COVID-19 market crash

You May Be Entitled to COVID-19 Market Crash Loss Recovery

May 11, 2020

For the past few years, stocks have been going up and stock market indices have continued to reach new highs. The stock market crash of 2020 erased years of gains and caused billions of dollars of equity to be lost. While millions of investors have lost billions of dollars, not everyone who has lost money due to the coronavirus market crash has a claim against their broker. In fact, many losses occurred simply as a result of a market decline. However, some investors may have claims against their brokers or their brokerage firm if they lost money due to the broker’s negligence or a brokerage firm’s misconduct. Our experienced Former Wall Street Attorneys can evaluate your case and let you know if you are entitled to file a claim seeking to recover your market crash loss recovery. Please call us today or use our online contact form, for a free consultation.  Are You Retired or Saving For College or Retirement & Lost Money in the 2020 Market Crash? If you are a retiree, who is living on a fixed income or who has only one source of income such as social security or a pension, you often cannot return to work to earn the money to replace your investment losses. Even if you are not a retiree, certain investors, especially those with limited assets or who need their funds to pay for their kid’s college, their parents, or who are saving for retirement themselves may also be conservative investors who do not want their money or a particular account exposed to stock market risk. If you are one of these types of conservative investors and lost money, it may have been invested in unsuitable investments and thus you could have a valid claim to recover your stock market losses. The most common type of claim for such investors is that their money was invested in a way that did not meet their objectives. This type of claim is called “unsuitability.” Unsuitable investing is often raised as a claim for retirees living on a fixed income or other conservative investors who did not want to be, and should not have been, exposed to stock market risk. Even Experienced Investors Can Have Stock Market Loss Claims. Even experienced or so-called sophisticated investors can have claims when the risks of investing were too extreme or were not adequately disclosed or understood by the broker. A broker has a “reasonable basis” suitability obligation to every client. According to the Financial Industry Regulatory Authority, the reasonable-basis obligation is critically important because, in recent years, securities and investment strategies that brokers recommend to customers, including retail investors, have become increasingly complex and, in some cases, risky. Brokers are required to understand the securities and investment strategies they recommend. A broker has an obligation to (1) perform reasonable diligence to understand the nature of the recommended security or investment strategy involving a security or securities, as well as the potential risks and rewards, and (2) determine whether the recommendation is suitable for at least some investors based on that understanding. A broker must adhere to both components […]

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margin call in your brokerage account

Has the Stock Market Crash Forced a Margin Call in Your Brokerage Account?

Mar 30, 2020

When the stock market quickly moves down, as it has been doing during the coronavirus market crash, you may find yourself in a situation where your stocks are sold to pay back a loan that a brokerage firm made to you. This is called a “margin call.” A margin loan is a loan that the brokerage firm makes to you that is secured by the investments in your account. Some people do not even know that they have a margin in their brokerage account, and only first become aware of this fact when they are forced to pay a margin call or maintenance call. Many new account documents that you are asked to sign when you open a brokerage account allow for the securities firm to make a margin loan to you for the purchase of securities in your account. Therefore, you should review your brokerage account statements carefully to determine if you have a margin debit or a margin loan in your account. The Securities and Exchange Commission has published an investor bulletin explaining to investors how margin accounts work.  The Difference Between Cash and Margin Accounts A “cash account” is a type of brokerage account in which the investor must pay the full amount for securities purchased. An investor using a cash account is not allowed to borrow funds from his or her broker-dealer in order to pay for transactions in the account.   In contrast, a “margin account” is a type of brokerage account in which the broker-dealer lends the investor cash, using the account as collateral, to purchase securities. Margin increases investors’ purchasing power but also exposes investors to the potential for larger losses.   You Should Understand How Margin Works Margin loans are a tool that allows customers to leverage their accounts to make a greater return. Let’s say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you’ll earn a 50 percent return on your investment (your $25 gain is 50% of your initial investment of $50). But if you bought the stock on margin – paying $25 in cash and borrowing $25 from your broker – you’ll earn a 100 percent return on the money you invested (your $25 gain is 100% of your initial investment of $25). You may also owe your broker interest on the $25 you borrowed. There is a downside to using margin, which is riskier than a cash account. If the stock price decreases, you can quickly lose your money. For example, let’s say the stock you bought for $50 falls to $25. If you fully paid for the stock, you’ll lose 50 percent of your money (your $25 loss is 50% of your initial investment of $50). But if you bought on margin, you’ll lose 100 percent (your $25 loss is 100% of your initial investment of $25), and you still must come up with the interest you owe on the loan. Many investors cannot afford to takes this type of gamble with their funds. Your […]

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