The use of margin greatly increases the risks associated with investments held in a brokerage account. In many instances, stock brokers fail to disclose to investors that a brokerage account with margin can become many times more risky than the overall stock market. A margin balance occurs when securities are purchased or withdrawals are made by borrowing against brokerage account assets. During market declines, account equity declines rapidly due to the effects of margin which could result in a margin call. A margin call may require additional deposits of cash, or the sale of securities at a significant loss. The brokerage firm has the right to liquidate any securities held in the brokerage account it chooses to reduce the loan balance and protect its own interests. The unsuitable use of margin which results in substantial losses may be a cause of action in a FINRA arbitration claim for damages.
If you are the victim of excessive or unsuitable use of margin immediately contact the attorneys at Mathews Giberson LLP to learn more about your rights.