Risks Associated with Using Margin
Vision is furnishing this information to you to provide facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading securities in a margin account, you should understand these risks and carefully review Vision’s Margin Supplement. Consult your financial advisor or Vision’s Client Services team regarding any questions or concerns you may have with your margin account or margin generally.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from Vision If you choose to borrow funds from Vision, you will open a margin account with us. 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, and, as a result, Vision can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, 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 your account(s). If the securities you purchased on margin decline in value, you will be required to provide additional securities or cash to Vision to avoid the forced sale of the securities or other assets in your account(s).
- Vision 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 under the law, or Vision’s higher “house” requirements, we can sell the securities or other assets in any of your accounts held at Vision to cover the margin deficiency. You also will be responsible for making up any short fall in the account after such a sale.
- Vision can sell your securities or other assets without contacting you. Some investors mistakenly believe that Vision must contact them for a margin call to be valid, and that Vision cannot liquidate securities or other assets in their accounts to meet the call unless Vision has contacted them first. This is not the case. Vision will attempt to notify customers of margin calls, but we are not required to do so. However, even if Vision has contacted you and provided a specific date by which you can meet a margin call, we can still take necessary steps to protect our financial interests, including immediately selling the securities or other assets without notice to you.
- You are not entitled to choose which securities or other assets in your account(s) are liquated or sold to meet a margin call. Because the securities are collateral for Vision’s margin loan to you, Vision has the right to decide which securities to sell in order to protect our interests.
- Vision can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in Vision’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 us to liquidate or sell securities in your account(s).
- You are not entitled to an extension on time on a margin call. While Vision may grant you an extension of time to meet margin requirements, we are not required to do so and you do not have a right to an extension.
- Short selling is a margin account transaction and entails the same risks as described above. Vision can use your account(s) to buy securities to cover a short position without contacting you. If you don’t have sufficient assets, you are responsible for the shortfall and collection costs.
- Vision can loan out (to itself or others) the securities that collateralized your margin borrowing. If we do, you may not be entitled to receive, with respect to securities that are lent, certain benefits that normally accrue to a securities owner, such as the ability to exercise voting rights, or to receive interest, dividends or other distributions. Although you may receive substitute payments in lieu of distributions, these payments may not receive the same tax treatments as actual interest, dividends or other distributions, and you may therefore incur additional tax liability for substitute payments. Vision may allocate substitute payments by lottery or in any other manner permitted by law, rule or regulation. Please note that any substitute payments Vision makes are voluntary, and may be discontinued at any time.
- Checkwriting, cards and bill payment services may increase your risk of a margin call. If Vision provides any of these services to you, any debits that are posted to your account(s) when no income or account assets are available will increase your margin balance.
- The IRS requires Broker Dealers to treat dividend payments on loaned securities positions as a “substitute payment” in lieu of a dividend. However, please note that Vision does not provide tax advice and recommends that you consult with a tax professional.