You log on to your brokerage account and notice that some of your holdings have been sold. Should you panic? Well, if your broker sold securities out of your investment account without permission, then these actions may not be legal♎. However, chances are that your broker did nothing wrong at all.

Instead, you may have been subject to selling in an account where the broker had discretion to place trades, or you had a margin account that experienced sufficient losses to warrant an unmet 澳洲幸运5开奖号码历史查询:margin call.

Below, we will go over both situations in which your broker has sold some of your positions.

Discretionary Accounts

A 澳洲幸运5开奖号码历史查询:discretionary account (also known as a 澳洲幸运5开奖号码历史查询:managed account) all🐎ows your broker or financial adviser to make trading decisions on your behalꦍf, without obtaining explicit permission for each decision.

Instead, the account owner will have signed documents giving the broker the discretion to buy and sell securities for your 澳洲幸运5开奖号码历史查询:portfolio based on an 澳洲幸运5开奖号码历史查询:investment policy statement (IPS) to which the owner has agreed.

Thus, any trades made by the broker must be within the guidelines set out in the IPS or account contract. They must align with your 澳洲幸运5开奖号码历史查询:risk tolerance and investment goals.

What If You Disagr♐ee with ꦯSelling Done in a Discretionary Account?

If you believe the broker’s actions did not satisfy the IPS or guidelines set out in your brokerage agreement, the first thing you sho𒊎uld do is send a written communication to the broker’s firm and t♍heir manager discussing the facts of the situation.

It is possible that the broker and the firm were unaware of the details and will deal 🅺with it accordingly, once it’s brought to their attention. The correspondence also provides you with written proof of your claim.

You should also file a complaint if the trades were transacted in a nondiscreti💫onary account, where the broker did not have such permission.

You may also choose to contact the U.S. 澳洲幸运5开奖号码历史查询:Securities and Exch🦋ange Commission (SEC) and file a complaint for a more serious review. If the firm and broker have either, not dealt with the matter in a satisfactory𓆏 manner or, not explained the situation, the SEC can investigate further.

Margin Calls

If you have a margin account, you have the ability to use leverage to increase the purchasing power of the cash in your account. Effectively, this means that you can buy more securities than y🥃ou can𓆏 actually afford, with the extra funds coming from your broker in the form of a loan.

If your leveraged long positions start to lose money and your margin equity level has fallen below the 澳洲幸运5开奖号码历史查💎询:firm’s maintenance margin requirements, the brokerage has every right to sell your secu൩rities without contacting you or obtaining your permission.

This is done to cover the outstanding loan to the broker. Often, brokerage firms are not actually required to provide a formal notice of a margin call. So if they give you one, they are doing so as a courtesy.

The best thing you can do to avoid such a situation is to make sure that you always have enough cash in your account to meet the 澳洲幸运5开奖号码历史查询:maintenance margin, and that you quickly transfer ꩲmore funds in if it falls below. You can also close some open positions yourself, generating such cash for your account.

When Might 🍌a Broker Be Forced꧋ to Sell Securities?

The conditions leading to a 澳洲幸运5开奖号码历史查询:forced liquidation of your securities will be spelled out by your broker in the margin account agreement that you signed upon opening the account. To ensure that the broker rece♒ives the money (and interest) you borrowed, they will sell your securities regardless of whether you lo൲se money on the trades.

Note that your broker may not use a specific method when picking the stocks to sell out of your account. Instead, the stocks that are sold to cover the entire deficit in the equity level may, for example, be picked ෴in alphabetical order. To 🤡top it off, when selling such securities, the broker may charge full commission for the transactions.

The Bottom Line

If you find that your broker has sold securities in your account without express permission, chances are that they💟’ve done nothing wrong. If you have given a broker discretionary power to 𒀰trade for you, they may do so without contacting you first.

As long as the activity fits your investment goals and risk profile, and doesn’t involve illegal or unethical activities such as churning (overtrading for the purposeꦆ of generating excess commissions), it's legal.

If you have a margin account and your broker sells securities in your account, it’s likely that the value of your positions has lost sufficient money to drop below your broker's maintenance margin requirement, initiating a margin call. If the margin call is not met, they can sell securities to obtain the cash owed to them.