Scottrade is furnishing this document 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 in a margin account, please review this statement and our margin agreement carefully and contact Scottrade regarding any questions you may have about your margin account.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from Scottrade. If you choose to borrow funds from Scottrade, you will need to open a margin account. 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 supporting your loan. As a result, Scottrade can take action, such as issue a margin call and/or sell securities in your account, 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, but are not limited to, 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 Scottrade to avoid the forced sale of those securities or other securities in your account.
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 Scottrade to avoid the forced sale of those securities or other securities in your account.
Scottrade can force the sale of securities in your account. If the equity in your account falls below the maintenance margin requirements required under the law, or Scottrade's higher "house" requirements, Scottrade can sell the securities in your account to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
Scottrade can sell your securities without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid and that Scottrade cannot liquidate securities in their accounts to meet calls unless Scottrade has contacted them first. This is not the case. Scottrade will attempt to notify you of margin calls, but is not required to under the regulations or as stated in our margin agreement. Even if Scottrade has contacted a customer and provided a specific date by which the customer can meet a margin call, Scottrade can still take the necessary steps to protect its financial interests, including immediately selling any securities without notice to the customer.
You are not entitled to choose which security in your margin account is liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, Scottrade has the right to decide which security to sell in order to protect its interest.
Scottrade can increase its "house" maintenance margin requirements at any time and is not required to provide you with advance written notice. These changes at Scottrade can take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause Scottrade to liquidate or sell securities in your account.
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.
Disclosure of Order Routing Information
U.S. Securities and Exchange Commission (SEC) rules require all brokerage firms to make available quarterly reports describing their order routing practices. These quarterly reports describe how and where customer orders are routed and are available on our Web site, or are available in writing upon request.
FINRA Investor Brochure
In accordance with NASD Rule 2280, Scottrade Inc. is providing the following information in the event you wish to contact FINRA. You may contact FINRA via telephone at 301-590-6500 or by mail at 1735 K Street NW, Washington, D.C. 20006-1500. In addition to the public disclosure number (800-289-9999), FINRA provides an investor brochure that describes their Public Disclosure Program. Additional information is also available at http://www.finra.org/.
Credit Interest and SIPC Disclosure
We may pay you interest on any free credit balances awaiting investment. A free credit balance is the sum of the uninvested cash in your Account less the funds required to pay for purchase transactions due to settle on or after the day the free credit balance is to be calculated, charges to your Account, and credit balances that are held as collateral. The current interest rate and APY can be found on our web site or by contacting your local branch office. The interest rate and Annual Percentage Yield (APY) can change at our sole and absolute discretion. We use an average balance method to calculate credit interest on free credit balances. This method tracks each day’s free credit balance and provides an average balance at the end of the calculation period. Different rates may apply to different tiers based on categories such as free credit balance amounts or other factors determined by Scottrade. We apply the interest rate applicable to the tier associated with your end-of-calculation period balance against the free credit balance in your account.
Scottrade is a member of the Securities Investor Protection Corporation (SIPC). SIPC currently protects the assets in your account up to $500,000 with a limit of $100,000 for cash balances held for the purpose of investment. The firm has also purchased additional coverage of $24.5 million with an additional $900,000 for claims for cash, with an aggregate limit of $100,000,000. This additional coverage may be canceled at the sole and absolute discretion of Scottrade. In order for cash to be covered by SIPC, cash held in an account must be there for the purpose of, or as a result of, securities transactions. Free credit balances held for the sole purpose of collecting interest may not be covered by SIPC. For more information on our credit interest policies and SIPC coverage, please refer to Scottrade’s Brokerage Account Agreement, which is incorporated herein by reference. A copy of this Agreement can be found on our web site or by contacting a Scottrade branch office.
Error Resolution Notice - MoneyDirect Service
(1) Tell us your name and account number (if any).
(2) Describe the error or the transfer you are unsure about, and explain as clearly as you can why you believe it is an error or why you need more information.
(3) Tell us the dollar amount of the suspected error.
If you tell us orally, we may require that you send us your complaint or question in writing within 10 business days. We will determine whether an error occurred within 10 business days after we hear from you and will correct any error promptly. If we need more time, however, we may take up to 45 days to investigate your complaint or question. If we decide to do this, we will credit your account within 10 business days for the amount you think is in error, so that you will have the use of the money during the time it takes us to complete our investigation. If we ask you to put your complaint or question in writing and we do not receive it within 10 business days, we may not credit your account.
For errors involving new accounts, point-of-sale, or foreign-initiated transactions, we may take up to 90 days to investigate your complaint or question. For new accounts, we may take up to 20 business days to credit your account for the amount you think is in error.
We will tell you the results within three business days after completing our investigation. If we decide that there was no error, we will send you a written explanation upon request. You may ask for copies of the documents that we used in our investigation.