What Is Excessive Use of Margin?
Excessive use of margin is when a financial advisor recommends borrowing money beyond what fits the investor’s risk tolerance, often known as a margin loan. This is possible due to the margin agreement that investors often sign before working with a brokerage.
Make no mistake, excessive margin trading is a form of investment fraud. If you’ve been a victim of broker misconduct, you deserve compensation for your financial losses.
While margin can increase gains when investments perform well, it can also magnify losses just as quickly when the market turns against you. Many investors do not fully understand how dangerous margin trading becomes until large portions of their portfolio disappear in a matter of days.
Most investors enter the market trying to grow their savings and increase returns. The problem is that cash on hand only goes so far. Margin allows investors to borrow money from the brokerage firm to buy additional shares and increase buying power. On paper, it can look like an easy way to accelerate profits.
Margin trading works by using the securities in your brokerage account as collateral for a loan from the brokerage firm. In some cases, brokers aggressively push margin accounts because the firm earns interest on the loan while the advisor generates additional commissions from increased trading activity. This is not acceptable, and you may have a case for compensation.
The Federal Reserve Board and FINRA (the Financial Industry Regulatory Authority) both regulate margin requirements across the stock market. Brokerage firms must follow those rules before approving investors for margin trading. When they don’t, an experienced attorney can help you take back what’s rightfully yours. We represent clients in margin call disputes in all 50 states.
What Are the Risks of Excessive Use of Margin?
Excessive use of margin can destroy a portfolio much faster than most investors expect. In fact, many of the clients we speak to don’t even know the risks involved. And, to make matters worse, they were never taught the proper risk management strategies needed.
Even a relatively small decline in account value can trigger margin calls, forced liquidations, and mounting interest charges that continue growing every day the loan remains open.
In some cases, investors lose not only their profits, but large portions of their original savings as well.
Common risks of excessive margin trading include:
- Forced liquidation of securities
- Margin calls demanding immediate cash deposits
- Significant investment losses
- Daily margin interest charges
- Overconcentration in risky positions
- Unauthorized or excessive trading
- Losses that exceed the investor’s original cash investment
Why Choose Robert Wayne Pearce as Your Excessive Use of Margin Attorney?
At the Law Offices of Robert Wayne Pearce, P.A., we represent investors harmed by unsuitable margin recommendations, overconcentration on borrowed money, undisclosed margin interest and fees, forced liquidation disputes, and unauthorized margin trading. Our firm understands how devastating margin losses can become once brokerage debt starts compounding and positions are liquidated at the worst possible time.
When you choose us, you benefit from:
- 45+ Years of Experience: Robert Wayne Pearce has handled securities fraud and investor loss cases for over four decades.
- $185 Million Recovered: Our firm has recovered more than $185 million for defrauded investors nationwide.
- 99%+ Success Rate: We have successfully recovered funds for over 99% of our clients through settlements, litigation, and FINRA arbitration.
- 200+ Cases Tried: Attorney Pearce has tried over 200 cases to verdict or arbitration award throughout his career.
- No Fees Unless We Win: You pay nothing unless we recover compensation for you.
Meet the Team
ROBERT WAYNE PEARCE
Securities Attorney
ADAM KARA LOPEZ
Securities AttorneyHow Can You Recover Losses in a Margin Call Case?
Investors can recover excessive margin losses caused by broker misconduct through FINRA arbitration, mediation, or negotiated settlements.
We understand how overwhelming these situations feel. Even sophisticated investors only realize how exposed they were after their account has already collapsed and the brokerage firm starts demanding additional money.
Our clients in margin cases often recover:
- Portfolio losses
- Margin interest paid to the brokerage firm
- Excessive commissions and fees
- Forced liquidation losses
- Lost investment opportunities caused by the misconduct
Many claims also involve:
- Unsuitable margin recommendations
- Overconcentrated positions
- Unauthorized trading activity tied to borrowed funds
That is why working with an experienced margin call attorney is so important.
Excessive margin cases often involve complex trading records, brokerage agreements, interest calculations, and FINRA rules that most investors have never dealt with before. An attorney can investigate whether the broker violated industry standards and determine whether the losses resulted from misconduct instead of normal market activity.
During the case, attorneys review account statements, trading history, margin balances, margin transactions, internal brokerage records, and communications between the investor and broker to determine whether misconduct occurred.
How Does FINRA Arbitration Work for Excessive Margin Cases?
FINRA arbitration is the binding dispute process most brokerage firms require investors to use instead of filing a lawsuit in court. It is a specialized forum where stockbroker fraud cases are mediated.
Once a claim is filed, both sides exchange evidence, account records, trading history, emails, and brokerage documents. A panel of arbitrators then reviews the case and hears testimony from the investor, the financial advisor, industry witnesses, and other parties involved. In larger cases, FINRA often assigns a three-arbitrator panel to decide the outcome.
One advantage for investors is that hearings typically happen near their home instead of at the brokerage firm's office. Arbitration also tends to move faster than traditional litigation. If the investor wins, FINRA requires the brokerage firm to pay the award within 30 days of the final decision.
We cannot stress to you enough how important it is to have a skilled attorney helping you during FINRA arbitration. Contact us today for a free consultation.
- Contact Our Experienced Orlando Investment Fraud Attorneys Now for a Free Consultation Obtenga una consulta gratuita
The Law Offices of Robert Wayne Pearce, P.A. represent investors in all 50 states and fight to recover losses caused by unsuitable margin recommendations, hidden interest charges, forced liquidations, and unauthorized margin trading. We understand how quickly margin debt can spiral out of control once markets turn against you. Call (800) 732-2889 for a free consultation. You pay nothing unless we recover compensation for your losses.
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What is excessive use of margin?
Excessive use of margin is when a broker pushes borrowing money beyond what suits the investor’s finances, age, or risk tolerance in order to generate fees, commissions, or interest income.
¿Qué es el ajuste de márgenes?
A margin call is a demand from the brokerage firm requiring the investor to deposit additional cash or securities after account equity falls below the required maintenance margin.
How long do I have to file a margin claim?
Under FINRA rules, investors generally have up to six years from the date of the broker’s misconduct to file a margin-related arbitration claim.
Do I pay anything if we don't recover money?
No. The Law Offices of Robert Wayne Pearce, P.A. work on a contingency fee basis, which means you pay nothing unless we recover compensation for you.