Securities Arbitration Lawyers BlogFINRA Orders Interactive Brokers LLC to Pay Hedge Fund $667,000
Alleged wrongful auto-liquidation made accounts subject to additional margin calls, which continued a death spiral of financial loss.
The turmoil in the market over the last two weeks has likely had significant impact on investors. For investors trading with margin accounts through Interactive Brokers LLC, this could mean even greater financial loss due to the firm’s practice of automatic liquidation.
When trading on margin, an investor borrows funds from the brokerage firm with the agreement that a “maintenance margin,” or minimum account balance must be maintained. If the account value is at risk of falling below the maintenance margin, the firm can require investors to either deposit more funds or make a margin call where the broker exercises their right to sell the stock, or liquidate, to pay down the loan.