Rehypothecation

Business / Taxes / Rehypothecation: Rehypothecation occurs when your broker, to whom you have hypothecated — or pledged — securities as collateral for a margin loan, pledges those same securities to a bank or other lender to secure a loan to cover the firm’s exposure to potential margin account losses. When you open a margin account, you typically sign a general account agreement with your broker, in which you authorize your broker to rehypothecate.

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