According to FINRA, Daniel M. King was fined $10,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay $33,374.31 plus interest in restitution to a customer for recommending unsuitable use of margin to effect trades in accounts of two customers who were not sophisticated investors.

King recommended the use of margin in his customers' accounts to leverage additional buying power while also employing a short-term trading strategy. He frequently recommended that customers buy securities on margin and, after holding the positions for a short time, sell those securities, often incurring realized losses in addition to trading costs and margin interest. The margined positions often experienced price declines, causing margin calls, which were often met by selling securities at a loss.

King's recommendations exposed his customers to significant risk, increased costs, and sizeable losses. He lacked a reasonable basis to believe that using margin in this way was suitable given the customers' investment objectives, financial situation, and needs. Neither customer had prior experience using margin, and both followed King's recommendations. As a result, one customer, a retired repairman, had realized and unrealized trading losses of $22,486.27, and the second customer, an IT account manager, had realized and unrealized trading losses of $58,050.27.

This case illustrates the dangers of margin trading, particularly for unsophisticated investors. Margin amplifies both gains and losses, and when combined with short-term trading, can lead to devastating losses. Representatives must carefully assess whether margin is suitable before recommending it to customers.