Suing Interactive Brokers for Flawed Margin Liquidations

Stoltmann Law Offices is investigating Interactive Brokers for allegedly executing forced margin calls in customer accounts. A number of cases have been filed against the brokerage firm for not providing investors fair pricing for the securities during the liquidations, violating the “National Best Bid/Best Offer” rule that is required in processing auto liquidations. Subsequently, the customer’s accounts were subject to additional margin calls, which causes more selling and additional investment losses. A margin call is a broker’s demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. They occur when an investor’s account value depresses to a value calculated by a particular formula. A broker must take into account a customer’s age, net worth, investment objectives and investment sophistication before recommending a security. If he does not, he or his company, such as Interactive Brokers, may be held liable for investment losses. A broker recommending a customer purchase an investment or security on margin may not always be suitable for the investor. They can be risky investments. In Interactive Brokers’ case, one Claimant asserted claims of breach of contract, promissory estoppel, violation of state securities statutes, claims under common law and vicarious liability. The Claimant alleged that the broker’s flawed, inefficient and fraudulent margin auto-liquidation system caused auto-liquidation of the customer’s portfolios at prices far inferior to the National Best Bid/Best Offer.