What Is Excessive Use of Margin?
Stockbrokers and financial advisors are not always as trustworthy as they should be. There are many ways that brokers and brokerage firms can take advantage of investors to further their own financial interests. One of the most common ways is by suggesting that investors purchase securities on margin.
Continue reading to learn more about what excessive use of margin is, how it costs investors like you, and what you can do to get your money back.
When Brokers Take Advantage of Investors
You can think of margin use as a type of loan from your brokerage firm. The brokerage firm allows the investor to borrow money and uses the value of their accounts as collateral for the loan. While this can work out well for investors, it can also be very risky.
When the value of your securities declines, the brokerage firm can then demand a margin call. This means they will require you to deposit additional funds to make up for the value lost on the securities in your accounts. If you are unable to do so, they can then sell your securities.
Use of margin is legal, but it is often not suitable for investors. Brokers may suggest that you borrow on margin because it will generate a commission for themselves, furthering their own financial interests and that of their brokerage firm.
How You Can Recover Your Losses
Excessive use of margin may be grounds for arbitration. The Financial Industry Regulatory Authority (FINRA) can order that the broker who breached their fiduciary duties, was negligent, or engaged in misconduct repay you for your losses.
Your stockbroker misconduct lawyer can take a closer look at your case to determine whether your broker mishandled your securities accounts and what options, if any, are available to recover these losses.
Speak with a Stockbroker Misconduct Lawyer
Has your broker taken advantage of you by recommending that you purchase securities on margin without disclosing the risks? If so, you may be entitled to financial compensation.
Schedule a free, confidential case evaluation with an experienced stockbroker misconduct lawyer at Wolper Law Firm to discuss your right to financial recovery. You can submit the quick contact form included below or call our office at 800.931.8452 when you’re ready to hold your broker accountable.