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Investment Fraud Lawyers for Excessive Use of Margin and Other Margin Account Claims

Investing on margin is a high-risk strategy that is only suitable for experienced and well-heeled investors. However, unscrupulous brokers and investment advisors will often promote margin trading to inexperienced clients—and they will often do so without explaining the significant risks involved.

If you have lost money with margin trading through a broker or investment advisor, you are not alone. This situation, unfortunately, is all too common. Our investment fraud lawyers represent investors who have margin claims; and, if you have a margin claim, we may be able to recover your fraudulent investment losses through FINRA arbitration.

When Can (and Should) You File a Margin Claim?

Investors can file margin claims in a variety of scenarios. Ultimately, if you have suffered losses investing on margin and either: (i) you did not understand the risks involved; or, (ii) your broker or investment advisor acted without your consent, it will be worth talking to an investment fraud lawyer about your legal rights. At Zamansky LLC, we handle all types of margin claims for defrauded investors, including:

Excessive Use of Margin

Many margin claims involve excessive use of margin. When you invest on margin, you are borrowing money (typically from your brokerage or investment firm) in order to invest. If the investments that you purchased with borrowed funds lose value, you are still required to repay the loan—and the money still has to come from somewhere.

This is the fundamental risk of margin trading, and it is the reason why margin trading isn’t suitable for most retail investors.

With this in mind, excessive use of margin is exactly as it sounds—borrowing too much in order to make too many risky investments. If you suffered investment losses and are facing a sizable debt because you relied on your broker or investment advisor’s advice, you may be able to use the FINRA arbitration process to pursue recovery of your losses and eliminate your liability.

Margin Account Abuse

Many margin claims also involve margin account abuse. This abuse can take many forms; and, as a casual investor, you may not realize that you are a victim of margin account abuse until you are already facing substantial losses. Some of the more common examples of margin account abuse include:

  • Unauthorized Trading – If you suffered losses after your broker or advisor conducted margin trades on your account without your authorization, you may have a margin claim.
  • Churning – Churning is similar to unauthorized trading, but involves conducting a series of transactions for the sole purpose of generating fees or commissions.
  • Front-Running – Front-running involves using advance knowledge of an investor’s impending trades to conduct additional trades that benefit a broker or investment advisor to the investor’s detriment.

All of these forms of abuse can provide grounds for investors to seek to recover their losses. If you have concerns about margin fraud abuse, a FINRA arbitration lawyer at our firm can assess your legal rights and determine what options you have available.

Margin Account Mismanagement

Along with margin account abuse, margin account mismanagement is a very real concern for retail investors as well. One of the most common issues involves improperly managing margin calls. If an investor’s debt exceeds a certain percentage of the value of his or her portfolio, the lending brokerage or investment firm may request that the investor make an additional deposit. This is referred to as a “margin call.”

There are several ways to manage margin calls—some of which are appropriate and some of which are not. Here too, if you are facing losses that could (and should) have been avoided, you will want to speak with a FINRA arbitration lawyer about your legal rights.

Overtrading is another very real concern when using margin. The more investors borrow to invest, the greater their risk exposure becomes—and they can end up owing substantial debts that they cannot afford (and, in many cases, could have never afforded) to pay.

Material Misrepresentations or Omissions

Investors who are facing margin-related losses will also have claims for material misrepresentations or omissions in many cases. Some of the more common examples include misrepresentations and omissions related to:

  • The risks associated with margin trading
  • The costs involved with borrowing funds from the brokerage or investment firm
  • The fees and commissions that brokers or investment advisors earn from margin trades

These are all issues that can provide grounds to pursue claims in FINRA arbitration. Here too, our lawyers can help you understand your options under the circumstances at hand and make informed decisions about your next steps.

Unsuitable Investment Advice

In all circumstances, brokers and investment advisors have a duty to provide their clients with suitable investment advice. To qualify as “suitable” investment advice must take into account an individual investor’s specific investment portfolio, risk profile and investment objectives. If investing on margin is not a suitable option for a particular investor, then recommending margin trading to that investor constitutes fraud under federal law.

How Do You File a Margin Claim Against Your Broker or Investment Advisor?

Let’s say you have a margin claim against your broker or investment advisor. How do you take legal action?

In most cases, recovering fraudulent margin-related investment losses involves filing a claim in FINRA arbitration. This is a process that exists specifically to allow defrauded investors to pursue claims against their brokers and investment advisors (and their firms). At Zamansky LLC, we routinely represent defrauded investors in FINRA arbitration; and, if you have a margin claim, an experienced investment fraud lawyer at our firm can represent you every step of the way.

Speak with an Investment Fraud Lawyer at Zamansky LLC

Do you need to know more about filing a margin claim against your broker or investment advisor? If so, we strongly encourage you to get in touch. To speak with an experienced investment fraud lawyer at Zamansky LLC in confidence, please call 212-742-1414 or request a free initial consultation online today.

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“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

Richard R.

“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

Donald A.

“Jake Zamansky and his firm represented me in a FINRA arbitration case to recover investment losses. Jake and his team were very professional and worked very hard preparing for trial and then reaching a substantial settlement of our case. I would highly recommend them.”

William E.

“Jake Zamansky represented me in a FINRA arbitration case which allowed me to recover a substantial portion of investment losses. He is truly an expert in this space and I would highly recommend him to those investors who may have been been a victim of investment fraud.”

Chris K.

“Jake and his team did a great job communicating with me throughout the process of my lawsuit. I would recommend him to anyone looking to sue UBS for unethical practices.”

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