Non-marginable securities cannot be bought with margin borrowing or used fully as collateral for margin capacity.
Non-marginable securities are investments that a broker does not allow to be purchased with margin borrowing or does not give full collateral value in a margin account. The investor generally must fund them with cash or accept reduced borrowing capacity.
Non-marginable status matters because it changes buying power. A portfolio can contain assets with market value but still have little margin capacity if those assets are ineligible, volatile, newly issued, thinly traded, or restricted by broker policy.
| Security type | Why it may be non-marginable or restricted |
|---|---|
| Low-priced or penny stocks | High volatility, low liquidity, and fraud risk concerns |
| OTC securities | Limited trading depth or weaker disclosure environment |
| Recent IPOs or new issues | Special settlement, seasoning, or house-rule restrictions |
| Certain mutual funds | Holding-period or product-specific margin limits |
| Concentrated positions | Broker may reduce loan value to manage collateral risk |
| Restricted or illiquid securities | Hard to value or sell quickly under stress |
These are examples, not a universal rule. The broker’s current margin schedule and account approval determine treatment.
| Feature | Marginable security | Non-marginable security |
|---|---|---|
| Purchase funding | May be eligible for broker credit | Usually requires cash funding |
| Collateral value | May support buying power | May support little or no buying power |
| Risk control | Still subject to requirements and house rules | Often restricted because liquidation or valuation is harder |
| Account effect | Can increase or maintain margin capacity | Can reduce available margin capacity |
An investor has $20,000 of cash and buys $12,000 of a non-marginable OTC stock. The account may show the OTC position at market value, but the broker may not count it as collateral for additional margin borrowing. The investor’s buying power may therefore be much lower than a simple portfolio-value calculation suggests.