Margin & Non-Purpose Lending Products
We offer the use of margin on your account, which means you can borrow additional money to invest against the value of your existing securities. Before trading in a margin account, you should carefully review our Margin Agreement. You should also discuss the use of margin with your financial advisor.
When you purchase securities, you may pay for the securities in full or you may choose to borrow part of the purchase price. If you choose to borrow funds, you will need to open a margin account and sign our Margin Agreement. The securities you purchase on margin are BFE’s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, we can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts, in order to maintain the required equity in the account.
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 deposit additional funds to your account to avoid the forced sale of those securities or other securities or assets in your account(s).
- BFE can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirement or our higher “house” requirements, we can sell the securities or other assets in any of your accounts to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.
- We can sell your securities or other assets without contacting you. As a courtesy, we will typically attempt to notify you of a margin call, but we are not required to do so. Even if we contact you and provided a specific date by which you must meet a margin call, we can still take necessary steps to resolve the margin call, including immediately selling the securities without notice to you.
- You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for your margin loan, we have the right to decide which security to sell.
- We can increase our “house” maintenance margin requirements at any time, and we are not required to provide you advance written notice. These changes in Firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the margin call may cause us 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 clients under certain conditions, a customer does not have a right to the extension.
Additionally, we offer a securities-based line of credit that can be used as a personal or business loan. This line of credit, called Loan Advance, is offered through our clearing firm, Pershing, and their affiliate, BNY Mellon. Unlike margin, the funds borrowed through the Loan Advance program cannot be used to purchase additional securities. The risks involved with the Loan Advance program are similar to those listed above for the use of margin. You should review the Margin Agreement and discuss this program with your financial advisor before taking borrowing money through our Loan Advance program.
Fees and Costs
When you borrow money from us, whether through the use of margin or through the Loan Advance program, you will pay us interest for the money you borrow. The interest rates you pay us fluctuate based on the amount of the loan and the overall interest rate decreases as your borrowed amount increases. The rates you pay are based on a benchmark interest rate, like the prime rate, and as such, your interest rate can fluctuate with changes in the market. Your financial advisor can provide you more detail about this, including current market rates for borrowing.
As stated above, borrowing money through the use of margin and the Loan Advance program involves risks that you should carefully consider prior to borrowing. Your financial advisor can explain the risks, characteristics and costs to borrow should you wish to learn more. Additionally, FINRA has related information for investors on its Margin Resource Page.