Charles Schwab Corp. tightened rules for clients using long‑short investment strategies, warning of margin calls if accounts breach new thresholds. The brokerage will contact advisers when borrowing exceeds limits, adding a new layer of protection around the tax‑management trade that blends long positions with short sales for wealthy investors seeking tax efficiency.

Long‑short strategies let investors borrow against short sales, generating tax losses that offset gains. Schwab’s new rule caps margin debits at 110% of short credits per account and 100% across all such accounts. With a $127 billion margin loan balance last quarter, the move curbs balance‑sheet risk for the brokerage for institutional clients and retail investors.

The policy follows Schwab’s April launch of leverage caps and account minimums for separately managed long‑short accounts, a strategy popular among high‑net‑worth Americans. Rival Fidelity has halted new accounts, underscoring industry concern about concentrated leverage and potential market jolts that could trigger cascading margin calls for large portfolio managers and wealthy individuals through 2025 period.

Schwab says the tighter guardrails keep the program sustainable while preserving tax‑loss harvesting for clients. By tightening leverage limits, the firm aims to balance growth with risk mitigation, ensuring that long‑short strategies remain available without exposing the firm or its customers to excessive credit exposure for long‑term stability and market integrity in future cycles today.