BB&T Securities, LLC is furnishing this information 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 BB&T Securities, LLC. 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 from your brokerage firm. If you choose to borrow funds from BB&T Securities, LLC, you will open a margin account with the firm. 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, and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, 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 the firm that has made the loan to avoid the forced sale of those securities or other securities or assets in your account(s).
- The firm 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 the firm's higher "house" requirements, the firm 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 short fall in the account after such a sale.
- The firm 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 will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer.
- 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, the firm has the right to decide which security to sell in order to protect its interests.
- The firm 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 the member 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.
DISCLOSURE OF CREDIT TERMS
An interest charge will be imposed for any statement period during which your average daily debit balance is greater than zero. The normal statement period will end on the last business day of each month. The statement period may be for fraction of a normal statement period on opening or closing your account. Interest will ordinarily be calculated through the second to the last business day of each month and will ordinarily be charged to the account on the next to the last business day of each month.
DETERMINATION OF INTEREST RATE
The annual rate of interest to be applied each time interest is charged to your account will depend upon and will vary with the size of your average daily debit balance for the period and with the average Broker Call money rate in effect during the interest period, in accordance with the following schedule:
If your Average Daily Balance for the period is:
$500,000 or over
The Annual Interest Rate Applied will be:
2.875 above the Broker Call rate for the period
2.625 above the Broker Call rate for the period
2.250 above the Broker Call rate for the period
1.750 above the Broker Call rate for the period
The Broker Call rate is based on published rates for call money lent brokers on stock exchange collateral or call money rates quoted by commercial banks, as determined by BB&T Securities, LLC. Under no circumstances will the call money rate used to determine the interest rate exceed the cost of borrowing money. "Cost of borrowing money" shall be the higher of (a) the interest rate charged BB&T Securities, LLC by a bank doing business in Virginia on loans collateralized by securities; or (b) the interest rate charged BB&T Securities, LLC by a bank doing business in Virginia on loans for business purposes.
Your average daily debit balance for each interest period will be computed by adding each daily debit balance in your account and dividing that sum by the number of days in that period. The daily debit balance represents the sum of all debits and credits posted to your account each day plus adjustments to reflect the value of any short positions in your account as valued at the close of business for that day. For each day, the daily debit balance reflects the actual settled debit balance in your margin account as reduced by the amount of any settled credit balances carried in your cash account. The balance in your money market account does not reduce the calculated debit balance. If a check which you deposited or other item is returned to BB&T Securities unpaid, BB&T Securities reserves the right to adjust your account to reflect interest charges that you would have incurred if the item or check had not been returned unpaid.
You will be given at least 30 days prior written notice of any changes in the terms and conditions under which interest is charged other than changes, which are explained herein, or are required by law or result in lower interest charges.
CALCULATION OF INTEREST CHARGES
Any credit or debit balance in the cash account will be combined with the balance in the margin account for the purpose of computing interest. The interest charged to your account is calculated by multiplying any net debit balance each day by the applicable interest rate. A credit balance in any short account will not reduce the average daily debit balance in your margin account because such credit balance are normally used to collateralize the borrowing of stock to make delivery against the short sale. However, short sale positions will be marked to the market daily and such changes resulting therefrom will affect the debit balance in your margin account. Therefore, if such change results in a credit, such credit will be transferred to your margin account as a credit; and conversely, if such change results in a debit, such debit will be transferred as a debit to your margin account.
COLLATERAL AND LIEN
By virtue of the agreement which you will have executed, or will execute upon opening a margin account with BB&T Securities, LLC we have or will have a general lien on all monies, securities or other properties that we may at any time be carrying for you or which may be in our possession for any purpose, including safekeeping, to secure the discharge of all your obligations to us. Notwithstanding you may have deposited monies, securities or other properties with us sufficient to satisfy the margin requirements under any applicable law, rule or regulation enacted or promulgated by any government regulatory body or authority, BB&T Securities expressly reserves the right to require you at any time, and from time to time, to deliver to BB&T Securities such additional collateral as BB&T Securities, in its sole discretion, may deem necessary to adequately secure BB&T Securities in the discharge of all your obligations to BB&T Securities.
This notice is written to conform with the Securities and Exchange Commission Rule 10b-16.