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You may have lost money in your investment portfolio,
due to mismanagement and not even know it.

Margin trading: When is that an unsuitable investment?

There are myriad reasons why residents in California and elsewhere across the country turn to brokers and other third parties to make financial recommendations and manage their investment portfolios.

For starters, it's a complex and tricky world out there, with that being abundantly clear in the securities realm. Legions of lay persons understandably feel a bit challenged and sometimes even overwhelmed when it comes to picking and overseeing investments that are appropriate for their age and risk level.

And that is precisely why they posit trust in financial advisers they believe will act competently and in their best interests.

Sadly, that doesn't always turn out to be the case. The securities universe is rife with stories of both outright broker fraud and other instances where negligence leads to unsuitable investments for consumers.

We note many such strategies and outcomes on our website at the Los Angeles Law Offices of Marc I. Zussman.

Including this one, which until now we haven't addressed in any detail for readers of our blog: unsuitable margin trading.

Margin trading operates as a loan provided by a securities firm or broker to a customer to fund an account, with the account subsequently used as collateral. Interest is charged on the credit extended.

When the account does well, everyone profits.

When it does not, conversely, the investor can be badly hurt. In many instances, the lender liquidates the account and leaves the customer with a loss. Obviously, that can be devastating.

What is often especially concerning is that a customer with a margin account does not truly understand how it works or the outsized risks it entails. Most people are not so-called "sophisticated investors" for whom margin trading might make sense relevant to a certain percent of their portfolios.

When ordinary investors suffer losses linked with buying stock on margin, it might well be the case that an adviser acted unethically or even illegally by pushing that investment vehicle.

Questions or concerns regarding margin trading and potential remedies for its abuse can be directed to an experienced securities arbitration and litigation attorney.

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