Can I sue a broker for doing this?
- Thread starter zorro1
- Start date
FWIW
Thinking about it from several points of view concerning all issues.
No, you can not litigate, because more than likely you signed an arbitration only agreement. However that does leave that option open.
The other issues of "margin call" time allowances, plus the net effect on your cash position upon liquidation in 5K share lots...were you at some point safe from a total liquidation would take some study of prices, cash balances, margins, etc upon each sale
Then the issue of the brokerage being allowed to sale based upon their feelings
This is extremely muddy as a situation and I would see an attorney after getting all the facts together.
Thinking about it from several points of view concerning all issues.
No, you can not litigate, because more than likely you signed an arbitration only agreement. However that does leave that option open.
The other issues of "margin call" time allowances, plus the net effect on your cash position upon liquidation in 5K share lots...were you at some point safe from a total liquidation would take some study of prices, cash balances, margins, etc upon each sale
Then the issue of the brokerage being allowed to sale based upon their feelings
This is extremely muddy as a situation and I would see an attorney after getting all the facts together.
Yes, i agree with torontoman as you do not work with a hedge fund with deep pockets, you work with a sell-side shop that takes no risk. absolutely none. It is your pockets they are concerened with and if the stock suddenly gaps 3 points (which can happen depending on how popular your short is) the firm would now take the heat, as your 80k surplus would dissapear. To take on a 25k share position without any sort of matching hedge and a min 1M equity is plain suicide. Honestly, you should have expected this. If a position was negative at the close of day and it was to be held overnight I would have been on the phone with my broker at the close, to let him know that I know full and well what it is I am doing and not disregarding it as an outrade of some sorts while i had been out golfing with my buddies.
I'm sorry to hear about your losing position 
, but people should read all the terms and conditions when opening accounts 
I've been reading posts on ET for a long time, but you made me sign up so I can reply.
You have no idea of the implications of what you just did
.
You used daytrading margin to hold a position overnight. Great!!
Daytrading margin is only for daytrading !!!! Daytrading means you close the position before the close.
You are lucky they only liquidated your position. They should have also closed your account, and reported you to the SEC, NASD and NYSE. I'm sure they'll do that the next time you do the same. They have the right to do that.
What to expect next:
====================
Do you know about Reg T Call??
You have 5 days to meet a Reg T Call. To meet the margin call you must deposit *cash* for the amount of the call (or marginable securities for 2x the call).
You can not meet the call by liquidating positions in your account. So you'll have to come up with the cash this week, deposit it and leave it in the account at least for 2 days (clearing time + 2 days if by check). You'll get a certified letter in 2 or 3 days, with the amount of the margin call, and the deadline to meet it (usually 5 days).
Also, remember you'll have to pay interest by the end of the month on the money you illegally borrowed overnight.
Lesson learned: Don't trade with money you don't have!
Don't feel bad about your mistake, but don't get mad with the broker either. You used their money in a way it was not meant to be used, and they took it back.
, but people should read all the terms and conditions when opening accounts I've been reading posts on ET for a long time, but you made me sign up so I can reply.
You have no idea of the implications of what you just did
.You used daytrading margin to hold a position overnight. Great!!
Daytrading margin is only for daytrading !!!! Daytrading means you close the position before the close.
You are lucky they only liquidated your position. They should have also closed your account, and reported you to the SEC, NASD and NYSE. I'm sure they'll do that the next time you do the same. They have the right to do that.
What to expect next:
====================
Do you know about Reg T Call??
You have 5 days to meet a Reg T Call. To meet the margin call you must deposit *cash* for the amount of the call (or marginable securities for 2x the call).
You can not meet the call by liquidating positions in your account. So you'll have to come up with the cash this week, deposit it and leave it in the account at least for 2 days (clearing time + 2 days if by check). You'll get a certified letter in 2 or 3 days, with the amount of the margin call, and the deadline to meet it (usually 5 days).
Also, remember you'll have to pay interest by the end of the month on the money you illegally borrowed overnight.
Lesson learned: Don't trade with money you don't have!
Don't feel bad about your mistake, but don't get mad with the broker either. You used their money in a way it was not meant to be used, and they took it back.
Looks like the broker screwed up too then. I was in a day trade margined position once (close to 4x) and the broker liquidated me down to 2x in the final 15 min's of the day. I was going to get flat before the closing bell but my broker helped me along so shame on your broker too! They should never have let you hold that overnight.
Quote from sarah_iru:
I'm sorry to hear about your losing position
I've been reading posts on ET for a long time, but you made me sign up so I can reply.
You have no idea of the implications of what you just did
You used daytrading margin to hold a position overnight. Great!!
Daytrading margin is only for daytrading !!!! Daytrading means you close the position before the close.
You are lucky they only liquidated your position. They should have also closed your account, and reported you to the SEC, NASD and NYSE. I'm sure they'll do that the next time you do the same. They have the right to do that.
What to expect next:
====================
Do you know about Reg T Call??
You have 5 days to meet a Reg T Call. To meet the margin call you must deposit *cash* for the amount of the call (or marginable securities for 2x the call).
You can not meet the call by liquidating positions in your account. So you'll have to come up with the cash this week, deposit it and leave it in the account at least for 2 days (clearing time + 2 days if by check). You'll get a certified letter in 2 or 3 days, with the amount of the margin call, and the deadline to meet it (usually 5 days).
Also, remember you'll have to pay interest by the end of the month on the money you illegally borrowed overnight.
Lesson learned: Don't trade with money you don't have!
Don't feel bad about your mistake, but don't get mad with the broker either. You used their money in a way it was not meant to be used, and they took it back.
It's very surprising to see an apparently level-headed contributor suggest that this is a 'muddy' situation. Obviously you don't believe that MBT hasn't drawn up its contract in such a way that it is essentially their discretion as to whether they liquidate once valid conditions are met? Someone posted, with regard to a complaint about IB, that brokers cannot simply take money from your account and then claim its covered in the contract you signed, and that an arbitrator might find in favour of a client if there was an obvious and aggregious disregard for the rights of the client.
In this situation, could it be clearer that this is the clients fault? It seems that the client was ridiculously overleveraged, had no concept of position size relative to capital, and essentially created this problem. You seriously think that he would stand a chance in arbitration?
I feel it is actually bad advice to tell this person to go to a lawyer. It'll just be more money down the drain.
Please see sarah_iru's post above. Is this an accurate description of the circumstances? If so, it's game over. In any case, it doesn't make any difference. The guy was trading with no risk control.
Are you suggesting that it's the brokers responsibility to babysit the client's positions? If that's the case, it's a bizarre idea. If I'm misunderstanding you, I apologize in advance.
Quote from sarah_iru:
I'm sorry to hear about your losing position
I've been reading posts on ET for a long time, but you made me sign up so I can reply.
You have no idea of the implications of what you just did
You used daytrading margin to hold a position overnight. Great!!
Daytrading margin is only for daytrading !!!! Daytrading means you close the position before the close.
You are lucky they only liquidated your position. They should have also closed your account, and reported you to the SEC, NASD and NYSE. I'm sure they'll do that the next time you do the same. They have the right to do that.
What to expect next:
====================
Do you know about Reg T Call??
You have 5 days to meet a Reg T Call. To meet the margin call you must deposit *cash* for the amount of the call (or marginable securities for 2x the call).
You can not meet the call by liquidating positions in your account. So you'll have to come up with the cash this week, deposit it and leave it in the account at least for 2 days (clearing time + 2 days if by check). You'll get a certified letter in 2 or 3 days, with the amount of the margin call, and the deadline to meet it (usually 5 days).
Also, remember you'll have to pay interest by the end of the month on the money you illegally borrowed overnight.
Lesson learned: Don't trade with money you don't have!
Don't feel bad about your mistake, but don't get mad with the broker either. You used their money in a way it was not meant to be used, and they took it back.
My god, how can people be so stupid. I did not and cannot exceed by day trading buying power. I exceeded my overnight buying power. As for the other guy the broker has no right to get me flat by the end of the day. You are allowed to exceed your overnight buying power. It will result in a reg T call and I am well aware of that. Will you people please go and read up on the rules before making such outrageously inaccurate statements.
The 2nd violation will result in freezing your account for 90 days during which you are only allowed to liquidate positons.