Securities Litigation Attorneys Representing Clients Nationwide
As an investor, margin investing is one of the best ways to boost your investment gains. However, having a margin account investment is a high-risk form of investment that is a reserve for sophisticated investors who understand the risks that come with it. Even though this investment can increase investors’ buying power and yield high returns, thousands of investors have lost lots of funds through margin abuse. If you have suffered losses due to this, you might not know who to turn to for professional help. At Weltz Law, we understand how margin account investment works, and we are ready to use our expertise and experience to help you get justice. Connect with us now and let us discuss your needs.
Understanding Margin Abuse
A client who buys securities may decide to pay for them in full or may borrow part of the buying price from an advisory firm, financial institution, or brokerage firm. Buying securities using borrowed money is typically referred to as “buying on margin.” In case you decide to borrow funds from a securities investment firm, you must open an investment account with the firm. When you do, the investment firm is supposed to determine whether you can afford the financial risks of this kind of investing, provide a comprehensive explanation of the risks involved, and decide whether or not you understand these risks.
Risks Involved in Margin Trading
Margin accounts involve significant risks, and you need to understand them before you enter into an agreement. Investment firms and their financial advisors should disclose these risks, including that:
- You might lose more money than your initial investment.
- You might be forced to sell some or all your security positions in your brokerage account to meet margin calls.
- In order to meet margin calls, the stockbroker or brokerage firm might sell your security positions without consulting you.
- You may have to deposit additional securities or money to meet margin calls.
- You may not be able to request for more time once a margin call is made.
- The brokerage firm can charge a particular fee for margin account maintenance – this fee can be increased with time.
- The brokerage firm decides the assets that are paid to them when a margin call is made.
If a stockbroker fails to explain these risks, an investor cannot be reasonably expected to meet margin calls. When this happens, the investor may have solid grounds for a legal recourse with the help of a professional securities litigation attorney from Weltz Law.
Benefits of Speaking to an Attorney
Margin abuse could cost you hundreds of thousands of dollars in the long run. If you choose to invest in a margin account, always engage a securities attorney the moment you suspect wrongdoing. If you have experienced financial losses as a result of a margin loan that your stockbroker or brokerage firm recommended, a professional attorney will help you develop a solid case that will ensure you get the compensation you are looking for in no time.