Q: Hello I have a negative balance due to a margin call with an offshore stockbroker, am I liable for the negative balance?
Hello I have a negative balance due to a margin call with an offshore stockbroker, am I liable for the negative balance?
I held a short position of a stock and was forced to liquidate my position which resulted in a negative balance in my trading account. The amount is 20k USD.
I am a Canadian citizen residing in Vancouver, BC using an offshore trading brokerage in the Bahamas.
The brokerage is demanding payment however I do not feel liable since the position should have been automatically liquidated once 5% margin in my account was not maintained. A negative balance should never have incurred. The firm claims the customer is responsible for such situations.
Who is responsible in this instance?
What if any legal recourse will they have against me?
A: Depending on the specific account guidelines and contractually binding terms will determine if a breach of contract is pursuable. If it was not contractually then you should be ok
A: One thing that is immensely clear is that this question should not be answered by a U.S. lawyer. You need a Canadian lawyer in BC if you wish to make it a defensive stand when they sue you or exercise the arbitration clause that you probably signed; and you need a Bahamian lawyer if you are going after them in the Bahamas. If you failed to mention that the brokerage is in the U.S., you need a U.S. securities lawyer someplace where the brokerage can be found. Justia doesn't have Canadian and Bahamian lawyers AFAIK.
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