Margin Borrowing

Margin borrowing is a type of loan using eligible securities in margin-enabled accounts as collateral. You can use margin borrowing to purchase additional securities or to withdraw funds.

Borrowing on margin allows you to take advantage of investment opportunities by leveraging your existing equity holdings to buy more securities without depositing more money. It can also be a cost-effective way to obtain cash without selling securities. By borrowing against securities rather than selling them, you can keep your investment strategy intact and delay recognition of capital gains or losses resulting from the sale of investments. You should consult a tax advisor for more details.

A principal risk of margin borrowing is related to decreases in the market value of the securities in your account. While margin borrowing has the potential to amplify gains, it can also magnify your losses. If the value of the securities falls significantly, you will need to add additional funds or sell securities held in the account to correct the deficit. Even if you do so, we may still sell assets in your account without notifying you first.

Margin interest is charged on the amount of money you borrow, for the time that you borrow it. Margin interest rates are available on our site and are subject to change at any time without notice. Interest is calculated based on the amount borrowed in each account (balance tiers are not calculated across your accounts). Interest accrues at the end of each calendar day and is generally charged to your account monthly but may be charged sooner, such as when closing or transferring an account.

Individual, Joint, Trust, and Business accounts are eligible for margin borrowing.

Note that if you have multiple accounts of the same type and registration, you are limited to enabling margin borrowing in just one account for each registration.

• Margin borrowing can only be enabled for one individual taxable account with us in your name, if you have more than one such account with us.
• If you have a joint account with another person, in addition to an individual taxable account, then both of those accounts could be margin borrowing enabled.
• However, if you have a second joint account with this same person, then only one of those joint accounts could be margin borrowing enabled.

We encourage you to read the full FINRA margin disclosure statement, which is available here.

• Publicly traded stocks and ETFs held by us in client brokerage accounts are generally considered eligible securities for margin borrowing.
• Securities priced under $5 per share are not eligible for margin borrowing.
• Securities issued in an Initial Public Offering (IPO) are not eligible for margin borrowing until 30 days after their listing date.
• Mutual funds are not currently eligible for margin borrowing.
• Leveraged ETFs provide less margin borrowing power than fully margin eligible securities.

Note that the amount of money we will lend to you will vary for different securities, may decrease based on the volatility of the securities and on other factors, and may change at any time as we determine. We do not publish or provide advanced notice of changes to our list of eligible securities or our credit extension policies.

For an account to be eligible for margin borrowing, it must have a value of at least $2,000, either in cash and/or in eligible securities.

The amount of money that you can borrow is determined by us, based upon our internal policies, the rules of the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA). Generally you can borrow up to 50% of the market value of eligible securities in a margin enabled account.

After you have met the $2,000 minimum equity requirement, you can borrow and withdraw from the account up to 50% of the market value of eligible securities.

Margin borrowing is based on the market value of eligible securities in the account. If the value of eligible securities in the account decreases and the account’s equity falls below certain minimum maintenance thresholds, you will be required to either sell securities in the account or deposit cash. We can sell any securities in your account to satisfy a deficit, including selling more securities than the debit amount, and we may not notify you before we sell your securities.

You may deposit funds or sell securities to pay off some or all of the margin debt. There is no set repayment schedule.

Go to the Settings page after you login to your Folio account and select the Margin Borrowing link then follow the instructions.

If you wish to turn off margin borrowing, and you have paid off any margin debt, you can select the Margin Borrowing link on the Settings page and follow the onscreen instructions to disable this feature.

While we are not required to place a margin call on an account (i.e., we can sell securities without prior notice), we normally will notify you by email if a margin call is placed on your account. You may satisfy the margin call by transferring funds into the account or selling securities in the account. If you do not respond within the required time period, or if we otherwise decide based on market or other factors to act, we will sell securities in the account, without notifying you first, to satisfy the margin call. If the sale proceeds did not satisfy the margin call, you will still be responsible for any margin debit in your account. We are not obligated to honor any time period specified in a margin call email.

Yes, we can for our benefit loan securities held in your margin enabled account and pledge those securities, for an amount up to 140%of your margin debit to us, as collateral for a loan at a bank. We may also loan these securities to ourselves or to others. As a result of these loans, you may not be entitled to receive certain benefits, such as the ability to exercise voting rights and/or receive interest, dividends, and/or other distributions on the securities lent. You may only be allocated and receive substitute payments in lieu of interest, dividends, and/or other distributions. Substitute payments may not be afforded the same tax treatment as actual interest, dividends, and/or other distributions, and you may incur additional tax liability for substitute payments that you receive. We may allocate substitute payments in any manner permitted by law, rule, or regulation, including, but not limited to, through a lottery allocation method. You are not entitled to any compensation in connection with securities lent or pledged from your account or for additional taxes you may be required to pay as a result of any tax treatment differential between substitute payments and actual interest, dividends, and/or other distributions.