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Guidance on Margin

What does it mean when I purchase securities on margin?

When you use a margin account, you are borrowing money from a brokerage firm. As a client of ACM you are borrowing money from National Financial Services LLC ( “ NFS ” ) as the Cl earing Agent. The amount of money borrowed from the firm is charged interest at competitive rates. These rates can and do change. For current rate information contact your broker. When purchasing securities on margin you use a combination of your own funds and the funds you borrowed from NFS . These securities are NFS ’s collateral for the loan. When the securities in your account decline in value, so does the value of the collateral supporting your loan. If the value of the securities declines substantially, NFS will take action to shore up the value of the account by issuing a margin or house call. Whether or not NFS chooses to issue a margin or house call, the firm has the right to liquidate securities in your account, with or without notice, in order to me et its equity requirements for customer margin accounts. Should NFS actually issue a margin or house call, you may be afforded very limited time to satisfy the call. This time may be less than the amount of time the firm may normally allow in the event the markets are experiencing unusually volatile conditions. This information pertains to the most common use of a margin account; i.e., purchasing securities on margin. Investors who sell securities short, which are also margin transactions, should check with ACM to fully understand the impact that changes in market value may have on their account. For more information log on to : http://www.finra.org/PressRoom/NewsReleases/200 7NewsReleases/p018890

What can I do to better manage my margin account?

If you use a margin account, make sure you do not use all of your available funds to trade securities in the margin account. You should retain a ready reserve of easily accessible c ash (for example, in a checking or savings account) so that you can promptly meet a margin call. Manage your margin account. If you see that the securities in your margin account are declining in value, deposit additional funds into your account. These cas h deposits will reduce the margin loan, and lessen your chances of a margin call as long as the value of the securities in your account do not continue to decline or you do not use the money to engage in further securities transactions. ACM and FINRA are e xcellent sources of information on margin accounts.

If you do not fully understand how a margin account works, limit your investments to a cash account where you must pay for the securities in full. Cash accounts are not subject to margin calls. Know you r NFS and ACM margin policies. Speak with your broker or check ACM’s Web site (www.axiomcapital.com) for any changes in margin policies. NFS or ACM can make policy changes at their discretion, and are more likely to do so in volatile markets.

What are the risks associated with the use of margin?

  • You can lose more than you have invested;
  • You may have to deposit additional cash or securities into your account on short notice to cover market losses and/or a decrease in your account’s equity value;
  • If you are unable to deposit additional cash or securities into your account, you may be forced to sell some or all of your securities when falling stock prices reduce the value of those securities; and
  • Your broker may be forced to sell some or all of your securitie s, with or without notice, when falling stock prices reduce the value of those securities, and you are unable to meet a margin or house call in a timely manner.