Miami Excessive Use of Margin Attorney
Margin means borrowing money from the brokerage firm to buy securities and using the securities as collateral for repayment of the loan. Investors generally use margin to increase their buying power so that they can own more securities with borrowed money. The use of margin, or sometimes called leverage, exposes investors to the potential for higher returns but also higher losses.
If the stocks in a margined portfolio fall in value, the results can be quite devastating. Brokerage firms can require customers to deposit additional cash if their securities (which act as collateral for the repayment of the loan) fall in value. Firms also are allowed to sell a customer’s securities in a margin account if they fall in value and cash or additional collateral is not delivered into the account. The problem is that if the securities fall in value and the customer is forced to sell them, the customer has no chance to recoup losses if the market recovers.
Margin accounts can be very risky and are not suitable for many investors. Before opening a margin account, your financial adviser is required to fully explain the risks, including the fact that you can lose more money than you have invested; you may have to deposit additional cash or securities in your account on short notice to cover market losses; you may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities; and your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you. Contact our Miami Excessive Use of Margin attorneys for more information.
Many financial advisers and their firms put clients on margin out of greed. The financial adviser can earn greater commissions when an account is on margin because a greater amount of securities can be purchased. In addition, the firm makes a profit on the interest charged to the client to borrow money. Investors must also be aware that the interest paid on the margin loan will impact the overall performance of your account.
Carlson & Associates, P.A. has experience in handling cases involving excessive use of margin and all Miami investment fraud.
Contact our Miami Investment Fraud Attorneys
Carlson & Associates, P.A. has years of experience helping Miami clients with investment fraud, corporate & partnership disputes, officer liability and coverage & legal and accounting malpractice. Contact us online or call 305-372-9700 for more information or assistance.