What happen if the broker doesn't execute the margin call and empty my account until the balance is 0?
What happens if broker does not execute margin call and i lost everything
- Thread starter michael001
- Start date
Your account can actually go to a debit balance in fact. When this happens, you have to come up with additional money to bring it up to zero. They will sue you or send your account to collection if you do not send them the money.
Such suits happen not infrequently when accounts go to debit balance. Usually, the broker wins.
You can *try* making a claim in arbitration (or counter-suing if they claim against you) asserting that they were negligent in the way they executed the margin call (or failing to do so on a timely basis) but you would need to show a compelling fact situation, and be lucky as well, to win.
It is hard to say much more without knowing the full fact situation.
In my case i lost everything that i have in the account, can i claim somewhere the money i lost because the broker didn't execute the margin?
First of all, I am sorry that the account got wiped out. Your situation is quite unusual. As previously stated, nowdays everything is monitored electronically and the borker will have a system that automatically liquidates the position.
I would guess that it was probably a small brokerage firm that allowed a much lower intraday margin balance, and therefore the position turned quickly against you, and then their risk management system blew a fuse.
At the end of the day, it's the trader's responsability to monitor their positions and protect them. You should consider yourself lucky that your balance didn't go into debit.
I don't think there is anything you can do, except closing the account and considering the amount as a tuition expense. reputable firms tend to have better risk management, and therefore in the long run that protects them and the trader.
Good luck. Please share additional info if you don't mind. Who is the firm? what was their margin requirement? on which instrument?
I would guess that it was probably a small brokerage firm that allowed a much lower intraday margin balance, and therefore the position turned quickly against you, and then their risk management system blew a fuse.
At the end of the day, it's the trader's responsability to monitor their positions and protect them. You should consider yourself lucky that your balance didn't go into debit.
I don't think there is anything you can do, except closing the account and considering the amount as a tuition expense. reputable firms tend to have better risk management, and therefore in the long run that protects them and the trader.
Good luck. Please share additional info if you don't mind. Who is the firm? what was their margin requirement? on which instrument?
As I said, you need to explain the circumstances and detailed time line in a far more detail.
Just the bare fact that you lost the money and there was a margin call does not entitle you to recover from the broker.
It is like saying, "I had a car accident, can I recover damages from the other driver?" The question cannot be answered until you lay out enough detail to know where fault lies.
You need to explain the time periods involved, what communications there were between you and the broker about the margin call, etc.
If you just sat aside and said nothing after the margin call, that would be the one thing. It is less common now, but there are still a few brokers that give clients 2 or 3 days to meet a margin call and in that case the broker is not at fault if further losses occur in that period.
The literal meaning of "margin call" is a request for additional funds to be added to the account, not necessarily a promise to liquidate immediately.
If you phoned the broker immediately and told him that you would not meet the margin call and asked him to liquidate the trade immediately, and he said he would but actually failed to do so, and further losses were incurred *after* that point, while the markets were open, that would be another different set of circumstances that would be more favorable to you.
At one of the large (everyone has heard of this one) firms I worked for as the guy that made the margin calls. I recall an account that went "liq to def" as we called it. (Liquidate with a deficit) The account holder was unable to deposit funds to bring the account back to -0-. However he also had his IRA account with us as well. We took the required funds out of the IRA. Not only did the client get wiped out in his trading account but took a hit in his IRA and was then faced with the tax penalty for the early withdrawal from his retirement IRA, a little over $80k
Brokers have tried to touch accounts belonging to the Trader's wife, if you have all your accounts linked up and they will get creative depending on how Boiler Room your Brokerage is. That's why Brokers will make you wait 3 days with ACHs, I talked with different Brokerages who gave credit to the Trader $50,000 for a $50,000 ACH-pull (deposit) and Bozo goes and loses $60,000 (4 X Day Trading BP can wipe out $50,000 quickly) and tells his Bank to decline the ACH. The guys pulls the cash out of the Bank and files Bankruptcy, all kinds of neat tricks.
This happened to a guy I know that was spreading cattle. He was a worth probably 5 million and lost about 1 million on the trade and owed around another million.
He didn't end up having to pay because there was broker error. I bet he spent at least 50-100k in lawyer's fees.
He didn't end up having to pay because there was broker error. I bet he spent at least 50-100k in lawyer's fees.
Possession is 9/10 of the law.
You need to read your broker agreements carefully.
Margin calls and liquidations are rights you give them but they are under no obligation to liquidate.
Its your responsibility to manage and maintain your account in good standing.
Most likely you will have to bring your claim under FINRA Arbitration.
Be prepared for discovery abuse. They will ask you to produce every record on this list http://www.finra.org/web/groups/arbitrationmediation/@arbmed/@arbtors/documents/arbmed/p394527.pdf
Most likely this will not end in your favor unless you can show the broker was responsible for your blow up.
You need to read your broker agreements carefully.
Margin calls and liquidations are rights you give them but they are under no obligation to liquidate.
Its your responsibility to manage and maintain your account in good standing.
Most likely you will have to bring your claim under FINRA Arbitration.
Be prepared for discovery abuse. They will ask you to produce every record on this list http://www.finra.org/web/groups/arbitrationmediation/@arbmed/@arbtors/documents/arbmed/p394527.pdf
Most likely this will not end in your favor unless you can show the broker was responsible for your blow up.