IT IS IMPORTANT THAT YOU READ AND UNDERSTAND THIS INFORMATION PRIOR TO OPENING A MARGIN ACCOUNT.
E.K. Riley Investments and First Clearing, LLC (hereinafter collectively referred to as “EKR”) are furnishing this document to you to provide some basic facts about purchasing securities 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 provided by EKR. Please consult your Financial 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 through EKR. If you choose to borrow funds from EKR, you will open a EKR margin account. The securities purchased are the 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, EKR can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with EKR, 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 EKR, which made the loan(s), to avoid the forced sale of those securities or other securities or assets in your account(s).
• EKR 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 our higher “house” requirements, EKR can sell the securities or other assets in any of your accounts held with us to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.
• EKR can sell your securities or other assets without contacting you. Some investors mistakenly believe that firms such as EKR 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. While we will try to notify you of margin calls, we are not required to do so. However, even if we have notified 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 without notice to you.
• 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, EKR has the right to decide which security to sell in order to protect our interests.
• EKR 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 us 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 to customers under certain conditions, a customer does not have a right to the extension.
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