Unsuitable or Excessive Margin

Buying securities on margin might drastically increase your profits… or your losses. Investors frequently trade on margin because they are lured by promises of high profits without fully understanding the possible downsides of such transactions. In order to use margin in your account your broker must make clear to you the risks and downsides of margin.

When you operate on margin, your stockbroker is in effect lending you money to trade and of course will charge you interest for it; your stockbroker has in fact become your banker. The conflict of interest that arises here is easy to see: your stockbroker has an incentive to recommend that you use margin without warning you of its risks.

Whether an investor should trade on margin or not has a lot to do with suitability; a stockbroker must not only warn you of the risks of operating on margin but also consider whether your investing profile suits buying securities on margin.

If your stockbroker has not warned you properly about the risks of margin and as a result you have lost a lot of money you might be entitled to compensation. If you need an experienced securities arbitration lawyer you should call us at (504) 526-2921 or e-mail us at: kirk@reasonoverllc.com.