Hypothecation Agreement
Categories: Bonds, Muni Bonds, Ethics/Morals
Pretty much a margin agreement.
Someone (we're not naming names) wants to start investing but doesn't have enough cash for all the investments they want to scoop up. So, they use the stocks or securities they buy as collateral to borrow money to invest.
If the investments make money and the investor can pay back the cash, all is well and good. If the investor can't make good on the loan for some reason, the lender can grab up those stocks or securities.