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 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 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:
- 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 sale.
- 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 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.
Securities purchased on margin 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 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.
- The firm can force the sale of securities or other assets in
your account(s).
- The firm can sell your securities or other assets without
contacting you.
- You are not entitled to choose which securities or other assets
in your account(s) are liquidated or sold to
meet a margin call.
- The firm can increase its "house" maintenance margin
requirements at any time and is not required
to provide you advance written notice.
- You are not entitled to an extension of time on a margin call.
