J.J.B. Hilliard, W.L. Lyons is publishing this information for you to provide some basic facts about the use of borrowing on margin, and to alert you to the risks involved with trading securities in a margin account.

Before trading stocks in a margin account, you should carefully review the margin agreement we have provided to you. Contact your Wealth Advisor regarding any questions or concerns you may have with your margin accounts. When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from Hilliard Lyons. If you choose to borrow funds from Hilliard Lyons, 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 for the loan to you, and, as a result, we can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with us, 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 the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to Hilliard Lyons to avoid the forced sale of those securities or other securities or assets in your account(s).
  • Hilliard Lyons 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 or Hilliard Lyons’ higher “house” requirements, we can sell the securities or other assets in any of your accounts held at the firm to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
  • Hilliard Lyons can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms, including Hilliard Lyons, will attempt to notify their clients of margin calls, but they are not required to do so. However, even if we have contacted a client and provided a specific date by which the client can meet a margin call, we can still take necessary steps to protect our financial interests, including immediately selling the securities without notice to the client.
  • You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call.
    Because the securities are collateral for the margin loan, Hilliard Lyons has the right to decide which security to sell in order to protect its interests.
  • Hilliard Lyons can increase its “house” maintenance margin requirements at any time and is not required to provide you advance written notice.
    These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause Hilliard Lyons to liquidate or sell securities in your account(s).
  • You are not entitled to an extension of time on a margin call.
    While an extension of time to meet margin requirements may be available under certain conditions, a client does not have a right to the extension.
Risks of Borrowing On Margin