Losing money due to margin calls and excessive use of margin can be devastating for investors. Fortunately, if your stockbroker failed to inform you of the risks of purchasing on margin or bought on margin without your permission, you may be able to recover these losses in arbitration through the Financial Industry Regulatory Authority (FINRA).
Read on to learn more about what it means to buy on margin,what excessive use of margin is, and how you can go about getting your money back.
Purchasing securities on margin means that you are using money borrowed from the brokerage firm to invest in other securities. You can think of it as a type of loan that you’ll be expected to repay, with interest. However, there are a couple of things that often make purchasing on margin an unsuitable option for many investors.
When you buy on margin, you are using the securities you already own as collateral.
When your securities are used as collateral, and the brokerage firm issues margin calls, you can lose your securities if you are unable to make a deposit in your accounts to raise the value of your existing securities.
Now picture what would happen if a significant amount of your securities were used as collateral to continue investing. If margin calls were issued and the brokerage firm sold your securities to recoup those losses, your accounts could suffer catastrophic damage. For this reason, excessive use of margin is considered stockbroker misconduct.
In cases where you have lost money due to stockbroker negligence or misconduct, as would be the case if your broker engaged in excessive use of margin, you may be able to recover the losses you endured by initiating a FINRA arbitration complaint.
FINRA arbitration complaints give wronged investors the chance to present their case to a panel of arbitrators. The goal is to prove that your broker’s actions are directly or indirectly responsible for your stock losses. If the arbitrators find in your favor, they will order the financial advisor or brokerage firm to repay you for your investment losses.
It is important to note that FINRA arbitration does not leave room for appeals if the arbitrators do not find that misconduct or negligence occurred. However, because arbitration is often faster than going to court would be, and you could be repaid far more quickly than if you attempted to file a lawsuit, FINRA arbitration is often the more attractive option to wronged investors.
If you suffered considerable stock losses due to your financial advisor’s excessive use of margin, get help recovering your investment by reaching out to a qualified stock loss lawyer at Wolper Law Firm. You can find us online or call our office at 800-931-8452 to schedule a free, confidential consultation when you are ready to get started on your FINRA arbitration complaint.
The Wolper Law Firm is a client-focused law firm devoted to recovering investment losses on behalf of aggrieved investors. We pursue claims nationwide and in all forums, including arbitration before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (AAA), and JAMS. We also pursue claims in state and federal courts. For nearly fourteen years, Matt Wolper, the managing principal of the Wolper Law Firm, was a partner with a national law firm, where he represented the largest banks and brokerage firms on Wall Street. This experience and pedigree gives the Wolper Law Firm a competitive advantage. ... View full business profile here: Wolper Law Firm, PA
