This disclosure is being provided to you by GlobalVest Financial to deliver you with some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a Margin Account. Before trading stocks in a Margin Account, you should carefully review the section entitled “Margin Accounts” in the Customer Agreement provided to you. Please call GlobalVest Financial if you have any questions or concerns with your Margin Account.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from the Clearing Broker of GlobalVest Financial. If you choose to borrow funds from our Clearing Broker, GlobalVest Financial will open a Margin Account for you with the Clearing Broker. The securities purchased are the Clearing Broker’s collateral supporting your loan, and as a result the Clearing Broker can take action, such as issue a margin call and/or sell securities in your Account(s), in order to maintain the required equity in your Account(s).
It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:
You can lose more funds than you deposit in the Margin Account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the Clearing Broker to avoid the forced sale of those securities or other securities in your Account(s).
Clearing Broker can force the sale of securities or other assets in your Account(s). If the equity in your Account(s) falls below the maintenance margin requirements under the law, or the Clearing Broker’s higher “house” requirements, the Clearing Broker can sell the securities in your Account(s) to cover the margin deficiency. You also will be responsible for any shortfall in your Account(s) after such a sale.
GlobalVest Financial or the Clearing Broker can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that a firm cannot liquidate securities in their Account(s) to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interest, including immediately selling the securities without notice to the customer.
You are not entitled to choose which securities or other assets in your Margin Account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for the Margin Loan, GlobalVest Financial or the Clearing Broker has the right to decide which security to sell in order to protect its interests.
Clearing Broker can increase its “house” maintenance margin requirements at any time and is not required to provide you with advance written notice. These changes in the Clearing Broker’s policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the Clearing Broker to liquidate or sell securities in your Account(s).
You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.