Failure to Investigate Risk Lawyers Based in New York
A broker or financial advisor oversees explaining the rules and risks surrounding margin trading to their investors. This way, clients can make informed decisions when trading. However, sometimes brokers do not put their clients’ interests first and fail to investigate risk before opening a margin account. It is the duty of the broker to do the checks beforehand and ensure that their investors have the financial ability to afford a margin account. They must also ensure you are aware of the risks and that you are willing and able to take the financial risks involved before proceeding with the margin transaction.
An attorney from Weltz Law can help you with your failure to investigate risk case. Schedule your consultation by calling (877) 905-7671 today.
Risks of Margin Trading
Before deciding to engage in margin trading, the brokers must ensure that investors know of the risks. Here are some of the risks of margin trading:
- It is possible that you lose more funds than you originally deposited in the margin account. If the value of the securities purchased on margin declines, you may be required to provide additional funds. These funds are directed to the firm that made the loan to prevent the forced sale of those particular securities, or even other securities within your account.
- It is possible for the firm to sell your securities without notifying you. Some investors think that before the sale of the securities is made valid, the firm must contact them. This is not true. The firm can liquidate securities in their account without contacting the investors first. Although firms usually try to notify customers of margin calls to maintain good relationships, they are technically not required to.
- Sale of securities in your account can be forced by the firm. If there is a margin deficiency, such as when the maintenance margin requirements exceed that of the equity in your account, the firm can force the sale of securities to cover the deficiency. If there is any short fall in the account after the sale, the investor needs to be responsible.
- You may not be able to request for an extension on a margin call. Customers do not have a right to extension of time to meet a maintenance margin call, although extensions can be made in certain circumstances.
- Even if a stock is halted or delisted, you may need to continue to pay interest on open short positions.
Practices of Firms
Firms can set their own house requirements, which are essentially their own margin requirements. They also have the right to raise maintenance margin requirements for specific stocks. This is to ensure there is an adequate amount of funds to cover any price swings. Changes in policies of the firm can realize effect immediately, resulting in a maintenance margin call.
Discuss Your Failure to Investigate Risk Case Today. We Represent Clients Nationwide.
If you think that your broker has failed to investigate your ability to take the risks involved in margin trading, a securities litigation attorney will be able to advise you on what to do next. Weltz Law is a firm based in New York that has been assisting many in litigation and FINRA arbitration for over two decades. Our attorneys will represent you and help you settle all the legal aspects of your failure to investigate risk case.
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