Why some shares fall outside a broker line.

A brokerage securities-based line of credit (SBLOC) is built for diversified, eligible securities held at the broker. Concentrated, restricted, thinly traded, small-cap and non-US positions often get a low advance rate or none. A bespoke Lombard facility reviews each freely tradable holding on its own terms, not against a broker’s eligibility list; restricted shares can qualify once the restriction lifts.

What is a securities-based line of credit?

A securities-based line of credit (SBLOC) is a revolving line secured by securities held in an investment account. FINRA’s investor insight on securities-backed lines of credit notes that many brokerage firms offering them do so through a bank affiliate, that they are non-purpose loans whose proceeds cannot be used to buy or trade securities, and that they are demand loans the lender may call at any time.

Schwab Bank’s Pledged Asset Line® is one example. Schwab describes it as a line of credit from Charles Schwab Bank, SSB, secured by non-retirement assets held in a separate Pledged Account at Charles Schwab & Co., Inc., and as an uncommitted demand line whose proceeds may not be used to purchase securities. SBLOCs are one form of securities-based lending, which a private bank would call Lombard lending.

Schwab is cited here only for what its own pages said when checked on 27 October 2026; no relationship between Lombard Financing and Schwab, or any other broker, is implied.

Why do brokers cap or refuse some positions?

Brokers cap or refuse positions because a securities-based line lends only against eligible collateral, at a loan value the lender sets. FINRA notes that the maximum credit limit typically depends on the quantity and type of collateral in the account, and that credit limit determination varies by firm.

Eligibility

Eligibility is the first filter: only securities that meet the broker’s rules, held in the pledged account, count towards the line. FINRA says eligible collateral generally includes stocks, bonds and mutual funds held in fully paid-for cash accounts, and that a firm might decide a previously eligible security no longer qualifies, in which case the credit limit is adjusted.

Schwab’s Pledged Asset Line FAQs say eligible collateral generally includes equities, most ETFs, most mutual funds, cash, certificates of deposit and many bonds, while ineligible collateral generally includes control and restricted stock, options, retirement assets, annuities and leveraged ETFs. Schwab Bank says it determines the eligible collateral criteria and the loan value of collateral at any time, in its sole discretion.

Concentration

Concentration matters because a single holding can fall sharply on its own news. FINRA warns that if a portfolio is concentrated in a particular stock or sector, a single market event could cause its value to plummet and trigger a maintenance call. Schwab’s disclosures for its line go further, excluding securities of a single issuer whose market value equals or exceeds its collateral concentration threshold.

Liquidity and share price

Liquidity matters because a lender must be able to sell the collateral if a call is not met. FINRA notes that the firm can then sell the securities to satisfy the maintenance call, and that lenders often can make these decisions without giving notice.

Schwab’s disclosures exclude equity securities valued below $3 per share (as checked on 27 October 2026), and its Advance Rate Lookup gives advance rate information by security, including for securities subject to special maintenance requirements. For thinly traded or small-cap shares, lenders also consider free float, average daily volume and how many days of normal trading the position represents, because a large block sold quickly can move the price.

Rule 144 restrictions

Restricted and control stock is hard to lend against because US securities law limits how, and how fast, it can be resold. The SEC’s guide to Rule 144 sets out the conditions; the rule is at 17 CFR 230.144, cited here from the Code of Federal Regulations revised as of 1 April 2025.

Restricted securities include shares acquired from the issuer, or from an affiliate, in a transaction not involving any public offering. They can be resold under the rule only after a holding period: six months where the issuer has been a reporting company for at least 90 days before the sale, otherwise one year.

An affiliate is a person that controls, is controlled by or is under common control with the issuer, and the SEC calls its shares control securities. Sales for an affiliate, restricted or not, face a cap in any three months (the greater of one per cent of the shares outstanding or average weekly trading volume over the prior four weeks), manner-of-sale conditions and, above set sizes, a Form 144 notice.

Two provisions address pledges. Under Rule 144(e)(3)(ii), a lender’s sales of an affiliate’s pledged shares after a default are added to the borrower’s own sales in applying that cap, in any three-month period within six months of the default (one year if the issuer is not a reporting company).

Under Rule 144(d)(3)(iv), shares bona fide pledged by an affiliate and sold by the lender after a default are treated as acquired when the borrower acquired them; if they were pledged without recourse, they are treated as acquired by the lender at the time of the pledge. Because the holding period runs from acquisition, the recourse profile can affect when a lender could resell restricted shares under the rule. Check with local counsel.

Non-US listings

A broker line is secured by securities held in the account at that broker, so a holding listed outside the US first raises practical questions. Schwab’s FAQs list American depositary receipts among eligible categories, provided they are considered marginable by Schwab Bank and valued at or above $3 per share.

Shares that trade only on a non-US exchange raise further considerations for any lender: whether the broker can hold them in the pledged account, how they are priced and in which currency, and how they would be sold in their home market if a call were not met. How a particular broker treats them is set by its own eligibility rules.

What does a bespoke Lombard facility do differently?

A bespoke Lombard facility starts from the position rather than from a product’s eligibility rules. The holding is reviewed on its own terms, the recourse profile is chosen, and custody is arranged for the market where the shares are listed, with the terms agreed in the facility documentation.

Position-level review

A position-level review looks at the specific holding: the liquidity and traded volume of the line, its volatility and free float, the size of the holding, the market and its settlement and enforcement regime, currency, and any dealing or disclosure constraint. Those drivers set the loan-to-value; the method is set out in how much you can borrow against shares.

A concentrated holding is lent against more conservatively than a diversified book, but it is not excluded for being concentrated; borrowing against a concentrated position explains how staged drawdowns and hedging fit in. For a controlling or substantial shareholder, the review also covers disclosure of the pledge and the takeover-code consequences of enforcement, the subject of controlling-shareholder financing.

Restricted stock is a different case. The firm requires freely tradable shares listed on a recognised exchange, so restricted shares are reviewed for when, and how, they become freely tradable, and a facility can be planned for that date; borrowing against restricted or unvested stock covers the detail. Private company shares, with no public market, fall outside those criteria.

Recourse options

A bespoke facility can be arranged as non-recourse, limited-recourse or full-recourse, and the choice is agreed at structuring. Recourse moves the other terms: where the lender can look only to the collateral, it will generally want a lower loan-to-value and a wider spread. The trade-offs are set out in non-recourse Lombard loans.

The loan-to-value, recourse profile, tenor and custody are written into the facility documentation for the life of the loan, and a Lombard loan term sheet shows where each one sits. For US shares pledged by an affiliate, Rule 144 also limits how fast a lender could sell after a default, as above.

Cross-border custody

Custody in a bespoke facility is arranged to suit the shares and their market, rather than around an account at one broker. The pledged securities are held by a qualified custodian under bankruptcy-remote arrangements, and legal title and settlement follow the conventions of the market where the shares are listed. The loan can also be drawn in a different currency from the shares, a case covered in cross-currency Lombard loans.

The firm does not accept Indian-listed shares, although an issuer with a dual or secondary listing, or a depositary line, outside India may qualify. Each market brings its own disclosure regime and settlement mechanics, which shape how the pledge is taken.

When is the broker line the better choice?

A broker line is often the better choice when the holdings are diversified, eligible and already at the broker, when speed and convenience matter most, when the aim is revolving access for modest needs, or when the amount is below what a bespoke facility is arranged for.

Speed and convenience favour the broker line. The securities are already in the account. Schwab’s page (checked on 27 October 2026) says approvals usually come in as little as one business day, and FINRA’s January 2024 insight notes that SBLOC funds may be available within a week of signing. A bespoke facility needs documentation and a custody arrangement, and the firm’s indicative timelines put documentation alone at one to three weeks.

Revolving access is another strength: Schwab says there is no minimum draw requirement or maturity date on its Pledged Asset Line. A holder who wants revolving access on bespoke terms has an equivalent in a Lombard credit line, secured by the same kind of pledge.

Size and status matter too. Schwab’s pages state that Pledged Asset Line amounts begin at $100,000 (as checked on 27 October 2026). The firm arranges facilities only for professional investors, or the local equivalent, against eligible collateral of US$2 million equivalent or more, as set out in who qualifies for a Lombard loan. For a smaller need, or a borrower without that status, a broker line is the more practical route.

Where the holdings are eligible and the broker line covers the need, there may be little reason to move them. A bespoke facility earns its place where the position itself is the obstacle: concentrated, thinly traded, small-cap or listed outside the US, provided the shares are freely tradable.