Margin Account Agreement
EFFECTIVE JAN. 1, 2025, DRIVEWEALTH IS SUNSETTING THIS AGREEMENT AND REPOSITIONING ITS PROVISIONS INTO THE CUSTOMER ACCOUNT AGREEMENT.
When you buy securities on margin you are borrowing money from DriveWealth for part of your transactions. All securities and other assets in your DriveWealth accounts are pledged as collateral to secure this loan. These margin transactions are riskier and involve the possibility of greater loss than transactions where you are not borrowing money. If the value of your securities and other assets falls, you may be required to deposit more assets (a “margin call”) to secure your loan or your securities, and other assets may be sold to pay down or pay off your loan without prior notice and at a loss or at lower prices than under other circumstances.
By applying for a margin account and/or placing an order on margin, you acknowledge that you have read and understood DriveWealth’s Margin Account Agreement and Margin Disclosure and have considered all relevant factors including, but not limited to, your own financial condition, risk tolerance, and investment objectives, in making your determination that margin is appropriate for you. All transactions in your Margin Account are subject to the terms of this Customer Account Agreement in its entirety and any other written agreements between you and us, as may be amended from time to time.
1. Initial Margin Requirements.In order to be eligible to be extended credit in your Margin Account you must maintain Securities and Other Assets in your Margin Account of at least $2,000 and meet other standards as may be required by Applicable Law or DriveWealth policies. The initial equity deposit will be due prior to settlement date. DriveWealth may, at anytime and without prior notice to you, require more stringent requirements on positions that in our sole discretion involve higher levels of risks.The maximum amount that we currently may extend as credit to you for common stock securities is fifty percent (50%) of the value of marginable securities purchased in you Margin Account. You agree that any credit extended to you is for investment purposes.
2. Payment for Transactions. You agree that you are responsible for paying for all transactions in your Margin Account. When you purchase securities on margin, you agree to deposit the required initial equity by the settlement date and to maintain your equity at the required levels. In addition, you agree to pay any debit remaining in your Margin Account upon demand if your positions are liquidated to satisfy a margin call. We may extend credit to you according to Applicable Law, and in accordance with our own review of your Margin Account application and transactional activity.
3. Maintenance of Collateral.You agree to maintain such collateral in your Accounts in such form and amounts as may be required by Applicable Law, DriveWealth’s own margin policies and procedures or as DriveWealth may, in its sole discretion, require from time to time. You understand that DriveWealth may from time to time determine that certain Securities and Other Assets, irrespective of whether such assets are already held in your Margin Account, are ineligible for margin credit. You agree that DriveWealth may request additional collateral in the event your Margin Account falls below such margin maintenance requirements and there may be circumstances where DriveWealth will liquidate Securities and Other Assets in your Margin Account (including Securities and Other Assets in a cash account or other non-margin account) without notice to you to ensure that margin requirements are satisfied. DriveWealth’s determination as to whether request additional collateral is made on a case-by-case basis; any decision not to request additional collateral with respect to your Margin Account will not be deemed to otherwise limit DriveWealth’s ability to request additional collateral at a later point.
4. Liquidations in Your Margin Account. DriveWealth is entitled to exercise its rights under this Section, in its sole discretion, if any of the following events occur: (i) your Margin Account falls below the required equity levels; (ii) sufficient funds or securities are not timely deposited to pay for transactions in your Margin Account; (iii) you fail to maintain the eligibility requirements as determined by Applicable Law and DriveWealth’s internal policies; (iv) a petition of bankruptcy or the appointment of a receiver is filed by or against you; (v) an attachment is levied against any of your brokerage accounts established at DriveWealth; (vi) death of the Account owner; (vi) any of your other “Eligible Accounts” (i.e. non-retirement brokerage accounts established at DriveWealth) are closed.
DriveWealth may, in its sole discretion, sell, assign, and deliver all or any part of the Securities and Other Assets used as collateral for your Margin Account in order to satisfy a margin call, deficiency, debit, or other obligation that you owe to us. We will make a reasonable effort, where practicable, to contact you prior to taking any action related to your Margin Account but you understand that we are not obligated to do so. Any instance where prior notice was provided to you will not be deemed a waiver of our right to liquidate Securities and Other Assets in your Margin Account without notice.
You understand that 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 and Other Assets are collateral for the margin loan, DriveWealth has the right to decide which security to sell in order to protect its interests. DriveWealth, in its sole discretion, will determine which Securities and Other Assets to liquidate, which transactions to close, and the sequence and timing of the liquidation(s). You further understand that DriveWealth may transfer Securities and Other Assets between your Eligible Accounts established at DriveWealth that you maintain an interest in, regardless of whether there are other account holder on the Eligible Accounts, if we determine that your obligations are not adequately secured or to satisfy a margin deficiency or other obligation. You agree that you will not seek to hold DriveWealth liable for any decisions made under this Section.
5. Pledge of Securities and Other Assets. You hereby authorize DriveWealth to lend either to itself or others any Securities and Other Assets held by DriveWealth or its clearing broker in your Account and to carry all such Securities and Other Assets in its general loans, and such Securities and Other Assets may be pledged, repledged, loaned, hypothecated or rehypothecated either separately or in common with other such Securities and Other Assets for any amounts due to DriveWealth thereon or for a greater sum, and DriveWealth shall have no obligation to retain a like amount of similar Securities and Other Assets in its possession and control. The value of the Securities and Other Assets we pledge or repledge may be greater than the amount you owe us. Securities that are fully paid for or are deemed “excess margin securities” under Applicable Law and may not be pledged, repledged, or used unless you have signed a separate written agreement that gives us the right to do so. You understand and agree that if Securities in your Account are loaned to anyone other than DriveWealth, you may lose your right to vote such securities. In the event that you no longer maintain a debit balance or any other indebtedness to DriveWealth, it is understood that DriveWealth will fully segregate all Securities and Other Assets in your Account in DriveWealth’s safekeeping or control (directly or through a clearinghouse) and deliver them to you upon request.
6. Loan Consent.You agree and acknowledge that Securities and Other Assets held in your Margin Account, now or in the future, may be borrowed (either separately or together with the property of others) by us (acting as principal) or by others. With respect to Securities and Other Assets held in your Margin Account, you also agree and acknowledge that:
- We may transfer Securities and Other Assets held in your Eligible Accounts between your Eligible Accounts.
- We may receive certain benefits including, but not limited to, interest on collateral to which you will not be entitled.
- In certain circumstances, your ability to exercise voting rights, submit shares for consideration in corporate actions, or receive dividends, may be impacted, in whole or in part, due to Securities and Other Assets in your Margin Account being lent out.
- To the extent that your Securities or Other Assets are lent to another borrowing counterparty, you understand that the borrower may exercise the applicable voting rights on the shares. We will process any corporate action on lent securities consistent with your election regardless of whether your distribution is paid directly from the issuer or indirectly from the borrowing counterparty.
- Interest, dividends, and other payments made on Securities and Other Assets will go to the borrower. You understand that you are not entitled to compensation or other reimbursements of any kind.
7. Restricted Securities as Collateral. You agree that all Securities and Other Assets you deposit in your Account as collateral for any loan you may obtain from DriveWealth will be in Good Deliverable Form. If you deposit Restricted Securities in violation of this Agreement and you do not, upon demand, promptly replace such Restricted Securities with Securities and Other Assets that are satisfactory to DriveWealth, or pay in full the margin loan secured by such Restricted Securities, you agree that you will be in default under this Agreement and DriveWealth may, without prejudice to its other rights and remedies at law and in equity, take any and/or all of the following actions:
- Liquidate Collateral. Liquidate any Securities and Other Assets or, to the extent permitted by Applicable Law, any Restricted Securities held in your Margin Account, or any other Account with DriveWealth in which you have an interest, to satisfy the debit balance secured by the Restricted Securities.
- Set Off. Set off against the debit balance secured by such margin loan any amounts held in any other Accounts you maintain with DriveWealth.
- Default Rate of Interest. Until such time as the default is cured and in substitution for any other rate of interest specified in this Agreement, charge interest at the default rate of 24% per annum on the debit balance of all Accounts which you maintain with DriveWealth and debit such Accounts from time to time for such interest (provided, however, that you acknowledge that in no event does DriveWealth intend to charge a rate of interest in excess of the maximum rate permitted under Applicable Law and, in the event such rate of interest is in excess of the permitted rate, DriveWealth agrees that any excess interest so charged shall at DriveWealth’s option be returned to you or applied to your Account).
- Demand Immediate Payment. Demand immediate payment in full of the margin loan secured by such Restricted Securities; or
- Other Remedies. Assert any other remedies available to DriveWealth under Applicable Law to collect all amounts that you owe to DriveWealth.
8. Tax Treatment of Payments In Lieu of Dividends. The Internal Revenue Code generally provides that, subject to certain requirements, dividends paid to a U.S. individual shareholder from domestic corporations and certain foreign corporations are subject to tax at the reduced rates applicable to long-term capital gains. These dividend payments are considered qualified dividends subject to certain holding period requirements. DriveWealth has the right to rehypothecate the shares in your Account. Consequently, as a result of the rehypothecation the IRS requires that some or all of the dividend payments you may receive are considered substitute payments in lieu of dividends. Any substitute payments in lieu of dividends will appear on Form 1099-MISC Box 8 of your Consolidated 1099 Form instead of Form 1099-DIV Box 1b “Qualified Dividends”. Accordingly, you understand that the Account may receive substitute payments in lieu of dividends rather than qualified dividends, which are taxed at ordinary income tax rates, and DriveWealth, shall not be responsible to you for any additional taxes or other costs you incur for receipt of substitute payments in lieu of dividends. You should consult with your tax adviser if you have any questions relating to substitute payments in lieu of dividends.
9. Non-Individual Certification. If this Margin Agreement is for a trust, other fiduciary account, or other non-individual account, you hereby certify and represent to DriveWealth that the use of a margin account and specifically the borrowing, lending and pledging of Securities and Other Assets as described herein is in accordance with and authorized by the provisions of the trust or other instrument and Applicable Law governing the trust or other entity.
10. Customer Account Agreement.All transactions in your Margin Account are subject to the Customer Account Agreement in its entirety and any other written agreements between you and us, as amended from time-to-time.
Truth-in-Lending Statement
The following information explains how we extend credit, charge interest, and secure obligations against Securities and Other Assets held in your Account.
1. Interest Charges.DriveWealth will charge you interest on a daily basis based on the amount of credit that we extend to you. The daily interest charges are calculated by multiplying your “Daily Debit Balance” by our “Margin Rate.”
2. Daily Debit Balances. The Daily Debit Balance is determined by adjusting your previous day’s debit balance by any additional debits and credits to your Account. If your Daily Debit Balance is reduced because you deposit a check or other item that is later returned to us unpaid, we may, but are not required to, adjust your Daily Debit Balance to reflect the interest charges that you incurred. DriveWealth will deliver monthly account statements to you which show the activity in your Account, including all applicable interest charges, interest rates, and Daily Debit Balances.
3. Margin Rate.DriveWealth’s Margin Rate is set at a “Base Rate” of 4.00% plus the daily Federal Funds Rate (FFR). The Margin Rate is set at our sole discretion with reference to commercially recognized standards, industry rates, and industry conditions related to the extension of margin credit and general credit market conditions.
Since the Margin Rate depends on the FFR, any changes in the FFR will cause corresponding changes in the Margin Rate charged to your Account, and such changes will be reflected in your Account without any notice to you. If the Margin Rate increases for any reason other than a change in the FFR, we will provide you with notice at least thirty (30) days prior to such change. The Margin Rate is based on a 360-day year. Note that the use of a 360-day year results in a higher rate of interest than if a 365-day year were used. DriveWealth reserves the right, but is not required, to negotiate a different Margin Rate with you or your Introducing Broker.
4. Compounding Interest Charges.All interest charges are compounded on a daily basis based on the adjusted Daily Debit Balance. Interest charges will accrue to your account each day. We will include the charges in the next day's opening debit balance and charge interest accordingly. The interest rates described in Section 3 do not reflect compounding of unpaid interest charges; the effective interest rate, taking into effect such compounding, will be higher. All interest charges will be charged to your Account on a monthly basis.
5. Initial Margin Requirements.The Federal Reserve Board and various stock exchanges determine margin loan rules and regulations. While DriveWealth does not require a minimum deposit to establish a Margin Account, we will not extend credit to you unless the value of the Securities and Other Asset in your Margin Account is at least $2,000, or such greater amount as may be required by Applicable Law or our internal policies as may be amended from time-to-time.
The maximum amount we currently may loan for common stock (equity) securities is 50% of the value of marginable securities purchased in your Margin Account; DriveWealth, in its sole determination, will decide whether Securities and Other Assets are eligible for margin. We are not required to extend you credit on any Securities and Other Assets.
If the market value of stock held as collateral increases after you have met the initial margin requirements, your available credit may increase proportionately. Conversely, if the market value decreases, your available credit may proportionately decrease. Initial margin requirements may change without prior notice. We may impose anytime and without prior notice more stringent requirements on positions that in our sole discretion involve higher levels of risk
6. Margin Maintenance Requirements.You must maintain a minimum amount of equity in your Account to collateralize outstanding credit and other obligations extended to your Account. Margin maintenance requirements are determined based on the rules and regulations set by Financial Industry Regulatory Authority (FINRA) and other regulatory agencies which we are subject to. DriveWealth, in its sole discretion, may set more stringent standards than the regulatory required minimum margin maintenance requirements. Additionally, DriveWealth may change its margin maintenance requirements without any prior notice to you.
If the value of eligible collateral in your Account falls below the margin maintenance requirement, we mayissue a “margin call.” A margin call is a demand issued by DriveWealth that you deposit further Securities and Other Assets in your Account. A margin call may be issued for various reasons; the most common reason is that the value of long securities held in your Account as collateral decreases (i.e. the market value drops).
The amount of additional collateral demanded in the margin call is usually an amount sufficient to raise your eligible collateral back to the minimum maintenance requirement; however, DriveWealth retains absolute discretion to determine whether, when and in what amounts we will require additional collateral. In certain situations, we may require additional collateral if we deem it necessary for our protection, such as changes in market conditions, changes in your financial condition, or if certain Securities and Other Assets become restricted or otherwise are deemed ineligible collateral by DriveWealth.
7. Day Trading Requirements.Day Trading is when you are actively pursuing a trading strategy that involves buying and selling the same security on the same day. FINRA rules defined Pattern Day Trading to be a margin customer that day trades four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. Day Trading presents additional risks. Please refer to our Day Trading Disclosure Statement for additional details. Additionally, you understand that individuals who qualify as Day Traders are subject to a number of strict requirements, in addition to those for Margin Accounts. These include requiring a minimum deposit of $25,000 before any day trades can be made in a Margin Account and using a different calculation for determining margin buying power.
8. Liens and Liquidations. All debit balances in your Account, including those resulting from extensions of credit, will be immediately due and payable at DriveWealth’s election. You understand that in the Customer Account Agreement, you granted to us a lien on all Securities and Other Assets maintained for any purpose, including safekeeping, in your Account or in any other present or future brokerage account in which you have an interest regardless of whether there are other account holders on any of the accounts. This lien secures the full performance of obligations owed to us by you or any joint account holder, whether those obligations are incurred in connection with your Account or any other brokerage account maintained with us and extends to property that may not be eligible as margin collateral under Federal Reserve Board regulations.
If the value of your eligible collateral falls below the applicable margin maintenance requirement, we may (but are not obligated to) notify you of a margin call for an amount sufficient to bring your Account up to the equity level that we require. Margin calls require prompt delivery according to our instructions of either additional funds or acceptable securities. Failure to make a required deposit may result in the liquidation of part or all of the Securities and Other Assets in your Account.
Notwithstanding any oral communications between you and us, we reserve the right to liquidate anytime (including on or before settlement date) if the value of Securities and Other Assets in your Account falls below our minimum margin requirements. You will continue to be held liable on demand for any debit balance remaining after liquidation of assets in your Account. It may not be possible to notify you of a margin call or allow any time to deposit additional collateral. Therefore, we reserve the right to initiate immediate liquidation procedures without notice to you. You are responsible for monitoring the status of your Account, for ensuring that sufficient collateral is maintained in the Account and for liquidating positions to minimize losses. Any action we take or do not take to issue a margin call or liquidate collateral is undertaken solely to protect our interest as a creditor. You agree that we do not have any responsibility to issue a margin call, to liquidate positions in your Account or to select the Securities to be liquidated or the manner or timing of the liquidation in order to prevent or minimize losses to you.