Margin Account Disclosure Statement

Transcription

1 Margin Account Disclosure Statement COR Clearing ( COR ) is furnishing this document to you 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 stocks in a margin account, you should carefully review the COR Margin Agreement. Consult your broker or COR regarding any questions or concerns you may have with your margin accounts. When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from COR. If you choose to borrow funds from COR, you will open a margin account with COR. The securities purchased are COR 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, COR can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with COR 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 provide additional funds to COR to avoid the forced sale of those securities or other securities or assets in your account(s). COR can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements or COR s higher house requirements, COR can sell the securities or other assets in any of your accounts held at COR to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale. COR can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. COR or your broker will attempt to notify its customers of margin calls but is not required to do so. However, even if COR or your broker has contacted you and provided a specific date by which you must meet a margin call, COR or your broker can still take necessary steps to protect its financial interests, 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 by COR to meet a margin call. Because the securities are collateral for the margin loan, COR has the right to decide which security to sell in order to protect its interests. COR can increase its house maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in COR s policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause COR to liquidate or sell securities in your account(s). You are not entitled to an extension of time on a maintenance margin call. While an extension of time to meet margin requirements may be available to you under certain conditions, you do not have a right to the extension. Member FINRA & SIPC 1 of 1 LC04 09/12

2 Account Number: Margin Account Agreement A margin account involves an extension of credit to you in connection with your securities account. The Margin Agreement and consent to loan securities enables securities in your account to be pledged or loaned to others to finance the funds that are loaned to you. General Information Initial margin requirements established by the Board of Governors of the Federal Reserve specify the minimum amount of collateral you must provide when you buy securities on margin. The requirement is expressed as a percentage of the purchase price. It may change from time to time, and it may be a different percentage for different types of securities. For example, if the current margin requirement is 50%, and you purchase equity securities on margin costing $15,000, you are required to deposit 50% of that amount or ($7,500). The balance due on the purchase will be financed by COR and your account will reflect the financed amount. As part of the initial margin requirement, you must have a minimum of $2,000 equity every time you enter a new commitment in your margin account. The term equity means the excess market value of the securities in your account less any liabilities. COR and / or your Investment Firm may impose higher requirements from time to time. Maintenance margin requirements are established by COR and or your Investment Firm and by regulatory authorities for the purpose of maintaining a sound financial condition for COR and your account.. If there is a decline in the market value or liquidity of securities that are the collateral for your loan or other circumstances where, in COR s and/or your Investment Firm s judgment, adequate collateral does not exist, it may be necessary to request additional collateral for your margin account.. Ordinarily, a request for additional margin will be made when the equity in an account falls below 30% of the market value of all qualified securities in the account. Additional margin will ordinarily be required if there is an undue concentration of one or more collateral securities, or if the liquidity of certain securities declines, significantly declines, if your credit-worthiness declines, or if the market value of low-priced stocks declines below $6 per share. Stocks priced from $3 to $6 per share require 50% maintenance, and stocks priced below $3 per share require 100% maintenance. A margin call may be satisfied by the prompt deposit of cash or additional acceptable securities with a loan value equal to the deposit request. While most call notices are delivered with a three-day response time, COR retains the right to require additional margin in any amount and in any time frame considers prudent. This determination is based on current market conditions, concentration in one or more securities and other relevant factors. If you do not meet a margin call, COR and / or your Investment Firm may liquidate securities in the account to the extent necessary to satisfy the call. COR and /or your Investment Firm can sell your securities or other assets without contacting you. COR and /or your Investment Firm may attempt to notify you of margin calls but is not required to do so. However, even if COR and / or your Investment Firm has contacted you and provided a specific date by which you must meet a margin call, COR and / or your Investment Firm may still take necessary steps to protect their financial interests, including immediately selling securities without notice to you. You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold by COR to meet a margin call. COR and / or your Investment Firm may increase its house maintenance margin requirements at any time and is not required to provide you with advance notice. You are not entitled to an extension of time to meet a margin call. Interest charged is based on the amount of money loaned to you. Interest is calculated on a 360-day basis and posted to your account as an addition to your debit balance on a monthly basis. The Interest Rate will vary from time to time without prior notice, in accordance with shifts in money rates, industry conditions relating to the extension of margin credit and the general credit markets. If the basis on which your interest rate is calculated is increased for any other reason, you will be notified in writing at least 30 days prior to any change. Short account securities will be marked to the market daily. The value of any short securities will be considered as a debt to your account. Securities in a margin account are registered in COR s name and are collateral for any margin loan. You still receive credit for all dividends or interest payments on these shares. Your account will be charged for any dividends or interest on short positions. Margin Agreement Your Investment Firm will be pleased to answer any questions you may have regarding your margin account. This Margin Agreement is part of the Client Agreement ( Agreement ) between you and your Investment Firm. In consideration of the acceptance of your account under this Margin Agreement, you agree to the following supplemental terms and provisions: Extension of Credit. Pursuant to Regulation T under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities Exchange Commission ( SEC ) and the Board of Governors of the Federal Reserve System, it is agreed that you may purchase, carry and trade certain securities on margin. You authorize COR and / or your Investment Firm to obtain reports concerning your credit-worthiness and business conduct. Upon your request, COR you may obtain a copy of any said reports. Maintenance of Margin. You agree to maintain such positions and margin as required by Regulation T and all other applicable statutes, rules and regulations, or as may be deemed necessary by COR or your Investment Firm. Additional requirements may be more stringent then those required by law or exchange regulations. Such requirements may be changed or modified without prior notice to you. You shall promptly satisfy all margin and maintenance calls. Short Sales. You shall clearly designate any order to sell short or short exempt; all other sales shall be deemed to be long. Member FINRA & SIPC LC03 09/12 1 of 2

3 Interest on Margin. You shall pay interest on credit extended by COR under this Margin Agreement for the purpose of purchasing, carrying or trading securities. Interest will be charged on your average daily net settled debit balance and calculated using the interest rate schedule selected by your Investment Firm. This interest schedule will be added to the COR Clearing Base Rate ( LCBR ) to determine your interest rate. The LCBR will change without notice to you as changes occur in the general credit markets, the broker call rate and general industry conditions relating to the extension of margin credit. On demand, you shall pay any balance owing with respect to your accounts, including fees and any costs of collection. All payments received in your account, including dividends, interest, premiums and principal payments may be applied to the balance due in your account. The rate of interest charged for the credit extended to you shall be calculated on a 360-day year and actual days elapsed. Securities Lending. For any securities held by COR as property on margin under this Margin Agreement or as collateral for your obligations under this Margin Agreement, you authorize COR to lend such securities, either separately or with other securities, to itself or to other entities. Until written confirmation is received by COR or your Investment Firm this Margin Agreement constitutes your continuing consent to effect securities lending transactions. Upon such written revocation, and payment of all balances due COR, COR will deliver such securities to you if so requested. Hypothecation of Securities. For any amount due on your account, you authorize that your securities may be pledged, re-pledged, and hypothecated or re-hypothecate, without notice to you, either separately or with securities of other bona fide clients. You represent that you will not allow any securities in any of your accounts to become subject to liens, security interests or other encumbrances. You further represent that you are not controlled by or in control of any issuer of any security you have provided as collateral to COR. Disclosure Regarding Liquidation. You acknowledge that: (i) There is no requirement to provide notice to you of a margin deficiency, and (ii) Securities held in your account may be liquidated without notice to satisfy minimum maintenance or margin calls. You also acknowledge that failure to promptly enforce its margin requirements does not prevent the subsequent enforcement of such margin requirements with respect to your Account. Liquidation. It is understood and agreed that to satisfy margin maintenance requirements, you may be required to provide additional collateral or liquidate any part of the securities in your account. Without limitation, any of the following circumstances may give rise to the exercise of this power: (i) Your failure to promptly meet any call for additional collateral; (ii) the filing of a petition in bankruptcy by or against you; (iii) the appointment of a receiver is filed by or against you; (iv) a significant judgment is entered against you, or any levy is made on your account(s); (v) The occurrence of any event which, in COR Clearing s or your Investment Firm s judgment, operates to impair your ability to perform its obligations under this Margin Agreement. In any such event, and without further notice, you authorize COR or your Investment Firm to (i) sell any securities held in your account(s); (ii) buy any securities which may be short; (iii) cancel any open order; (iv) to close any outstanding order; and (v) otherwise take any action deemed necessary to comply with applicable statutes, rules and regulations or any other requirements governing your margin account. I hereby request that my Investment Firm and COR amend the account in the name(s) listed as account owner(s) on this MARGIN application and to that purpose endorse this account as a MARGIN ACCOUNT. By signing below, I acknowledge that I have received, read, understand and agree to be bound by the terms & conditions as set forth in the MAIN Customer Agreement as currently in effect and as amended from time to time. I acknowledge that I have received, read, understand and agree to be bound by the terms and conditions as set forth in the Margin Account Agreement as currently in effect and as amended from time to time. I represent that I am of required legal age to enter into this Agreement. I understand and acknowledge that COR does not provide investment, tax, legal, accounting, financial or other advice. Please Note: COR and/or my Investment Firm will verify information provided on this form through a third-party vendor in accordance with the USA Patriot Act. I UNDERSTAND THAT THIS ACCOUNT IS GOVERNED BY A PRE-DISPUTE ARBITRATION AGREEMENT, WHICH IS SET FORTH IN SECTION 28 OF PAGE 3 IN THE MAIN CUSTOMER AGREEMENT. I ACKNOWLEDGE THAT I HAVE RECEIVED AND READ THE PRE- DISPUTE ARBITRATION AGREEMENT. BY SIGNING THIS AGREEMENT I ACKNOWLEDGE THAT MY SECURITIES MY BE LOANED TO YOU OR LOANED OUT TO OTHERS. Account Name Account Number Account Holder s Signature Joint Holder s Signature Broker s Signature General Principal s Signature Member FINRA & SIPC 2 of 2 LC03 09/12 2 of 2

4 DAY TRADING RISK DISCLOSURE On July 10, 2000, the Securities and Exchange Commission (SEC) approved rule changes proposed by the National Association of Securities Dealers, Inc. (NASD) that require a firm that is promoting a day trading strategy to furnish a risk disclosure statement to a non-institutional customer prior to opening an account for the customer. The firm will further be required to either: (1) approve the customer s account for a day trading strategy; or (2) obtain from the customer a written agreement that the customer does not intend to use the account for day trading purposes. As part of the account approval process, the firm will be required to make a threshold determination that the day trading is appropriate for the customer. 1. Day trading can be extremely risky. Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success. 2. Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial loss. 3. Day trading requires knowledge of securities markets. Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading. 4. Day trading requires knowledge of a firm s operations. You should be familiar with a securities firm s business practices, including the operation of the firm s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures. 5. Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses. 6. Day trading on margin or short selling may result in losses beyond your initial investment. When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position River Place Boulevard, Suite 1-200; Austin, TX Phone: Fax: Member: FINRA / SIPC / NFA

5 DAY TRADING RISK DISCLOSURE 7. Potential Registration Requirements: Persons providing investment advice for others may need to register as either an Investment Advisor under the Investment Advisors Act of 1940 or as a Broker or Dealer under the Securities Exchange Act of Such activities may also trigger state registration requirements. Do you intend to user your account for day trading purposes? (Check one) Yes No Account Name as Registered with Clearing Firm Account Number _ Customer Signature _ Joint Customer Signature Office use only Designated Principle Comments: _ Designated Principle Signature 6500 River Place Boulevard, Suite 1-200; Austin, TX Phone: Fax: Member: FINRA / SIPC / NFA