In the lending process, understanding borrowing costs and related policies is crucial. Below are important explanations regarding interest policies, calculation methods, and payment procedures.
1. Interest Policy
When you obtain or maintain credit through our clearing agent, interest will be charged to your account. The annual interest rate will vary based on your daily net debit balance and the current base rate. The base rate refers to the current prime rate as correctly published in The Wall Street Journal Pacific Edition. The actual interest rate charged will not exceed the base rate plus 2.5%.
Since the actual rate is tied to the base rate, changes in the base rate may result in corresponding adjustments to the actual rate charged without prior notice. Additionally, administrative fees may be charged in the form of an interest rate increase not exceeding 2%, which will be paid directly to us by the clearing agent. Contact your broker for current effective rates.
2. Interest Calculation Method
Interest on your account is calculated using a 365-day year factor, applied to your daily net debit balance across account types. Each account type's free credit balance after daily settlement is combined to determine your daily net debit balance. A net debit balance occurs when combined debit balances exceed combined free credit balances.
Free credit balances exclude credit balances in short accounts, non-transferable long positions, technical short positions, and cash account transaction settlement balances from sales proceeds. Interest is calculated daily but typically compounded monthly and shown on your monthly statement using a weighted average method. Detailed daily calculations are available upon written request.
3. Interest Payment Policy
Our clearing agent will pay interest (where state law permits) on qualified free credit balances intended for investment or reinvestment. Unless notified otherwise, the clearing agent will continue providing credit interest under this policy. An administrative fee may reduce the interest rate by up to 0.5%, and monthly interest under $6.00 won't be paid.
Free credit balances represent funds available on demand (including uncleared checks) that may be used in business operations, subject to SEC regulations. You may request delivery of any free credit balance, fully-paid securities, or margin securities used to repay debts.
4. Advance Payments
Advance payments (sales proceeds delivered before settlement date) are recorded as debit entries on payment date and included in daily net debit balance calculations.
5. Liens and Additional Collateral
The clearing agent maintains a general lien on all account assets (individual or joint) to secure all obligations to them. Additional collateral may be required per regulations or at the clearing agent's discretion.
6. Market Valuation
Short positions are marked to market, with credit balances adjusted for market value changes. These adjustments affect your margin account balance and interest calculation basis.
7. Dividend and Interest Payments
Dividends and similar distributions are typically paid monthly according to your selected payment option.
8. Clearing Agent Privacy Policy
The clearing agent collects non-public personal information to provide services outlined in account agreements. They may share information with reporting agencies as necessary for business operations or when legally required, but won't sell your information and maintain appropriate safeguards.
9. Dispute Arbitration Clause
This agreement contains mandatory arbitration provisions where parties waive rights to jury trials and class actions. Arbitration awards are generally final and binding, with limited appeal rights. Claims must be filed according to FINRA, NYSE, or other applicable exchange rules.
By signing account agreements, you consent to arbitrate all disputes with us or our clearing agent under current industry arbitration rules. Failure to opt out within 10 days of notice authorizes us to make arbitration selections on your behalf. Class actions are prohibited unless specific court determinations occur.