an investor receives a margin call?

• A. The investor can withdraw funds without restrictions
• B. The investor is required to add more cash or marginable securities
• C. The investor must sell all their securities immediately
• D. The investor can ignore the call if they have enough equity

Answer: (B)

When an investor receives a margin call, it indicates that the value of the investor's account has fallen below the required maintenance margin level. This typically occurs when the market value of the securities they have purchased on margin decreases, thus reducing the equity in their margin account. As a result, the investor is required to respond by adding more cash or marginable securities to restore the equity balance to acceptable levels, in line with the brokerage firm's requirements. This action ensures that the account remains compliant with margin regulations and mitigates the brokerage's risk.

The other options do not align with the protocol surrounding margin calls. For instance, withdrawing funds without restrictions is not possible during a margin call since the account needs to be funded to meet margin requirements. Selling all securities immediately is not a mandatory action; instead, the investor has the option to add funds or securities. Lastly, ignoring the call is not advisable, as failing to address a margin call can result in forced liquidation of securities by the brokerage to protect its lending obligations. Thus, the correct understanding of what a margin call entails is captured in the requirement to add more cash or securities.