Court: "Securities Firm Liable for Investor Compensation Due to 'System Failure'... Not Based on Peak Price"

A court ruling has recognized the liability of a securities firm to compensate investors who suffered losses because they could not sell stocks on time due to a system failure. However, the compensation standard was not considered to be based on the 'peak price.'

According to the legal community on the 20th, Judge Hong Eun-gi of the Civil Division 34 at the Seoul Central District Court ruled in a damages claim lawsuit filed by investor A against securities firm B, stating, "The plaintiff shall be paid approximately 16 million won by the defendant," partially ruling in favor of the plaintiff. This amount is the same as the compensation initially proposed by firm B.

The court stated, "Firm B had a contractual obligation to maintain the system properly so that customers could smoothly conduct stock brokerage transactions, but failed to fulfill this duty, resulting in orders not being received." However, it also noted, "It must be proven that Mr. A had the intention to sell at the claimed time and that the index was at a level where transactions could be executed, but there is no evidence to confirm that an order was attempted."

On August 8 of last year, firm B's Home Trading System (HTS) and Mobile Trading System (MTS) were inaccessible for 15 hours from 4 p.m. until 7 a.m. the following day.

Firm B determined the compensation amount by calculating the average price based on the actual transaction volume during the system failure period according to internal standards. Approximately 16 million won was allocated to Mr. A as well.

However, Mr. A filed a lawsuit, claiming he suffered a loss of 52 million won based on the highest indices during the system failure, specifically the Nasdaq 100 and KOSPI 200 futures.

The court acknowledged firm B's liability for compensation but ruled that the amount should be the same as the initial figure proposed by firm B.

It added, "Considering the possibility of execution in stock trading where numerous transactions occur in real time, it is difficult to view the defendant's compensation standard as lacking rationality."