FSS Warns "Be Cautious of Losses from Forced Liquidation During Sharp Stock Price Drops... Careful Management Required"

[Asia Economy Reporter Lee Jung-yoon] #Mr. Lee purchased stocks using credit transaction loans and provided them as collateral. Later, due to a decline in stock prices, a collateral shortage occurred. Although Mr. Lee deposited the shortfall amount, he filed a complaint with the Financial Supervisory Service (FSS), claiming that the securities company’s forced sale was unfair.

#Mr. Park provided his held stocks as collateral to a securities company and took out a loan to purchase other stocks. However, the stocks provided as collateral were suspended from trading due to auditor’s refusal of approval, causing a collateral shortage. When the loan repayment was not fulfilled, the securities company executed a forced sale of the purchased stocks. Mr. Park filed a complaint, arguing that forced sale due to trading suspension was unfair.

The FSS announced on the 17th that when borrowing funds from a securities company using stocks as collateral to purchase stocks, strict collateral management must be maintained to prepare for forced sales and other measures. The FSS Rapid Complaint Handling Center is analyzing the results of rapid complaint processing in the first half of this year and providing key precautions for financial consumers.

In Mr. Lee’s case, an additional deposit deadline was granted after the repayment period expired, but it was confirmed that the deadline was not met. In Mr. Park’s case, the securities company responded that it handled the matter according to related terms and conditions and explanatory documents. According to the FSS, stocks that are designated as management stocks or suspended from trading due to auditor’s refusal of approval may be excluded from collateral evaluation. If a collateral shortage occurs below the agreed collateral ratio, the shortage can be resolved through forced sales or other means.

The FSS stated, “When borrowing funds from a securities company using stocks as collateral to purchase stocks, it is essential to carefully review the borrowing conditions, collateral evaluation criteria, and collateral execution (forced sale) conditions. If stock prices plummet in a short period, large-scale forced sales may cause losses, so careful management is necessary.”

Additionally, many fund products are not subject to subscription withdrawal, so consumers should verify this in advance before subscribing. Mr. Kim subscribed to a public stock-type fund at a bank. He wanted to cancel the transaction the next day, but the bank unfairly refused the subscription withdrawal, and he could not get the upfront fee refunded, so he filed a complaint. However, the fund was confirmed to be a public stock-type fund, which is not subject to subscription withdrawal under the Financial Consumer Protection Act.

Furthermore, the FSS advised that if a securities company’s system failure is suspected during stock trading, related evidence must be secured. Mr. Cho filed a complaint requesting compensation for damages after failing to sell stocks on time due to a securities company’s system failure during the early trading hours on the day of a public stock listing when stock prices were falling. The FSS recommended the securities company pay damages based on submitted video evidence, and the securities company accepted compensation for the confirmed cases with proof.

In addition, the FSS reminded that stock warrants are not long-term investment products or stocks, and if a paid subscription is not made according to exercise conditions, the rights will expire.

This content was produced with the assistance of AI translation services.