At a time when ever more complex means of trading traditional share markets are being developed, such as options, short selling, stock borrowing and margin trading, investors need to recognise that new opportunities for exceptional profit also bring exceptional new risks. Some may well be hidden behind a cloak of "immateriality" even though potential consequences could be disastrous.

In summary, private investors can minimise exposure to margin trading risk by taking a few precautions:

" Treat very fast growing companies with caution. These companies and their high profile directors seem most susceptible to the allure of big rewards offered by serious margin trading while overlooking the exceptional risks posed to both themselves and others. " Examine available stock exchange announcements and news to unearth margin trading practices relating to major shareholdings, including those of directors, executives and related parties. These may be difficult to find and interpret, but they do exist. " Simply ask the Company Chairman if Directors and Executives or even the Company itself, is involved in margin trading the company's own shares - if the answer is yes, stay away. " Also ask if shareholders' funds are being used to margin trade any other company's shares - hidden danger lurks there too. " Avoid personal use of margin share trading accounts altogether - borrow elsewhere if you intend to use leverage for share purchases. " Ensure any shares you purchase on leverage are registered in your own name to avoid the possibility of seizure by a higher ranking creditor should your sharebroker's business collapse.

Eventually disclosure of margin trading by company directors, executives and related parties may become mandatory under stock exchange listing rules, but until that time equity investors will need to include "margin trading risk" as yet another factor for their own determination.

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