Merrill Lynch, a subsidiary of Bank of America, offers various investment and banking services, including the LMA (Loan Management Account) account. This account combines the flexibility of a checking account with the benefits of a securities-based loan. Before opening an LMA account with Merrill Lynch, it is crucial to understand the terms and conditions outlined in the LMA account agreement.
The LMA account agreement is a legal document that sets forth the terms and conditions of the LMA account. The agreement outlines the borrower`s obligations and Merrill Lynch`s rights in connection with the LMA account. It is essential to read and understand the agreement carefully before signing it.
The agreement outlines the credit terms, including interest rates, fees, and repayment terms. The interest rate on the LMA account is typically based on the prime rate, with a margin added on top. The margin varies depending on the borrower`s creditworthiness and the size of the loan. The fees associated with the LMA account may include annual maintenance fees and transaction fees. It is important to note that if the borrower defaults on the loan, Merrill Lynch may seize the assets in the account to repay the debt.
The agreement also outlines the types of securities that can be used as collateral for the loan. The securities must be eligible for margin and meet Merrill Lynch`s credit criteria. Merrill Lynch reserves the right to reject securities as collateral if they do not meet its standards.
The borrower must maintain sufficient collateral in the LMA account to avoid a margin call. A margin call occurs when the value of the securities falls below a certain level, and the borrower must deposit additional collateral to bring the account back into compliance. If the borrower fails to meet the margin call, Merrill Lynch may liquidate the securities to repay the debt.
In conclusion, the LMA account agreement is essential reading for anyone considering opening an LMA account with Merrill Lynch. The agreement outlines the terms and conditions of the loan, including interest rates, fees, collateral requirements, and repayment terms. It is crucial to understand these terms and to maintain sufficient collateral to avoid a margin call. Failure to comply with the terms outlined in the agreement may result in the liquidation of securities and the loss of assets.