Here's a funny story of why you should read the small print with your brokerage...
I Bought $15k worth of mdrm stock a while back. I then began trading quite a bit. I would buy a few hundred worth of shares, then sell, buy shares from another company and sell etc. Etc. Because my broker is linked to my bank I would simply transfer money from my bank account to my investment account.
I realized it was taking about 5 days for the transactions to go through and it was extremely frustrating to be waiting on funds to clear. So I began using the overdraft in my investment account.
Eventually I would transfer money every few weeks from my bank to my brokerage account when needed just to square up my balance.
I called the broker and asked if this was a problem if I used my investment account and carried a negative balance and just squared up once a month due to the fact that it took a week to clear.
They ensured me it was fine and if anything I'd be charged 3% interest for the negative balance.
Eventually I seen a stock I had to have like every new trader and figured I'd buy $1500 worth. Now my investment account showed that I was -$2500 balance. I had the $ in my chequing account but figured I'd square up later.
I called the broker the next day and asked if they were sure it was OK to hold a negative balance. They assured me it was fine but I'd be charged interest. Being new I figured it was an overdraft type deal.
A couple weeks later I notice that $2500 worth of MDRM shares had been sold which had a book value of $5000. Because mdrm was down. I did not sell. Seems the bank sold those shares to bring my account to even.
I lost my sh.it. Told them they ensured me I could hold that negative balance. They said I couldn't all of a sudden and that I was given bad info... They never bothered to call me, just sold a bunch of shares. I had them listen to recorded voice calls so they could see that they gave me bad information and that they were at fault. They eventually admitted that their brokers gave me bad info but I was still responsible and I wouldn't be refunded.
Talk about choked. So just like that I took I loss of a book value of $5000 mdrm shares.
They told me I should've read the fine print in my contact.
Funny thing was they decided to sell mdrm that was in the red big time rather than any other stock that I had that was in the green. they couldn't tell me why they chose to settle up in that fashion. Guy told me the credit people just randomly sell shares until the balance is at zero.
I suppose that loss will help me this tax year.
There's my long winded boring story of being a noob. Costly
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