Series 7 - General Securities Representative Exam
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A client of yours calls you and wants to short a stock. You are checking the quotes and see it is on the Hard To Borrow list. What do you tell the client?
You cannot short the stock
A
You can short the stock, but have to pay a higher borrowing costs
B
You can only short the stock if you can pledge the underlying shares in one of your brokerage accounts
C
You can short the stock, but it is on the hard to borrow list. So, you have to find someone to pledge the underlying stock as collateral - if you don't own the shares
D
Explanations
Stocks on the hard to borrow list are shortable - but with high borrowing costs. The costs vary for each issue. The client can short it, but with higher borrowing costs