Margin Disclosure Statement
Scottrade is furnishing this document to provide 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 in a margin account, please review this statement and our margin agreement carefully and contact Scottrade regarding any questions you may have about 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 Scottrade. If you choose to borrow funds from Scottrade, you will need to open a margin account. The securities purchased are the firm'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. As a result, Scottrade can take action, such as issue a margin call and/or sell securities in your account, 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, but are not limited to, 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 Scottrade to avoid the forced sale of those securities or other securities in your account.
Scottrade can force the sale of securities in your account. If the equity in your account falls below the maintenance margin requirements required under the law, or Scottrade's higher "house" requirements, Scottrade can sell the securities in your account to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
Scottrade can sell your securities without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid and that Scottrade cannot liquidate securities in their accounts to meet calls unless Scottrade has contacted them first. This is not the case. Scottrade will attempt to notify you of margin calls, but is not required to under the regulations or as stated in our margin agreement. Even if Scottrade has contacted a customer and provided a specific date by which the customer can meet a margin call, Scottrade can still take the necessary steps to protect its financial interests, including immediately selling any securities without notice to the customer.
You are not entitled to choose which security in your margin account is liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, Scottrade has the right to decide which security to sell in order to protect its interest.
Scottrade can increase its "house" maintenance margin requirements at any time and is not required to provide you with advance written notice. These changes at Scottrade can take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause Scottrade to liquidate or sell securities in your account.
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.