House Call

A house call is a margin call by the brokerage firm for a customer whose equity has fallen below the margin maintenance requirement of that brokerage firm. If the client fails to fill the shortfall in the margin account within the time specified by the "house," positions will be liquidated without notice to the account holder until the house requirement is satisfied.

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 Regulation T of the Federal Reserve Board. However, individual brokerage firms have the discretion to decide the percentage amount; for instance, it may allow an investor to borrow only 30% of the purchase price of the initial security. After a stock is purchased on margin, the Financial Industry Regulatory Authority (FINRA) imposes requirements on margin accounts that they hold a minimum of 25% of the market value of securities. Again, a brokerage firm may set its own policy with respect to the minimum percentage as long as it is over FINRA's 25% threshold. If it is a higher number, it effectively becomes the "house requirement" upon which house calls are made. When a house call is issued, the account holder will be told that he or she must act to meet the margin maintenance requirement "immediately" or within a stated time period.

House call percentage triggers may vary among brokerage firms as well as their time limitations before unilateral liquidation begins in a deficient margin account. Fidelity Investments has a margin maintenance requirement of 30% and this house call allows an account holder four business days to sell margin-eligible securities or deposit cash or margin-eligible securities before it starts liquidating securities. Charles Schwab, another brokerage firm, has the same maintenance requirement of 30%, but house calls are due "immediately" by the firm.