marginSmith, Brown & Groover, Inc. (“SBG”), as your introducing broker/dealer 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.

SBG does not recommend that clients purchase stocks on margin. For some account holders, however, borrowing on margin may provide a convenient and cost effective short-term source of funds (liquidity).

Before trading stocks in a margin account, you should carefully review the margin agreement provided by our clearing firm, National Financial Services (“NFS”). Please consult with your representative 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 our clearing firm (the lender of margin funds is NFS rather than SBG). If you choose to borrow funds, you will open a margin account, and execute a margin agreement. The securities purchased serve as collateral for the loan to you (the collateral is for the benefit of our firm and our clearing firm). If the securities in your account decline in value, so does the value of the collateral supporting your loan and, as a result, our firm or our clearing firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held by NFS, 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 the securities that are purchased on margin may require you to provide additional funds to NFS to avoid the forced sale of those securities or other securities or assets in your account(s).
Our firm or our clearing 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 of the NFS “house” requirements, either SBG or NFS can sell the securities or other assets in any of your accounts held at NFS to cover the margin deficiency. You will also be responsible for any short fall in the account after such a sale.