A house call in the context of a brokerage account refers to a demand made by the brokerage firm to an account holder, requiring them to deposit additional funds into their account. This demand usually arises when the account’s equity falls below a certain threshold, particularly in a margin account.

Here’s how it typically works:

1. **Margin Account:** When an investor opens a margin account with a brokerage firm, they are essentially borrowing funds to trade or invest, using both their own capital and borrowed money.

2. **Margin Requirement:** Brokerages have certain rules and regulations regarding the minimum amount of equity that must be maintained in a margin account. This minimum equity level is known as the margin requirement.

3. **Leverage and Losses:** While trading on margin allows investors to amplify their buying power, it also increases the potential for both gains and losses. If the value of the investments bought on margin decreases, it can lead to a decline in the account’s equity.

4. **House Call:** When the equity in a margin account falls below the required minimum (due to losses in the value of the securities purchased on margin), the brokerage may issue a “house call” or a “margin call.” This is a demand for the account holder to deposit additional funds into the account to bring the equity back up to the required level.

5. **Deposit or Liquidate:** The account holder usually has a specific timeframe within which they must respond to the house call. They can either deposit additional cash into the account or liquidate some of their existing positions to cover the shortfall.

6. **Risk Management:** House calls are a risk management measure taken by brokerages to ensure that accounts don’t fall into a negative equity situation. If an account holder fails to meet the house call requirements, the brokerage may take further actions, such as liquidating positions to cover the outstanding debt.

It’s important for investors to be aware of the risks associated with trading on margin and to understand the terms and conditions set by their brokerage regarding margin requirements and house calls. Failure to meet a house call can have significant consequences, including forced liquidation of assets and potential financial losses. Investors should carefully manage their margin accounts and be prepared to meet additional cash requirements in the event of market downturns or adverse price movements.