Dear Liz: How can I get help after my brokerage’s margin team illegally sold my Tesla and Palantir stock, citing market volatility and not notifying me?
Answer: Just because you don’t like the result doesn’t mean the brokerage acted illegally.
If you took out a margin loan using your portfolio as collateral, the agreement you signed allows the brokerage to sell investments if your account equity falls below a minimum level known as the maintenance requirement.
The firm generally doesn’t have to notify you in advance or let you choose what gets sold. Even if you’re given a deadline to make up the deficiency, the firm can liquidate your investments sooner if it decides waiting creates too much risk.
That’s not all. Brokerages can typically change their maintenance requirements at any time, without notice.
You may have heard the term “margin call” to describe the situation when an account’s equity falls below the maintenance requirement. Some people misunderstand that to mean that the brokerage actually calls you or otherwise gives you warning. That’s not the case.
Carefully read the margin agreement you signed. You can also ask the brokerage to explain in writing what triggered the liquidation.
If you believe there are discrepancies between what the agreement allows and what happened, you can complain to the firm’s compliance department, file a complaint with FINRA or the Securities and Exchange Commission and consult a securities attorney.
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