A broker requesting additional funds to cover losses is often initiating:

When a broker requests additional funds to cover losses, this is indicative of a margin call. A margin call occurs when the equity in a margin account falls below a certain threshold required by the brokerage firm. This usually happens when the value of the securities purchased on margin declines, leading to an insufficient balance to maintain the leveraged position. The brokerage demands that the investor deposit more funds or securities to cover the potential further losses, thus protecting both the investor and the broker from increased risk.

In this context, margin accounts allow investors to borrow funds from a broker to purchase more securities than they can afford with their own cash. However, if the market value of those securities drops significantly, the broker needs to ensure that they can recover their loan, prompting a margin call. This situation is critical to understand for anyone engaged in trading on margin, as failing to meet a margin call can lead to the liquidation of assets within the account.