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 you 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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