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Página principalPurchasing or borrowing against securities on margin always carries a degree of risk. You can help manage that risk by:
You should monitor the market and your investments against your risk tolerance and target goals.
Diversification does not ensure a profit or protect against loss in declining markets.
This is a generic term that refers to both maintenance calls and Regulation T calls (also referred to as Reg T or Fed calls). When the securities in your margin account decline in value, the equity in your margin account declines. Equity is defined by the market value less the outstanding balance. Firms require a certain amount of equity to be maintained. If the value of the securities declines enough, your brokerage firm may issue a margin call to reach the required equity.
An investor who receives a margin call is required to deposit additional funds or securities in a margin account because the equity in the account doesn’t meet the brokerage firm’s established minimum equity requirement (maintenance call or “house margin”). This could be due to changes in the market value of the margined securities, or because additional securities have been purchased or sold short in your margin account. If a call is not met a timely manner, your securities may be liquidated to meet the call and potentially create excess equity. In falling equity markets, your securities may be liquidated prior to the due date to prevent a negative equity position.
Wells Fargo Advisors also reserves the right to increase maintenance requirements, which could trigger a call. Please realize that you may not get an extension of time to meet a call, and the firm is not required to contact you before selling your securities to meet a call.
As a margin user, you need to thoroughly understand the risks associated with using this kind of leverage in your brokerage account, especially when you borrow at or near the initial margin limit.
The Federal Reserve authorizes this special account to preserve buying power in your margin account. It reflects any excess equity in your margin account that is above the required amount (50% for marginable securities). If the value of securities declines, this availability will continue to be preserved causing it to be elevated relative to the reduced market value.
Most securities are eligible to be used as collateral including most equities, other than low priced or thinly traded stocks, most mutual funds, if you’ve held the mutual funds for a minimum of 30 days, and most investment grade fixed income securities (municipal, corporate, government agency or Treasury bonds).
Some assets are not available to use as collateral for margin borrowing, including money market mutual funds, precious metals, annuities, and offshore mutual funds.
No. Because of the inherent risks in margining securities and regulatory prohibitions against doing so, margin is not permitted in retirement accounts.
No. Most managed programs do not permit margin loans based on the managed strategy.
No, when appropriate, margin proceeds can be used for a variety of funding needs for personal and business use, as well as investment opportunities.
Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
Margin borrowing may not be appropriate for all investors. When you use margin, you are subject to a high degree of risk. Market conditions can magnify any potential for loss. The value of the securities you hold in your account, which will fluctuate, must be maintained above a minimum value in order for the loan to remain in good standing. If it is not, you will be required to deposit additional securities and/or cash in the account or securities in the account may be sold. Clients are not entitled to choose which securities in their accounts are sold. The sale of their pledged securities may cause clients to suffer adverse tax consequences. Clients should discuss the tax implications of pledging securities as collateral with their tax advisors. An increase in interest rates will affect the overall cost of borrowing. Margin strategies are not appropriate for retirement accounts. Please carefully review the margin agreement, which explains the terms and conditions of the margin account, including how the interest on the loan is calculated.
PM-12132025-6696149.1.1
LRC-0624
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