Investors Challenging Brokers in Margin-Call Clashes

The specter of the dreaded margin call reared its ugly head for many investors as the markets tumbled last month, but that was just a preview of the legal snarls to come, say a growing number of securities lawyers and state and federal regulators.

The wave of margin calls that accompanied April's stock slides will spawn a significant increase in legal challenges against brokerages, firing up a debate over whether investors are adequately told about their rights -- or lack thereof -- when they borrow money from their brokers to buy stocks, the lawyers predict.

But while investors historically have won relatively few arbitration claims based on margin-call disputes alone, securities lawyers say that may be about to change. "In every contract there's a standard of reasonableness," says New York securities attorney Ted Eppenstein. ...