In any case, disputes are expensive propositions. Legal fees and possibly damages add up, while customer goodwill evaporates. True, legally savvy brokers rarely lose these cases in court, and the grievances of some investors will likely prove baseless. And brokers have been quick to finger the stupid margin tricks of investors. Our actions were in accordance with the policies laid out in the firm's margin agreement.
Brokers insist their service reps walk the straight and narrow.
Simply too many tales are circulating of broker account reps saying one thing and asking customers to sign an agreement that says something else. Fact is, with an eye trained on their own share values, brokers have little short-term incentive to discourage risky trading. Since many online brokerages are actually losing money on each stock trade, relying on margin loans for revenue growth is tempting. While some online brokerages claim they're tightening margin requirements, Siebert and others say this isn't the case with all. Because if changes don't come from the brokerages themselves or from the SEC, the industry will eventually suffer.