12. What is an EM call?

An Equity Maintenance (EM) call is a type of margin call issued to investors who have taken their trades to the limit and are no longer able to add to their positions. It is a demand from the broker/dealer for the investor to deposit additional equity or to close out some of their positions to bring the aggregate related margin account equity balance back up to the required level. 1. **Issuance of EM Call**: An EM call is typically triggered when the aggregate related margin account equity balance falls below a certain threshold, which is $25,000 for Pattern Day Traders (PDTs) as per the regulations. 2. **Consequences of EM Call**: Once an EM call is issued, the investor cannot remove it intraday, even if a deposit is made or market value increases. This means that the investor must either meet the call by depositing the required funds or securities or face the consequences, which may include restrictions on trading and potential liquidation of positions. 3. **Resolution of EM Call**: To resolve the EM call, the investor must either cover the call amount or remove the PDT status, depending on the circumstances. If the DT Call amount is greater than the EM Call amount, covering the DT Call will close out both calls. If the EM Call amount is greater than the DT Call amount, covering the EM Call will close out both calls. If the EM Call amount is greater than the DT Call amount, and the account is eligible for a PDT status removal, covering the DT Call and removing the PDT status will close out both calls. Otherwise, the account needs to serve the 90 days period. After which, the outstanding calls will expire, and a request to lift the account restriction can be submitted and processed. 4. **Prevention of EM Call**: To avoid the need for an EM call, investors must ensure that their aggregate related margin account equity balance remains above the $25,000 threshold. This can be achieved by managing their positions and maintaining a sufficient level of equity, especially if they engage in day trading activities. In summary, an EM call is a critical notification to investors that their margin account is at risk and requires immediate attention to prevent further restrictions or potential liquidation of their positions.