FAQs for online investors       

What should I expect from my on line stock broker ?

What should I do if I can't get through ?

What is the stock brokerage firms' financial responsibility for computer system problems ?

The account agreement I have to sign says that the firm isn't responsible if I lose money because their system goes down, do I have to sign this ?

What should I expect when I place a market order ?

I sent in my order and nothing happened, no acknowledgment, no report, nothing.  Is my order lost ?  What should I do ?

My on line broker just changed the margin requirements on my account and is threatening to sell me out, can they do that ?

I have jumped through every hoop my broker has asked me to, but I still can't seem to get any stock in the IPOs.   Doesn't my number have to come up sometime ?

On option expiration day. my broker exercised the options in my account, and on Monday sold the shares for less than the exercise price.  Do I have to pay the difference for this unauthorized trade?

What should I do if my broker's mistake or system failure costs me money ?

What should I expect from my on line stock broker ?

Access  - You should expect to be able to access your account regardless of market conditions.   Your broker should have enough computing power to handle all of the orders, all of the time.   Computer systems are not foolproof, but this does not excuse the firm.  If the computer is down, you should be able to pick up the phone and deal with a live broker.

Accuracy - You should expect that the information that your broker provides to you is accurate.  This would include information about your account balances, margin debt, buying power and the value of the positions in your account.  You should expect that information supplied to you about the market place, including quotes and volume, is accurate as well.  You should also expect that the research reports disseminated to you by your broker are accurate and honest, and comply with all applicable rules.    

Accountability - You should expect that the brokerage firm will have a system in place to deal with customers who have legitimate problems or disputes.  You should expect to be able to speak with someone who can address and ultimately resolve the matter. You  should expect to be compensated for losses you sustain as a result of the firm's failures or mistakes.   

What should I do if I can't get through ?

One of the most frustrating situations for any on line customer is not being able to log-on to the broker's website or otherwise operate the broker's system.   If you want to trade but cannot use the broker's website for whatever reason, I recommend that you pick up the phone, immediately, and place your order with a live broker.   This will minimize the delay, and the potential loss. 

Most firms will acknowledge when their system is down, but it may be a good idea to "print the screen" to show the messages you were getting, in case there is a question later.

What is the stock brokerage firms' financial responsibility for computer system problems ?

As a general rule, if a system failure makes it impossible for you to trade, or delays your trade, the brokerage firm should compensate you for any loss that you incur.  If the price of the shares moved counter to your position during the time you were delayed by the system failure, and you were ultimately forced to buy higher or sell lower because of the delay, the firm will generally owe you the difference.

In most cases, the firm should be willing to adjust your account by the difference in the price you got later and the price you would have gotten if you could have used the broker's system in a timely fashion.   The firm should also be willing to adjust any incremental cost of your having to deal with a live broker.

The account agreement I have to sign says that the firm isn't responsible if I lose money because their system goes down, do I have to sign this ?

No brokerage firm is under any particular duty to accept any customer, and most have a policy that will not allow them to accept customers who modify their account agreements.  So the short answer is, yes, you may have to sign it. 

Your account agreement will also require you to submit any claims or disputes that you may have with your broker to a panel of securities industry arbitrators.  Industry arbitrators don’t always give any weight this boiler plate language and in many states it is questionable whether stock brokerage customers can sign away their rights.  If the computer system goes down, the brokerage firm is generally going to be responsible for any losses you have. 

What should I expect when I place a market order ?

You should expect an execution, followed by a report of the execution, both within a reasonable amount of time.  In the case of a market order placed through a broker's website, both the execution and the report should usually occur within a minute, and more often in less than a minute.  

You should understand that you are only entitled to the price at which the transaction actually executes.  Market orders are filled in the order that they are received by the marketplace.  If a lot of people are in front of you, your execution price could be for more or less than you were expecting.

You have probably seen the disclosure on your broker's website concerning the extra risks of a fast moving market.  This disclosure has been mandated by the SEC.  It is a good idea to read and understand this disclosure.  The SEC is trying to tell you that YOU CAN LOSS MONEY because the marketplace does not always act in an orderly fashion.

The SEC has put numerous other rules and mandates in place in any attempt to protect investors.   It even has rules which help calm down the markets that are designed to prevent things from becoming too disorderly.  Nonetheless, investors beware, the markets can sometimes be very volatile and you can sustain a substantial loss in a very short period of time.  

I sent in my order and nothing happened, no acknowledgment, no report, nothing.  Is my order lost ?  What should I do ?

Most firms agree that your order is probably not lost even though you can't find it.  Most firms recommend against canceling and re-entering the order as you are likely to get two executions.  It is probably a good idea to review the firm's policy and guidelines or to ask customer service about this before you trade.

The most important thing to do is to contact the firm and find out the true status of your order before you do anything else.  Errors are always easier to correct when not compounded by actions taken on incomplete or incorrect information.

My on line broker just changed the margin requirements on my account and is threatening to sell me out, can they do that ?

Stock brokerage firms can, and do, change the margin requirements on accounts whenever they feel the need to offset increased credit risks.  The firm can reduce the collateral value of any particular company's shares, or declare the shares not marginable at all. 

The firm can also require that you post additional cash or collateral at any time, and they can liquidate your account at any time they see the need.   This is true even if they have issued a margin call for more funds.  And no, the firm does not generally have to send you a margin call or notify you before they sell you out. 

I have jumped through every hoop my broker has asked me to, but I still can't seem to get any stock in the IPOs.  Doesn't my number have to come up sometime?

No, it does not.   Brokerage firms have the absolute right offer shares in IPOs to select customers first.  Especially where the IPO is expected to be hot, Wall Street firms have traditionally allocated the first round of IPO shares to institutions and other good customers.  

Prior to the offering, the brokerage firm can only take indications of interest from potential buyers.   The internet has allowed the pre-IPO hype about many new stocks to reach a great many more people than what used to be called the "dog and pony show".  It is probable that very few, if any, of the individual customers who registered a desire to own the stock, actually received any at the offering price.           

On option expiration day,  my broker exercised the options in my account, and on Monday sold the shares for less than the exercise price.  Do I have to pay the difference for this unauthorized trade?

Most brokers will automatically exercise “in the money” options on expiration day, with or without your instructions, rather than let the value represented by the position just evaporate.  If you are trading options, it’s a good idea to read and understand the procedures that firm publishes.  And just because they tell you they will automatically exercise a position, if you want to exercise, its always better to give the firm clear instructions of your intention rather than leaving it to the computer.

What should I do if my broker's mistake or system failure costs me money ?

Ask for an adjustment.  Because the amounts are frequently small, many of the on line brokerage firms will make adjustments if the customer asks professionally and is persistent.  Contact the firm by telephone first, and asked to be put in touch with the right person. Some firms handle customer complaints through a centralized department, others through local branch offices.  Ask where the person you are speaking with is actually located.

Put your complaint in writing.   Keep hard copies of all confirmations and other pertinent documents or screens and any correspondence that you send or receive.  Also keep good notes of any contacts or conversations that you have with anyone at the firm.  Get a complaint number.  In most cases, if the firm is going to resolve your complaint honestly, and the amount is small, it should be able to gather the information and  get to decision maker in 2 to 3 weeks.

If you get no satisfaction or if the amount you have lost is larger consider asking for arbitration.  Claims or disputes up to $25,000 can be resolved in a simplified arbitration procedure, without a live hearing.  You send in your complaint and a few hundred dollars. The NASD then gets a response from the brokerage firm, and appoints an independent arbitrator to sort out responsibility for your loss. 

The arbitration process can have some twists and traps built into it, so if the amount is larger, seek out a firm that has specific experience helping on line investors make claims against firms.