As one of the most popular discount brokers, Webull has come under a lot of pressure for their practice of selling customers’ shares without their explicit permission. However, Webull usually has a reason for doing so:
Webull can sell your shares without your permission in the case of an unmet margin call. The number of shares sold by Webull will equal the amount owed to Webull. Webull may also sell your shares in the event of account closure.
In this post, we’ll look a bit more into why Webull may actually sell your shares even without consent. This practice is not widely known but there are some measures you can take to prevent Webull from doing so. Let’s find out!
Generally, a broker can never sell a client’s shares without their consent. The shares are the client’s property and ownership cannot be transferred without the client’s explicit permission. However, there are some cases where Webull is entitled to do so.
This scenario is not specific to Webull but typically applies to all modern stock brokers that offer a debt-based product such as margin trading. Other brokers that have similar cases stated in their terms and conditions are Robinhood, SoFi, and Stash.
Let’s look at some of the specific circumstances that can cause Webull to sell your shares!
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The three main scenarios where Webull may sell your shares are account liquidation, an unmet margin call, and account closure which can be voluntary or involuntary. All three cases give Webull the right to sell your shares without your consent.
- Liquidation: Account liquidation occurs when securities have to be sold in order to meet an unsatisfied debt obligation. This typically occurs when accounts have been overdrawn for over three months. Webull may also automatically exercise options at the end of the trading day.
- Margin Call: When a margin call is issued and not met, Webull may decide to sell your shares in order to safeguard their downside. Margin calls occur when the ratio of debt to equity in your account goes out of balance.
- Account Closure: In the event of account closure all your shares can be sold by Webull and transformed into cash. Typically the client gives their consent to an account closure but there are also cases – when terms are violated – that the account may be closed by Webull.
While the above scenarios all exist there are some simple measures you can take to prevent Webull from ever having to sell your shares. The most common situation is that of an unmet margin call but we’ll go through all three cases to see what best to do!
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After Webull has already sold your shares it is too late to act. Once shares are sold from your account the action is final. However, there are some preventative measures you can implement to dramatically decrease the likelihood of that ever happening.
- Good Standing: Make sure to always keep your account in good standing and act in accordance with Webull’s general terms and conditions. Don’t incur any good-faith-violations (GFV) as this may increase the likelihood of Webull eventually liquidating your account and selling your shares.
- No or Low Debt: Keep the debt to equity ratio as low as possible in your Webull account or don’t use any leverage at all. Higher leverage means a higher risk of a margin call in the case of a significant stock market downturn.
- Using ACATS: When closing your account and transferring to another broker use the automated ACATS clearing system. This way Webull won’t have to sell all of your shares and pay out the cash. You can simply transfer all of your holdings to the new brokerage account of your choice.
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Webull can only sell your shares without your consent in three cases: account liquidation, an unmet margin call, and account closure. Fortunately, all three scenarios are easy to prevent with a little foresight.
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