What is a "margin call" in the context of investing?

A "margin call" occurs when a broker requires an investor to deposit additional funds into their brokerage account in order to maintain the minimum equity required for their margin account. This situation arises when the value of the securities purchased on margin decreases to a point where the account does not meet the required maintenance margin. In essence, a margin call is a safeguard for brokers to ensure that they are protected against losses stemming from loans made to investors for purchasing securities.

If an investor does not meet the margin call by adding funds or selling some of their holdings to increase equity, the broker may liquidate the investor's assets to cover the deficit. This mechanism underlines the importance of maintaining sufficient equity levels in margin accounts to avoid forced liquidation and potential losses.

In contrast, the other options refer to different facets of investing but do not capture the essence of a margin call. For instance, a request to liquidate assets pertains to an investor's decision-making rather than the broker's requirement for additional capital. Notifications of dividend payments involve earnings distributed to shareholders, and recommendations to purchase more shares are advisory in nature, neither of which relate to the necessity of maintaining a margin account.