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MARGIN DISCLOSURE
STATEMENT
American Eastern Securities, Inc. (“AES”)
is furnishing this document to you to provide some basic facts about
purchasing securities on margin, and to alert you to the risks involved
with trading securities in a margin account. Before trading stocks
in a margin account, you should carefully review the margin agreement
provided by AES. Consult AES regarding any questions or concerns
you may have with your margin accounts.
When you purchase securities, you may pay for the
securities in full or you may borrow part of the purchase price
from your brokerage firm. If you choose to borrow funds from your
firm, you will open a margin account with the firm. The securities
purchased are the firm’s collateral for the loan to you. If
the securities in your account decline in value, so does the value
of the collateral supporting your loan, and, as a result, the firm
can take action, such as issue a margin call and/or sell securities
or other assets in any of your accounts held with the member, in
order to maintain the required equity in the account.
It is important that you fully understand the risks
involved in trading securities on margin. These risks include the
following:
• You can lose more funds than you deposit
in the margin account. A decline in the value of securities that
are purchased on margin may require you to provide additional
funds to the firm that has made the loan to avoid the forced sale
of those securities or other securities or assets in your account(s).
• The firm can force the sale of
securities or other assets in your account(s). If the
equity in your account falls below the maintenance margin requirements
or the firm’s higher “house” requirements, the
firm can sell the securities or other assets in any of your accounts
held at the firm to cover the margin deficiency. You also will
be responsible for any short fall in the account after such a
sale.
• The firm can sell your securities
or other assets without contacting you. Some investors
mistakenly believe that a firm must contact them for a margin
call to be valid, and that the firm cannot liquidate securities
or other assets in their accounts to meet the call unless the
firm has contacted them first. This is not the case. Most firms
will attempt to notify their customers of margin calls, but they
are not required to do so. However, even if a firm has contacted
a customer and provided a specific date by which the customer
can meet a margin call, the firm can still take necessary steps
to protect its financial interest, including immediately selling
the securities without notice to the customer.
• You are not entitled to choose
which securities or other assets in your account(s) are liquidated
or sold to meet a margin call. Because the securities
are collateral for the margin loan, the firm has the right to
decide which security to sell in order to protect its interests.
• The firm can increase its “house”
maintenance margin requirements at any time and is not required
to provide you advance written notice. These changes
in firm policy often take effect immediately and may result in
the issuance of a maintenance margin call. Your failure to satisfy
the call may cause the member to liquidate or sell securities
in your account(s).
• You are not entitled to an extension
to time on a margin call. While an extension of time
to meet margin requirements may be available to customers under
certain conditions, a customer does not have a right to the extension.
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