-6-
agreement). The PJ account agreement stated, in part, that
petitioner’s account included a “ready purchase credit feature”.
That feature allowed petitioner to purchase securities on credit
of up to 50 percent of the current market value of eligible
securities in his account. If petitioner used this feature, any
securities in his Piper Jaffray account became collateral for the
extended credit and, in the event of a default by petitioner in
repaying the extension of credit, could be sold by Piper Jaffray
to reduce or to liquidate entirely any debit balances in his
account.
As to any order that petitioner placed with Piper Jaffray
for the purchase of securities, the PJ account agreement stated:
When I buy securities, you will first apply any cash in
my Account on the settlement date to pay for the
purchase. If there is insufficient cash, you will then
redeem Fund shares at net asset value to pay the amount
due.
If there are not enough Fund shares in the Account
to pay this amount, the trade will be treated as a
credit transaction. You may extend credit to me on the
terms and conditions set forth in this Agreement. Any
credit you extend to me will be automatically
collateralized by eligible securities in my account.
If there are not sufficient eligible securities in the
Account, I must deposit additional cash or eligible
securities into my Account within the timeframes
required by regulations and your policies. If cash or
eligible securities are not deposited on time, you may
liquidate the securities at market risk and exposure to
me.
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Last modified: May 25, 2011