Day-Trading Disclosure Statement

 

PLEASE REVIEW THE FOLLOWING DISCLOSURES CAREFULLY BEFORE ENGAGING IN A DAY-TRADING STRATEGY.

Effective date: June 4, 2026

 

A “Day-Trading Strategy” refers to the frequent transmission of intra-day orders by a customer to execute both purchase and sale transactions within the same security or multiple securities. Day trading involves significant financial risk and may not be suitable for all investors.

Day Trading Involves High Risks

  • Day trading is generally not appropriate for individuals with limited financial resources, low risk tolerance, or minimal trading experience.

  • You should be prepared to lose all funds dedicated to day trading.

  • Day trading should not be financed with retirement savings, student loans, emergency funds, second mortgages, or other critical financial resources.

  • Studies indicate that investing less than $50,000 in day trading may significantly reduce profitability, though no investment level guarantees success.

Be Wary of Promises of Large Profits

  • Advertisements suggesting consistent profits from day trading can be misleading.

  • Many day traders experience substantial financial losses rather than gains.

Market Knowledge & Trading Expertise Required

  • Day trading requires an in-depth understanding of market mechanics, trading strategies, and execution techniques.

  • You are competing against professional, experienced traders, including automated high-frequency trading systems. 

System & Market Risks Can Impact Trading 

  • You should be familiar with the firm’s trading systems, execution methods, and potential system failures.

  • Market volatility can make it difficult or impossible to exit positions at expected prices.

  • Technical failures may exacerbate losses during sudden market declines or disruptions.

Commissions & Fees Can Reduce Earnings

  • Frequent trading generates substantial commission costs, even when fees per trade appear low.

  • Example: If each trade costs $16 and a trader makes 29 trades daily, they would need to generate at least $111,360 annually just to cover commission costs.

 Margin Trading & Short Selling Increase Risk

  • Trading on margin can result in losses exceeding initial investments.

  • Declines in stock value may require additional margin deposits or result in forced liquidations.

  • Short selling carries extreme risk, as stocks can rise indefinitely, leading to significant losses.

Pattern Day Trader (“PDT”) Designation & Risk

Summary of Regulatory Transition

  • Effective June 4, 2026, FINRA has abolished the legacy PDT framework. The former "four-day-trade" count and the $25,000 minimum equity requirement are replaced by a risk-sensitive "Intraday Margin Deficit" standard. Firms have an eighteen (18) month phase-in period ending October 20, 2027, to fully implement these technical system changes.

Elimination of PDT Designation

Under the 2026 Amendments to FINRA Rule 4210, the following concepts will no longer be effective:

  • The 4-Trade Test: Traders are no longer designated as "Pattern Day Traders" based on executing four or more trades in five (5) Business Days.

  • $25,000 Minimum Equity: The requirement to maintain $25,000 in equity to frequent-trade is eliminated.

  • Day Trading Buying Power: Legacy calculations for day-trading buying power (for instance, requiring 4x maintenance margin excess) are removed in favor of real-time or end-of-day deficit monitoring.

The New Intraday Margin Framework

The new standard focuses on ensuring that equity is commensurate with market exposure at all times during the trading day.

Intraday Margin Deficit (“IMD”)

  • Definition: An IMD occurs on any day an account engages in an "IML-reducing transaction" (e.g., short sales or purchases of securities not covering a short position) that causes the account equity to fall below the highest required maintenance margin level reached during that day.

  • Requirement: Member firms must determine the intraday margin deficit for each customer margin account (excluding good faith and portfolio margin accounts).

Monitoring Methodology

  • End-of-Day Calculation: DriveWealth will perform a single check after market close to identify the largest intraday deficit incurred during the day. 

Obligations and Account Restrictions

  • Satisfaction of Deficits: Customers must satisfy an identified intraday margin deficit "as promptly as possible".

  • 90-Day Trading Freeze: If a Customer "makes a practice" of failing to satisfy deficits promptly or fails to cure a deficit by the close of business on the fifth business day, the Account will be subject to a ninety (90) day freeze on certain trading activities.

  • Deficit Expiration: Unmet deficits remain outstanding until satisfied or until the close of business on the 15th business day after the deficit occurred.

  • De Minimis Exceptions: Firms may waive deficits that do not exceed the lesser of 5% of account equity or $1,000.

Risk Disclosure to Traders

While the $25,000 minimum equity requirement is removed, day trading remains highly speculative.

  • Leverage Risk: Use of intraday margin increases the potential for significant losses that can exceed the initial investment.

  • Forced Liquidation: If a trader fails to satisfy an intraday margin deficit or a standard margin call, the firm may automatically liquidate positions without notice to the Customer to protect against market exposure.

  • Regulatory Oversight: FINRA continues to enforce these rules under FINRA Rule 3110 to protect market integrity and ensure firms maintain reasonable supervision of high-exposure accounts. 

Potential Registration Requirements

Individuals offering investment advice or managing securities accounts for others may need to register as:

  • An Investment Adviser under the Investment Advisers Act of 1940

  • A Broker or Dealer under the Securities Exchange Act of 1934

  • State registration requirements may also apply 

For additional information or regulatory guidance, consult FINRA (FINRA.Org), the SEC (SEC.Gov), or a qualified financial professional.