The Notice was developed in response to a number of questions and concerns raised by industry and investors about current volatile market conditions and the risks posed by margin accounts to both investors and securities firms.
Turbulent markets pose considerable risk to investors who have margin accounts.
During times of price volatility, market values of securities can fluctuate dramatically, resulting in sudden margin calls by securities firms. Since a margin call can result in serious consequences to the small investor, it is especially important for firms to clearly explain margin rules and disclose all risk and finance charges associated with the loaning and borrowing of funds to finance securities transactions. NASD Regulation will accept public comment on the Notice through May 31, 1999. NASD Regulation oversees all U.S. stockbrokers and brokerage firms.