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Margin Disclosure Statement
Your brokerage firm is furnishing this document to
you to provide some basic facts about purchasing securities
on margin, and to alert you to the risks involved
with trading securities in a margin account. Before
trading stocks in a margin account, you should carefully
review the margin agreement provided by your firm.
Consult your firm regarding any questions or concerns
you may have with your margin accounts.
When you purchase securities, you may pay for the
securities in full or you may borrow part of the purchase
price from your brokerage firm. If you choose to borrow
funds from your firm, you will open a margin account
with the firm. The securities purchased are the firm’s
collateral for the loan to you. If the securities
in your account decline in value, so does the value,
so does the value of the collateral supporting your
loan, and as a result, the firm can take action, such
as issue a margin call and/or sell securities or other
assets in any of your accounts held with the member,
in order to maintain the required equity in the account.
It is important that you fully understand the risks
involved in trading securities on margin. These risks
include the following:
- You can lose more funds
than you deposit in the margin account. A
decline in the value of securities that are purchased
on margin may require you to provide additional
funds to the firm that has made the loan to avoid
the forced sale of those securities or other securities
or assets in your account(s).
- The firm can force the
sale of securities or other assets in your account(s).
If the equity in your account falls below the maintenance
margin requirements or the firm’s higher "house"
requirements, the firm can sell the securities or
other assets in any of your accounts held at the
firm to cover the margin deficiency. You also will
be responsible for any short fall in the account
after such a trade.
- The firm can sell your
securities or other assets without contacting you.
Some investors mistakenly believe that a firm must
contact them for a margin call to be valid, and
that the firm cannot liquidate securities or other
assets in their accounts to meet the call unless
the firm has contacted them first. This is not the
case. Most firms will attempt to notify their customers
of margin calls, but they are not required to do
so. However, even if a firm has contacted a customer
and provided a specific date by which the customer
can meet a margin call, the firm can still take
necessary steps to protect its financial interests,
including immediately selling the securities without
notice to the customer.
- You are not entitled
to choose which securities or other assets in your
account(s) are liquidated or sold to meet a margin
call. Because the securities are collateral
for the margin loan, the firm has the right to decide
which security to sell in order to protect its interests.
- The firm can increase
its "house" maintenance margin requirements
at any time and is not required to provide you advance
written notice. These changes in firm policy
often take effect immediately and may result in
the issuance of a maintenance margin call. Your
failure to satisfy the call may cause the member
to liquidate or sell securities in your account(s).
- You are not entitled
to an extension of time for a margin call. While
an extension of time to meet margin requirements
may be available to customers under certain conditions,
a customer does not have a right to the extension.
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