What triggers a margin call?

A margin call occurs when the value of the investor's equity in a margin account falls below a certain required level, typically due to a decrease in the value of the securities purchased on margin. This situation prompts the brokerage to request additional funding from the investor to cover potential losses and maintain the minimum equity requirement.

In the context of leveraged investments, which involve borrowing funds to purchase more securities, a decline in the invested securities' value leads to the scenario where the losses exceed the available equity in the account. Consequently, the brokerage will issue a margin call, demanding that the investor deposit additional funds or securities into the margin account to bring it back up to the required maintenance margin.

Other options provided don't align with the concept of a margin call. Profits exceeding expectations may lead to an increase in equity, while a failure to pay dividends relates to income distribution and does not impact margin requirements. A reduction in the total value of the investment portfolio could be a factor leading to a margin call, but it is the specific demand for covering losses on that leveraged investment that directly triggers the margin call.