Practice Areas

Unauthorized Margin Trading: Margin Accounts And Margin Calls

With a margin account, an investor can borrow money from the brokerage firm to purchase additional securities in his or her account. The loan from the firm is secured by the securities the investor purchases.

Investors need to be aware that when they buy on margin, they must repay both the amount borrowed and interest, even if money is lost on the investment. Unfortunately, many investors do not understand the risks of trading on margin and sometimes they are unaware that they have a margin account.

If you have suffered losses from unauthorized or excessive use of margin, it's important to contact an experienced lawyer to determine whether your stockbroker may be held liable for your losses. At Mihalek Law, we have more than 50 years of experience handling securities litigation in arbitration and in court. We provide clients in Lexington and throughout Kentucky and across the nation with the strong representation they will need to battle the securities industry.

Did The Brokerage Firm Act Legally?

If the portfolio experiences a significant loss of value, even temporarily, investors who cannot satisfy margin calls, i.e., deposit more cash or securities, may have large portions of their accounts liquidated. Furthermore, the brokerage firm can:

  • Sell securities in investors' accounts without contacting them
  • Choose which securities or other assets in the accounts are sold regardless of the investors' desires
  • Increase its margin maintenance requirements at any time and without advance notice

Regardless, stockbrokers have a duty to explain the risks associated with margin accounts and trading on margin. A broker's failure to properly disclose the risks associated with a margin account, and/or failure to follow a customer's instructions not to trade on margin, may constitute grounds for recovery of losses.

Contact Us For Help Holding Negligent Brokers Accountable

If your broker failed to warn you of the dangers of borrowing from the brokerage firm, contact our attorneys to determine if you have a viable claim. We offer free consultations and take the time to educate investors about their rights and options. Learn more by scheduling a consultation through our contact form or by calling 800-783-1413.