When you work with a broker to engage in margin trading, you put full trust in your broker and follow the advice that they give you. Brokers are expected to advise their clients on the risk of margin trading, and to ensure that their clients understand what is going on. However, this is not always the case. Sometimes, brokers give inappropriate margin trading advice, and this can lead to many negative consequences for their clients. If they are found to have given their client inappropriate investment advice, they can be held responsible for these mistakes.
Contact Weltz Law at (877) 905-7671 to discuss your margin trading advice issue.
Margin trading refers to the process of investors buying more stocks than they can afford to. Usually, they pay a portion of the price and get a loan to pay for the balance. The broker in charge of setting up the loan also creates a margin account. This account can be used to pay for the loan and its interests. Usually, firms choose to loan clients’ money so that they are more willing to buy more securities from the firm. This benefits the firm as it receives commissions and interest. Although this seems like a fast way to get more money, there is a certain level of risk that the broker is responsible for informing the investor.
Many types of trading involve risk, and this is no different with margin trading. To put it simply, when the investor purchases more, underlying debt will also increase. Thus, this increases the risk that the investor faces, also known as an increase in “downside risk”. Brokers are expected to inform investors about the risks involved in margin trading and the obligations involved.
Some of them include:
If you believe you are a victim of inappropriate margin trading advice, you should contact a securities litigation attorney to discuss your next course of action. For over 25 years, attorneys at Weltz Law have been assisting different clients and filing claims.
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