Disclosure 2 of 3
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MARGIN DISCLOSURE STATEMENT
We are 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 broker.
Consult your broker 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 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 in your account, 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 in your account.
The firm can force the sale of securities in your account.
If the equity in your account falls below the maintenance
margin requirements under the law, or the firm’s higher “house”
requirements, the firm can sell the securities in your account
to cover the margin deficiency. You also will be responsible
for any shortfall in the account after such a sale.
The firm can sell your securities 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 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 interest, including
immediately selling the securities without notice to the customer.
You are not entitled to choose which security in your margin
account is 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 requirement
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.
You are not entitled to an extension of time on 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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