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What is a cash account?

A cash account is a type of brokerage account in which the investor must pay the full amount for securities purchased. 

An investor using a cash account is not allowed to borrow funds from his or her broker-dealer in order to pay for transactions in the account (trading on margin).

In particular, regulation authorizes a broker-dealer to use a cash account to purchase a security for an investor if:

-There are sufficient funds in the account; or
-The broker-dealer accepts in good faith the investor’s agreement that the investor will promptly make full cash payment for the security before selling it and does not contemplate selling the security prior to making such payment.
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