FINRA Advises Investors on SBLOCs

FINRA provided an overview of securities-backed lines of credit ("SBLOCs"), a product increasingly offered by securities firms to investors. The investor alert explains: (i) what SBLOCs are; (ii) how they work; (iii) credit limits; (iv) related interest rates and repayments; and (v) weighing potential advantages and risks.

The alert recommends investors ask the following questions before taking out an SBLOC:

• When I take out an SBLOC, what am I agreeing to?
• Who is the lender?
• Should I use my investments as collateral?
• What if the value of my portfolio decreases?
• Does my investment mix matter?
• What if my securities are liquidated to meet collateral requirements?
• What impact will an SBLOC have on my pledged investments?
• What about interest rates?
• How is my broker compensated with SBLOCs?
• Can I move to a new firm if I have an SBLOC?